Important Changes Regarding Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS)

The Ministry of Finance has announced that the implementation of a new Tax Collected at Source (TCS) rule, which includes a higher rate of 20% on overseas remittances under the Liberalised Remittance Scheme (LRS), will be postponed by three months. The rule will now come into effect from October 1 instead of the previously scheduled July 1, 2023. This decision was made to allow sufficient time for banks and card networks to establish the necessary IT-based solutions.

Exclusion of Overseas Spending with International Credit Cards from LRS

The Ministry of Finance has clarified that overseas spending using international credit cards will not be considered under the purview of the Liberalised Remittance Scheme (LRS). As a result, such transactions will not attract Tax Collected at Source (TCS) from October 1 onwards.

TCS Rate and Threshold for LRS Payments

The higher TCS rate of 20% will only be applicable when payments made under the Liberalised Remittance Scheme (LRS) exceed the threshold of Rs 7 lakh. The government had initially proposed this increased TCS rate and removed the threshold for triggering TCS on LRS payments in the Finance Bill 2023. However, based on feedback and suggestions, suitable changes have been made. Therefore, for all purposes under LRS and for overseas travel tour packages, regardless of the mode of payment, the TCS rate will remain unchanged for amounts up to Rs 7 lakh per individual per annum.

Extended Timeframe for Revised TCS Rates and Credit Card Payments

In response to comments and suggestions, the Ministry of Finance has decided to provide more time for the implementation of revised TCS rates and the inclusion of credit card payments in the Liberalised Remittance Scheme (LRS). Consequently, the revised TCS rates will now take effect from October 1. Furthermore, for the purchase of an overseas tour programme package, the TCS rate will continue to be 5% for the first Rs 7 lakhs per individual per annum, with the 20% rate applying only for expenditures exceeding this limit.

Find More News on Economy Here