20% tax at source for offshore credit deals
Come July 1, any payment made using a credit card to foreign vendors will be subjected to tax collected at source (TCS) at 20 per cent irrespective of the amount paid.
Mumbai: Come July 1, any payment made using a credit card to foreign vendors will be subjected to tax collected at source (TCS) at 20 per cent irrespective of the amount paid. This is because the Budget 2023 has raised the tax collected at source (TCS) from five per cent to 20 per cent under the Liberalised Remittance Scheme (LRS).
While moving the Finance Bill 2023 for consideration and passage in the Lok Sabha the Finance Minister Nirmala SItharaman had said that cross-border credit card payments are currently not captured under the liberalised remittance scheme (LRS), and they escape the TCS. The finance minister said that the Reserve Bank of India (RBI) would take steps to ensure that these transactions come under the ambit of TCS.
If RBI brings credit card payments for overseas tour packages under LRS, then all the transactions done through credit cards are likely to attract TCS at 20 per cent. As a result, any payment made with credit card to foreign vendors such as for hotel, airline bookings, gaming, subscriptions to software/magazines/memberships etc will be subjected to TCS at 20 per cent irrespective of the amount paid.
In every such case, individuals will need to claim a credit for such TCS in their tax returns.
