Centre postpones implementation of new TCS rates to October 1

The Indian government has delayed the implementation of new tax collected at source (TCS) rates for overseas remittances, including tour packages, from July 1 to October 1. This was done to give banks and card networks enough time to put in place the necessary IT solutions.

The new TCS rates were announced in the Union Budget 2023-24. Under the new rules, a TCS of 20% would have been levied on all overseas remittances made by individuals, including those made through international credit cards. However, the government has now clarified that transactions through international credit cards, while being overseas, would not be counted as LRS and hence would not be subject to TCS.

The government has also decided to defer the implementation of a higher rate of TCS of 20% on overseas remittances under the Liberalised Remittance Scheme (LRS), like tour expenses, by three months. This means that the higher TCS rate will come into effect from October 1 instead of July 1, 2023.

The LRS is a scheme that allows Indian residents to remit up to USD 250,000 per year without any prior approval from the Reserve Bank of India. The scheme is popular among Indians who want to send money to their families and friends abroad, or to invest in foreign assets.

Decision welcomed by industry stakeholders

The government’s decision to delay the implementation of the new TCS rates has been welcomed by industry stakeholders. The Travel Agents Association of India (TAAI) said that the decision would provide much-needed relief to the travel industry, which is still recovering from the impact of the COVID-19 pandemic.

The TAAI said that the new TCS rates would have made it more expensive for Indians to travel abroad, and would have also led to higher costs for tour operators. The association said that the government’s decision to delay the implementation of the new TCS rates would help to boost the travel industry and support economic growth.

The government’s decision to delay the implementation of the new TCS rates is also likely to be welcomed by foreign exchange dealers. The Federation of Indian Chambers of Commerce and Industry (FICCI) said that the decision would help to reduce the volatility in the foreign exchange market.

The FICCI said that the new TCS rates would have led to an increase in demand for foreign currency, which could have put upward pressure on the rupee. The association said that the government’s decision to delay the implementation of the new TCS rates would help to stabilize the foreign exchange market and provide relief to businesses and consumers.

(With inputs from Travel Trade Journal)

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