RBI Liberalized Remittance Scheme: The expenditure made in foreign currency through International Credit Card has now come under the LRS (Liberalised Remittance Scheme) of the Reserve Bank of India, the regulator of the banking sector. Under this, any resident can spend only a maximum of 2.50 lakh dollars annually abroad. But spending more than this amount in the form of foreign exchange will have to take approval from RBI.
Notifying the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules 2023, the Finance Ministry has said that the expenditure incurred abroad through International Credit Card is also included in the LRS (Liberalised Remittance Scheme). Earlier, expenses incurred abroad through International Credit Cards were not included in LRS.
The Finance Ministry, after discussing with the RBI, has issued this notification and removed section 7 of the Foreign Exchange Management Rules, 2000. Due to this, payments made abroad through international credit cards have also come under the ambit of LRS. Earlier this year, in the budget presented for 2023-24, the TCS rate was increased from 5 per cent to 20 per cent. The new tax rate is going to be implemented from July 1, 2023. Under this, except for education and medical expenses, this rule will be applicable on foreign tour packages or other expenses under LRS.
After the implementation of this rule, RBI’s monitoring on international credit cards will increase when traveling abroad. Also, it will not be easy to avoid tax collection at source ie TCS by paying abroad with credit card. Along with this, the use of international credit card will also be tightened while going abroad. And as soon as someone spends more than 2.50 lakh dollars, TCS will have to be paid on it.
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