[Opinion] 20% TCS on Usage of International Credit Card – A Myth or a Reality?

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  • Last Updated on 23 May, 2023

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TCS on International Credit Card

CA Pinkesh Chhajed – [2023] 150 taxmann.com 342 (Article)

Various discussions are going on especially on social media about levy of 20% TCS on usage of international credit card. Is it just a hype created or a reality or half-truth and half reality?

Let us consider the same in a detailed manner.

Background

Before directly jumping into the sea, let us first start the source of the water so that the depth and other parameters can be verified. So let us first look into the provisions as applicable for collection of TCS.

Section 206C(1) of the Income Tax Act, 1961 (Herein after referred to as ‘the Act’) provides for collection of TCS alcoholic liquor, tendu leaves, scrap etc.

Further, Section 206C(1G) of the Act provides for collection of TCS on remittance of the amount under the Liberalized Remittance Scheme (Commonly referred to as the ‘LRS’) of the Reserve Bank of India (Common referred to as the ‘RBI’) and on sale of overseas tour program package.

Further, vide Finance Act, 2023, the rate of TCS for the specified remittances under LRS and overseas tour program package was revised at 20% effective from 1st July, 2023 from erstwhile 5% which is applicable till 30th June, 2023.

Thereby, the effective rates of TCS will be as follows:

Particulars TCS rate till 30.6.23 TCS rate with effect from 1.7.23 Remarks
Threshold Rate Threshold Rate
LRS – Remittance is from Education loan obtained from any financial institution as defined u/s 80E 7 Lacs 0.5% 7 Lacs 0.5% No Change
LRS – Remittance is from Education loan obtained other than from Sr. No. 1 7 Lacs 5% 7 Lacs 5% No Change
LRS – Remittance for medical treatment 7 Lacs 5% 7 Lacs 5% No Change
LRS – Any other remittance 7 Lacs 5% Nil 20% CHANGED
Sale of overseas tour program package Nil 5% Nil 20% CHANGED

Thereby, it is evidenced from the above table that with effect from 1st July, 2023, there will be change of rate of TCS to 20% from present 5% on sale of overseas tour program package and remittances under LRS except for medical and education loan purpose.

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