May 26, 2023
TCS doesn’t apply only to your foreign currency spending, domestic purchases too can bear its brunt
Amid summer holidays that vacationers prefer to spend in cooler climes overseas, the government’s recent move to levy Tax Collected at Source (TCS) on international transactions using credit cards came as an unpleasant surprise.
The Ministry of Finance notified that such transactions would come under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) with effect from May 16, 2023. And by virtue of that, these transactions are now subject to 5 percent TCS until June 30 and thereafter, at 20 percent.
Following much opposition, the government clarified that TCS would apply on international spending via debit or credit cards only beyond the threshold of Rs 7 lakh a year.
In this backdrop, we bring you this Q&A with Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, explaining what TCS is, what all transactions it applies to, and more. Edited excerpts: