The Government of India has amended rules under the Foreign Exchange Management Act (FEMA), bringing international credit card spends outside the country under the Liberalised Remittance Scheme (LRS). In addition, from July 1, spending on international credit cards (ICCs) will attract a higher rate of Tax Collected at Source (TCS) at 20%.
Spending in foreign exchange through ICCs will be covered under the Reserve Bank of India’s LRS, under which a resident can remit money abroad up to a maximum of $2.50 lakh per annum without the authorisation of the central bank, said a Union Finance Ministry notification on May 16. Any remittance beyond $2.5 lakh or its equivalent in foreign currency would require approval from the RBI.
Earlier, the use of ICCs for making payments for fulfilling expenses during travel outside India was not included in the LRS limit. The ministry notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to include international credit card payments in the LRS.
The Union Budget 2023-24 hiked TCS rates to 20 per cent, from 5 per cent currently, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes).