A credit card is a financial instrument through which individuals can use the credit provided to them to make general purchases. Yah is a plastic card that allows people to do business without cash. You can always earn a good amount of money using a credit card if you use it on time. When you use a credit card, you pay it later.
When you apply for a credit card, you need to provide a credit limit from the bank or financial institution. A credit limit is a means by which you can make purchases. You can make regular purchases up to your credit limit and pay us the amount every month at fixed rates.
Certain changes in the FEMA law to bring international credit card spends abroad under the Labor Labor Remittance Scheme (LRS) scheme are aimed at bringing uniformity in the tax aspects of credit and debit card remittances.
What the ministry said: The Finance Ministry has said that through the Foreign Exchange Management Amendment Rules 2023, the expenses incurred abroad through credit cards have also been included in the LRS scheme of the Reserve Bank of India. This will ensure that tax is collected at source at applicable rates on the amount spent abroad. If the TCS payer is liable to tax, he can claim credit or set-off against his income tax or advance tax liabilities.
In this year’s budget, TCS was proposed to increase the maximum tax on foreign tour packages and remittances under LRS from 5% to 20% and the new tax regime will be effective from July 1.
What is the matter, the Ministry issued a notification in this regard on Tuesday and informed about the amendment in the FEMA Act. This notification post inclusion of LRS will require RBI approval for any foreign exchange expenditure above Rs 2.5 lakh. Till this notification, international credit card payments for expenses incurred during foreign travel were not covered under LRS.
The ministry has tried to clarify the situation by releasing a list of related questions and their answers on this change and has also said that debit card payments have already come under the purview of LRS. But the expenses made abroad from the credit card did not come within the limit amount, due to which many people used to cross the LRS limit.
Data obtained from an overseas remittance facility showed that international credit cards are being issued with permission to spend in excess of the current LRS limit of Rs 2.5 lakh. According to the ministry, RBI has also issued letters to the government several times. And it was written in the letter that the different treatment of debit and credit card payments abroad should be abolished.