Following the Frequently Asked Questions (FAQs), the ministry clarified the Tax Collection at Source (TCS) collection for modest foreign debit/credit transactions under the Liberalised Remittance Scheme on May 19, 2023.
The implementation of Foreign Exchange Management (Current Account) Transactions Rules, 2023 has raised many questions for the taxpayers. From July 1st 2023, international credit card transactions for trips abroad will be subject to 20% Tax Collection at Source (TCS) due to the removal of Rule 7 of the Foreign Exchange Management (Current Account) Transactions Rules.
A procedural ambiguity in the individual payments up to Rs. 7 lakhs was avoided by the clarification. The Liberalised Remittance Scheme (LRS) restrictions will not apply to any payments made by an individual using an overseas credit or debit card up to a total of Rs. 7 lakhs in a fiscal year. As a result, Tax Collection at Source (TCS) will not be attracted. The existing beneficial TCS treatment for education and health payments will continue.
The Foreign Exchange Management Act or FEMA, 1999, which regulates outward remittances from India, includes the Liberalised Remittance Scheme (LRS).All residents of the country, including children, are permitted to freely remit up to $250,000 per fiscal year under the scheme.
The public has a confusion regarding the small payments in which many false concepts were spreaded regarding the new rules. So the ministry itself took the responsibility to clarify the same.
The FAQs mentioned the new TSC rates from July 1st 2023 in which 20% was very huge. The taxpayers are worried that they have to pay both Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) from their income. Even though it is refundable, the taxpayers have to wait till the income tax returns are filed.
The ministry also clarified that the necessary changes to the Foreign Exchange Management (Current Account) Transactions Rules will be issued separately.
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