The government on Wednesday said overseas spending using international credit cards will not be included under the Liberalised Remittance Scheme (LRS) and hence, would not attract TCS.

Also, the implementation of a higher rate of tax collected at source (TCS) of 20 per cent on overseas remittances under LRS, like tour expenses, has been deferred by three months and will come into effect from October 1.

However, credit card spending overseas will not attract TCS from October 1.

The higher TCS rate will be applicable only when the LRS payments exceed the threshold of Rs 7 lakh.

The government, in Finance Bill 2023, had increased the rate of TCS from 5 per cent to 20 per cent for remittance under LRS as well as for the purchase of overseas tour programme packages and removed the threshold of Rs 7 lakh for triggering TCS on LRS.

These two changes were not applicable when the remittance is for education or medical purpose. These amendments were to take effect from July 1, 2023.

“In response to the comments and suggestions, it has been decided to make suitable changes. Firstly, it has been decided that there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.

In a statement, the ministry said to give adequate time to banks and card networks to put in place requisite IT-based solutions, the government has decided to postpone the implementation of its May 16, 2023, notification through which credit card expenses were brought under LRS.

For the purchase of an overseas tour programme package, the TCS shall continue to apply at the rate of 5 per cent for the first Rs 7 lakhs per individual per annum; the 20 per cent rate will only apply for expenditure above this limit, the ministry added.

In May, the government brought changes to the FEMA Current Account Transaction Rules and included overseas credit card expenses in the ambit of LRS (Liberalised Remittance Scheme), under which a resident can remit money abroad up to a maximum of $2.50 lakh per annum.

Beyond the threshold, Reserve Bank of India approval would be required.

The necessary changes to the Rules will be issued separately.