RBI expands remittance scheme to include international credit card expenses, increasing oversight.
RBI Liberalized Remittance Scheme: The Reserve Bank of India (RBI), as the regulator of the banking sector, has incorporated expenditures made with International Credit Cards into the Liberalised Remittance Scheme (LRS). This means that any resident can now spend a maximum of 2.50 lakh dollars annually abroad. However, exceeding this amount in foreign exchange necessitates obtaining approval from the RBI.
The Finance Ministry has notified the inclusion of expenses incurred abroad through International Credit Cards in the LRS through the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules 2023. Previously, such expenses were not covered under the LRS.
Following discussions with the RBI, the Finance Ministry issued this notification, resulting in the removal of section 7 of the Foreign Exchange Management Rules, 2000. Consequently, payments made abroad using international credit cards are now within the scope of the LRS. In the budget presented for 2023-24, the TCS rate was raised from 5% to 20%, and this new tax rate will take effect from July 1, 2023. Except for education and medical expenses, this rule will apply to foreign tour packages and other expenditures under the LRS.
This rule implementation will lead to increased monitoring by the RBI on international credit card usage during travel abroad. It will also make it challenging to evade Tax Collection at Source (TCS) by making credit card payments overseas. Moreover, the use of international credit cards will be subject to tighter scrutiny while traveling abroad. Any expenditure exceeding 2.50 lakh dollars will incur TCS obligations.
Read more: Sanchar Saathi Portal: Unveiling crackdown on fake mobile connections, exposing 4 million frauds
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