Foreign Travel has always been a Middle-class Indian Family dream and now there is another rule to break the heart of such Indian Families as it is going to get a bit expensive. Recently, the government introduced new rules that made foreign travel expensive but there is a lot of confusion regarding the rate of TCS to be deducted on International Credit Cards, International Debit Cards and on the withdrawal of Foreign Currency. Read in detail to understand the new rules and their implications.
Earlier provision
The Finance Act, 2020 amended Section 206C of the Income Tax Act, 1961 and introduced tax collection at source (TCS) on foreign remittance under LRS subject to the applicable threshold limit. TCS at the rate of 5% shall be collected on foreign remittances under LRS exceeding INR 7 Lakh during the Financial Year. TCS at the rate of 0.50% shall be collected on foreign remittance under LRS if the amount being remitted is towards education abroad and is out of a loan obtained from any financial institution in India as defined under Section 80E of the Income Tax Act.
New Provision
Starting from July 1, 2023, the rate of TCS on international credit card transactions has been increased from 5% to 20%, as announced in the Budget 2023-24. This means that foreign currency transactions made using an international credit card will be subject to a hefty TCS rate of 20%. This rule generated quite a lot of stir on social media so the government responded well and modified the rule to provide an exemption limit amount to Rs. 7 Lakh, whether it's for travel, hotel bookings, or general purchases, will be subject to the 20% TCS.
How to save TCS or at least prevent blocking of the Amount?
- Spend individually means as the exemption limit is of Rs 7 Lakh is per person and not per family, simply spend money by dividing the same in the number of family members. In this case 7 Lakh will still be a great amount per person per year.
- Use Forex Cash or Currency for making such payments so you avoid paying TCS at the rate of 20%.
Extensive Travellers
This surely will be a reason to worry for the extensive travellers as blocking 20% Amount for every single expense for an already expensive Foreign Trip might discourage people from travelling abroad or at least will have an impact on their pockets.’
Difficult for the salaried class
This surely will be the reason to worry for the Salary Class as at least the Business Class can reduce the TCS amount from their Advance Tax Liability but the same cannot be done by the Salaried Class who will end up blocking their funds for a very long time.
TCS can be claimed while filing the ITR
- Lastly, the worries end here as this amount can be easily claimed while filing the ITR and accordingly refund can be claimed for the same.
- Refund will be credited on successful ITR filing after verification of no previous pending liability of Taxes.
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