The Finance Ministry has announced the deferment of the new mechanism of Tax Collected at Source (TCS) on the Liberalised Remittance Scheme (LRS) from July 1 to October 1.

In this News Explained podcast, Shishir Sinha, Associate Editor, joins Nabodita Ganguly to discuss the new mechanism of TCS, the reason behind the extension of the deadline and how it will impact us.

The changes to the TCS on LRS encompass three key components. First, spending through credit cards while abroad will no longer be considered a part of the LRS, thereby exempting it from TCS. This alteration is the most significant change.

Second, the deadline for implementing the new TCS rates for all purposes, including purchasing overseas travel packages, has been extended to October 1. The new rates and system will come into effect on this date.

The extension of the deadline for the new TCS rates was primarily motivated by the challenges faced in tracking credit card spending abroad and developing the necessary software. Banks require additional time to upgrade their systems and ensure compliance with the new regulations.

The third change addresses spending through credit cards within India on foreign websites. If the yearly expenditure exceeds approximately around seven lakh rupees, a TCS rate of 5% will apply until September 30. Starting from October 1, this rate will increase to 20%.

Notably, the higher TCS rate will not apply to educational expenses or medical treatments, which will continue under the existing system. Therefore, the impact of the changes will mainly affect individuals involved in gifting, overseas purchases, or tour packages. Listen in. Read the full story here.

Related Topics