The Income Tax Department is planning to propose a new credit card rule, under which credit card holders will need to file a declaration with the banks or card issuer. This has to be done within a predetermined timeline and has to specify the expense nature incurred as a foreign exchange as TCS or Tax Collected at Source, mentioned economictimes.Indiatimes while quoting their sources.
IT Department to Impose New Credit Card Rule
“The I-T department is in talks with the RBI and other stakeholders to firm up a mechanism for distinguishing whether the expense is towards medical/education which attracts a 5 per cent TCS or for other purposes on which a 20 per cent Tax Collection at Source (TCS) would be levied.”
As per the sources, “discussions are veering around giving additional time to taxpayers for filing a declaration to the credit card issuer bank specifying the nature of expenditure from July 1 – the date from which the new TCS proposal will come into force.”
Later the IT Department will release a detailed FAQ related to the levied TCS at the specified rate.
Starting from next month, “overseas expenses on credit cards exceeding Rs 7 lakh will be subject to a 20 per cent TCS. However, if such expenses are incurred for medical or educational purposes, the TCS would be levied at 5 per cent. For those availing loans for overseas education, a lower TCS rate of 0.5 per cent would be levied above the Rs 7-lakh threshold.”
“The Union Budget 2023-24 had hiked TCS rates to 20 per cent, from 5 per cent currently, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes). The new tax rates will come into effect from July 1, 2023.”
“In May, the government brought changes to the FEMA Current Account Transaction Rules and included overseas credit card expenses in the ambit of LRS (Liberalised Remittance Scheme), under which a resident can remit money abroad up to a maximum of USD 2.50 lakh per annum. Beyond the threshold, RBI approval would be required.”