The Ministry of Finance on May 16 notified that the Foreign Exchange Management (Current Account Transactions) Rules 2000 amended to include international credit card payments under LRS. Under LRS a resident can remit money abroad up to a maximum of USD 2.50 lakh per annum without the authorization of RBI.
According to the notification, the Finance Ministry, in consultation with the RBI, omitted Rule 7 of FEMA (current account transactions) Rule 2000, thus effectively including forex spending through international credit cards under the LRS. The deletion is to ensure that payments for foreign tours through a credit card do not escape tax collection at source (TCS)
Earlier, the usage of international credit cards (ICCs) for making payments towards fulfilling expenses during travel outside India is not included in the LRS limit.
The Union Budget 2023 Finance Minister Mrs.Nirmala Sitharaman hiked TCS rates to 20 percent from 5 percent. In the current financial year, expenses on overseas tours and funds remitted under LRS (other than for educational and medical purposes) are deducted TCS at 20 per cent. As a result, the spending by international credit cards will also attract a higher rate of TCS at 20 per cent effective July 1