The upcoming Union Budget 2024 may introduce a significant change for those who spend large amounts abroad using credit cards.
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Proposed Change:
- Overseas credit card spending above ₹7 lakh may soon fall under the 20% Tax Collected at Source (TCS) rule.
- Currently, this TCS rule applies to debit cards, forex cards, and other payment modes, but credit cards are exempt.
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Current Scenario:
- Spends via debit cards, forex cards, or any other payment mode attract 20% TCS once they exceed ₹7 lakh per person per financial year.
- Credit card spends above this threshold are currently exempt from TCS.
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Rationale:
- The proposed change aims to curb large foreign exchange outflows and bring credit card spending under the Liberalised Remittance Scheme (LRS).
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Overview:
- Under RBI’s LRS, an Indian resident can transfer funds of up to USD 250,000 in a financial year outside India.
- The scheme is designed to facilitate easy remittances for various purposes like education, travel, medical treatment, and maintenance of relatives abroad.
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For Consumers:
- If implemented, credit card transactions exceeding ₹7 lakh annually will attract a 20% TCS, similar to other payment modes.
- This could impact high-spending individuals who frequently use credit cards for overseas transactions.
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For the Government:
- The move is expected to help monitor and regulate large foreign exchange outflows, aligning credit card spends with existing LRS rules.