Circular to remove difficulty in implementation of changes relating to Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS) and on purchase of overseas tour program package- Circular No. 10/2023
Finance Act,2023 has amended sub-section (1G) of section 206C of the lncome-tax Act, 1961 (hereinafter referred to as ‘the Act’) to, interalia,
(i) increase the rate of Tax Collection at Source (TCS) from 5% to 20% for remittance under LRS as well as for purchase of overseas tour program package; and
(ii) remove the threshold of Rs 7 lakh for triggering TCS on LRS.
These two changes did not apply when the remittance is for education and medical purpose.
- Subsequently, the Government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated 16th May, 2023 to remove the differential treatment for credit cards vis i vis other modes of drawal of foreign exchange under LRS. This change has now been postponed for the time being.
- Comments were received about the practical difficulties that may arise from the removal of the threshold for LRS payments other than for education and medical treatment. During meetings with the RBl, Banks and Card networks, some financial institutions have desired more time to modify their current lT systems to address issues arising from the implementation of the provision of TCS on credit card transactions.
- ln order to address these issues, a Press Release dated 28.6.2023 (copy enclosed) was issued by Ministry of Finance wherein the following decisions relating to income-tax have been taken:
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