Higher Costs for International Card Usage from October 1: 20% Tax on Spending over Rs 7 Lakh Abroad

Use of International Credit or Debit Cards Abroad Will Be Costlier

From October 1st, using international credit or debit cards abroad will become more expensive. Now, a 20% tax collection at source (TCS) will be applicable. In this budget, TCS has been increased from 5% to 20%. The use of international credit cards outside India has been liberalized under the Liberalized Remittance Scheme (LRS).

TCS to Be Levied on Expenses Over 7 Lakhs

In the financial year ahead, a 20% TCS will not be imposed on expenses up to 7 lakhs made through international debit and credit cards. However, if an individual spends 8 lakhs or more during foreign travel in a financial year, they will have to pay 20% TDS, which amounts to a total of 1.6 lakhs on the entire sum. For expenses ranging from 7 lakhs to 1 rupee, the entire amount will come under the purview of TCS.

Expenditure on Education and Medical Expenses Excluded

This new TCS will not be applicable to expenses related to education and medical care abroad. Medical expenses include medical treatment and other daily expenditures. Additionally, tickets purchased for medical travel will also be exempt from this tax. Similarly, expenses incurred for educational purposes, such as tuition and other fees, as well as daily expenses, will not be covered by TCS. TCS will be collected by banks that issue the cards and will be added to the bill. This new tax will also affect non-resident Indians sending remittances and gifts.

Three Types of Concerns Regarding the Decision

The decision may deter affluent individuals from making online transactions abroad.Foreign exchange purchase obligations will be imposed on purchases in foreign currencies. Some individuals can still utilize the hawala network for transactions.

What Is TCS?

TCS stands for Tax Collection at Source, which means collecting tax at the source of income. TCS is levied by sellers, traders, merchants, or shopkeepers. It is collected when they sell any goods to buyers or customers. In simple terms, it is the same tax that is deducted when the payment is made. The responsibility for depositing it lies with the seller or shopkeeper after collection. This form of tax is governed by Section 206C of the Income Tax Act. This tax is applicable only when the limit of tax collection at source crosses.

Akash Shrivastav

My name is Akash Shrivastav, and I am a Blogger. I have 8 years of experience in blogging for Finance, Business, Investment, Stock Market, Cryptocurreny and more. Through my writing, I aim to provide readers with insightful and informative content.