Income Tax Rule: From October 1, using international credit or debit cards abroad is going to be expensive. 20% tax collection at source i.e. TCS will be applicable on this. In this budget, TCS was increased from 5% to 20%. Now the use of International Credit Cards outside India has come under the Liberalized Remittance Scheme i.e. LRS.
TCS will be levied on expenditure more than Rs 7 lakh
There will be no 20% TCS on spending up to Rs 7 lakh through international debit and credit cards in a financial year. But if someone makes a card payment of Rs 8 lakh in a financial year while traveling abroad, then he will have to pay TDS of 20% i.e. Rs 1.6 lakh on the entire amount. In case of expenditure exceeding Rs 7 lakh to Rs 1, the entire amount will come under the purview of TCS.
You are going to Dubai with your family. In this trip, payment of Rs 10 lakh was made through card. TCS of Rs 2 lakh will have to be paid on this. It will not make any difference whether all the payments are made through credit card or debit card. TCS will be collected not by you yourself, but by the card issuing bank and added to the bill. This new tax rate will also affect tour packages and gifts sent to non-resident Indians.
Excluded from education and medical tax scope
These new TCS rates will not be applicable on expenditure incurred on education and medical treatment abroad. Medical expenses include medical treatment and other daily expenses. Besides, tickets purchased for medical travel have also been exempted. Similarly, educational includes money sent for tickets purchased, tuition and other fees as well as daily expenses for a person studying abroad.
Three types of apprehensions regarding the decision
- Rich people will avoid doing online transactions abroad
- Will be forced to buy foreign currency in cash
- Some people may also use hawala network
Some experts are also counting the benefits of the decision
CA Abhay Sharma said that with this the government will get real time information about expenditure abroad. Tourists will also be freed from additional hassles like making Forex cards. Although this will entail additional expenses, the claim will also be covered.
What is TCS?
TCS means tax collection at source. It means tax collected at source. TCS is paid by the seller, dealer, vendor, shopkeeper. However, he collects the same from the buyer or customer while selling any goods. After collection, it is the responsibility of the seller or shopkeeper to deposit it. This is controlled in Section 206C of the Income Tax Act. This type of tax is deducted only when the payment exceeds a limit.
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