Credit Card latest news: The 20 percent TDS rule on credit card transactions abroad is unlikely to be implemented from July 1. According to the exclusive information received by CNBC Awaaz from sources, different dates are being considered for when to implement this system.
Credit Card: The 20% TDS rule on credit card transactions abroad is unlikely to be implemented from July 1. According to the exclusive information received by CNBC Awaaz from sources, different dates are being considered for when to implement this system. Actually, last month the Finance Ministry had made an amendment in the rule of Foreign Exchange Management Act (FEMA). Under this, credit card transactions abroad were included in the Liberalized Remittance Scheme (LRS).
This has two meanings, the first is that if you do transactions abroad with a credit card, then you will have to pay 20% TCS. TCS means Tax Collected at Source. Which will be taken from you only while doing the transaction. Later you can claim it back as credit while filing income tax return.
The second effect was that the limit of spending 2.5 million dollars annually under the LRS would also include the expenses incurred abroad through credit cards. Both these arrangements were to be implemented from July 1. But according to the exclusive information received by CNBC Awaaz, the government may not implement it from July 1. Now from when it should be implemented, a new date is being considered in the Finance Ministry.
Ministry is preparing guidelines
Sources say that the Finance Ministry is currently preparing a guideline which will form the basis of the framework to monitor international transactions of credit cards. Then on the basis of this guidelines will be issued to the banks by the Reserve Bank. Then it is possible that banks will also have to make changes in their software according to these guidelines. For example, how to combine different transactions from different credit cards together and do real time monitoring.
May take a long time
How to make arrangement for deducting TCS on credit card etc. Which means it may take a long time. Therefore, from July 1, the possibility of bringing international transactions of credit cards under LRS is less. This also means that from July 1, there is less possibility of deducting 20% TCS on international transactions of credit cards. That is, at present, you can shop abroad fiercely with a credit card.
