20% TCS on International Credit Card Spends: Banks Seek Delay, Experts Advise Strategies

Dhaneshwar Prasad

The Indian government’s decision to impose a 20% Tax Collected at Source (TCS) on international credit card transactions has sparked concerns among banks and individuals alike.

The move, aimed at tracking high-value spends and enhancing transparency, has led banks to seek a delay in implementation.

The TCS will be applicable on all international credit card transactions from July 1, 2024, with certain exceptions.

Individuals spending less than Rs 7 lakh per annum on their international debit or credit cards will be exempt from the TCS. However, the threshold applies to the aggregate amount spent across all cards, not individually.

Banks have raised concerns about the practical challenges in implementing the new regulations. “Banks issuing credit cards will be responsible for collecting 20 per cent TCS from July 1.

This may be difficult for banks to track, and they may have to rely on declarations by the credit card users themselves as to the nature of the payment,” said Neeraj Agarwala, Partner at Nangia Andersen India.

To minimize the impact of the 20% TCS, experts suggest strategies such as:

  1. Utilizing the Rs 7 lakh exemption limit: Individuals can book tour packages offered by international websites and make payments through international debit or credit cards, as long as the total spending remains below the threshold.
  2. Separating bookings and payments: By booking flights, hotels, and sightseeing components separately, individuals can avoid forming a package and attracting the TCS levy on overseas tour packages.
  3. Distributing remittances: For large sums of funds to be remitted abroad, individuals can consider distributing the payments in tranches spread over two financial years to stay within the exemption limit.

It is important to note that the TCS amount collected by banks will be available as a credit and can be adjusted towards quarterly advance tax or annual income tax liability.

While the TCS may impact holiday budgets, individuals can offset it against their tax dues.

The government’s decision to bring international credit card transactions under the Liberalised Remittance Scheme (LRS) aims to track spending, prevent misuse, and increase tax revenue.

As banks and individuals navigate the new regulations, strategies to minimize the TCS burden and comply with the rules will be crucial.

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Former Sony professional turned multi-business owner and stock investor, Dhaneshwar leverages his MBA to produce market, IPO and biz content and personal investments on Indimarket.in.
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