Starting from July 1, 2023, you will have to shell out more to book foreign tour packages. Budget 2023 has raised the tax collected at source (TCS) rate for foreign remittances under the Liberalised Remittance Scheme (LRS) from 5 per cent to 20 per cent. As a result, TCS on remittances for booking overseas travel packages will increase from the existing 5 per cent to 20 per cent. The Ministry of Finance has recently asked the Reserve Bank of India (RBI) to look into the aspect of bringing credit card payments during foreign tours under the central bank's LRS to ensure that such expenses do not escape tax collected at source.
Why the finance ministry wants to bring credit card payments for foreign travel under LRS
While tabling Finance Bill in the Lok Sabha last month, Finance Minister Nirmala Sitharaman said, "It has been represented that payments for foreign tours through a credit card are not being captured under the Liberalised Remittance Scheme (LRS) and such payments escape tax collection at source (TCS)."
"The RBI is being requested to look into this to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon," she added.
What happens if credit card payments for forex transactions come under LRS
If RBI brings credit card payments for overseas tour packages under LRS, then all the transactions done through credit cards are likely to attract TCS at 20 per cent. Let us understand this with an example.
For instance, suppose you want to book a family tour package to Thailand that costs Rs 2 lakh. Now, if you use your credit card to purchase the package, you will have to spend an additional Rs 40,000. Do remember, all other payment methods such as transferring money from bank account to another or payments through debit cards for the overseas trip are already under LRS and this TCS of Rs 40,000 will be applicable there as well.
Read more at: https://economictimes.indiatimes.com/wealth/tax/foreign-trip-booking-credit-card-users-may-soon-have-to-pay-20-tcs-on-forex-transactions/articleshow/99606094.cms