The Ministry of Finance has clarified that the Tax Collection at Source (TCS) at the rate of 20% would not apply to payments made by individuals using international debit or credit cards up to Rs.7 lakh per financial year. Such small transactions have been excluded from the Liberalized Remittance Scheme (LRS) limits.
The press release dated May 19, 2023, also stated that the prevailing beneficial TCS treatment for education and health payments would continue.
As per the Foreign Exchange Management (Current Account Transactions) Rules, 2000, prior approval of the Reserve Bank of India (RBI) is required when foreign remittances are made, exceeding specified limits for purposes enumerated in Schedule III. The rules also specified that this requirement does not apply to the use of international credit cards by persons for covering expenses while on a visit outside India.
However, the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 notified by the Finance Ministry on May 16, 2023, omits Rule 7 from the 2000 Rules thereby bringing credit card transactions carried out by individuals in foreign countries within the ambit of the LRS. A joint reading of the amendment rules and the Finance Act, 2023 would indicate that the TCS payable for such transactions exceeding Rs. 7 Lakh would be 20% w.e.f. July 1, 2023.
 Rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000
 Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000