International credit card usage to come under RBI’s LRS; 20% TCS to be charged July 1, 2023
Spending in foreign exchange through international credit cards will be covered under the RBI’s liberalized remittance scheme (LRS), under which a resident can remit money abroad up to a maximum of $2.50 lakh per annum without the authorization of the Reserve Bank, as per a Finance Ministry notification.
The Ministry on May 16 notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to include international credit card payments in the LRS. Any remittance beyond $2.5 lakh or its equivalent in foreign currency would require approval from the RBI.
Earlier, the usage of international credit cards (ICCs) for making payments for fulfilling expenses during travel outside India was not included in the LRS limit.
According to the notification, the Finance Ministry, in consultation with the RBI, has omitted Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, thus effectively including Forex spending through international credit cards under the LRS.
The Union Budget 2023-24 hiked TCS rates to 20%, from 5% 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.
