The charges for international business that exceed the $250k annual ceiling
Government Attempts To Clear The Air Regarding International Remittances, TCS
The finance ministry clarified on Thursday that for employees who are using their credit cards while on business-related trips abroad, the spending will be outside the $250.000 annual limit under the Liberalised Remittance Scheme (LRS), in an effort to clear up any confusion regarding tax collected at source (TCS) on overseas spending, including through credit cards. Additionally, purchases done while in India from international e-commerce sites or transactions made on platforms like Netflix would not be counted.
A day after notifying the public that LRS will include credit card transactions, a decision that was made by finance minister Nirmala Sitharaman after the passing of the budget in Parliament, the ministry released two sets of comprehensive FAQs. The new laws will become effective in July.
International credit cards are being issued with limits greater than the current LRS limit of $250,000, according to data gathered from major money remitters under LRS. In order to capture total expenditures under LRS for prudent foreign exchange management and to prevent by-pasting of LRS limits, it was necessary to eliminate the differential treatment of debit cards and credit cards. This was done in the interest of uniformity and equity in the treatment of different methods of dra-wal of foreign exchange. The RBI has written to the government on many occasions highlighting the need to end this discriminatory treatment, according to the finance ministry, which also noted that debit cards had previously been covered.
Overseas travel accounted for more than half of the increases in flows under LRS during the previous fiscal year, rising 22% to $24 billion. The ministry released a new set of frequently asked questions (FAQs) on TCS, where the rate has been raised in a number of circumstances as a result of the government discovering several instances in which LRS Payments are “disproportionately high” as compared to the stated taxable income.
THE NEW TCS MATRIX
|Remittance for||Up to June 30, 2023||From July 1, 2023|
|Threshold (lakh)||Rate (%)||Threshold (lakh)||Rate (%)|
|i)With loan from bank,FIs||7||0.5||7||0.5|
|ii)When not from loan||7||5||7||5|
|Overseas tour package||Nil||5||Nil||20|
According to the statement, “(The) principal impact 4 (is) only on HNIs’ (high net worth individuals’) investment in assets like real estate, bonds, and stocks outside of India as well as on their trip arrangements or presents for non-residents. stating once more that the change won’t have an influence on medical and educational costs. According to the FAQs, the 20% rate on such supposed income is not excessive if the TCS belongs to a person who is not a taxpayer. For incomes exceeding Rs 12 lakh under the new system, the tax rate bracket is 20%; for incomes over Rs 151 lakh, it is 30%.
In the next days, TCS will get a thorough explanation on travel and incidental costs associated to schooling and medical treatment.
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