19/05/2023
Your Next Foreign Trip is Becoming Expensive
Government has Introduced 20% TCS on all Credit Card Transactions Internationally from July 1, 2023
All use cases covered ๐
Let me simplify this for you ๐งต
Before that, For Starters ๐ฐ
Whatโs the Basic Difference between TDS & TCS?
TDS - Tax Deducted as Source
TCS - Tax Collected as Source
Your Company deducts TDS on your Salary, Bank deduct TDS on FD Interest
While Your Bank Deduct TCS on Foreign Remittances, basically TCS is Collected by the Seller at the Point of Sale
Now letโs Dig Deeper in the Use Cases
โข Use Case 1
Shubham has a Credit Card with a Credit Limit of โน5 Lakh
He went on an International Vacation to Dubai
He used his Credit Card for all Transactions abroad such as Hotel Bills, Shopping, Restaurants, Cabs etc
His Total Spends are say โน2.5 Lakh
Total Spends/Bill - โน2.5 Lakh
20% TCS - โน50,000
Total Amount - โน3 Lakh
(Note, Your bank may charge additional Forex Markup, GST when you use Credit Card Abroad)
You see what happened here
So Basically Shubham has to pay 20% TCS on his spends upfront
His Credit Card issuing Bank will Deposit that 20% TCS against his PAN
Shubham can claim/adjust this TCS only at the time of filling his Income Tax Returns
โข Use Case 2
Aman wanted to Book a Honeymoon Trip Package for Maldives
He got a Quote of โน5 Lakh (All Included) from a Travel Agency based out of India
Aman doesnโt use a Credit Card
He wanted to pay via Debit Card/Cash/Net Banking
Aman too has to Pay 20% TCS
So the Total Upfront Amount he needs to pay is โน6 Lakh Instead of โน5 Lakh
Why Government is Doing This?
โข To Tax Rich & HNIs
โข Increase TCS Cashflow
โข More People in Tax Net & Compliance
โข To Promote Domestic Tourism (Maybe?)
Will it hurt Indian Credit Card Industry? ๐ณ
Personal View, Yes
Many Premium Credit Cards such as Infinia, Magnus, Reserve used to offer great reward points on International Transactions
So even after Markup & Taxes, the Value back on Foreign Spends were great. But now people need to plan their spends accordingly as 20% TCS on Spends needs to be paid
โข This is Applicable from July 1, 2023
โข You may also set off the TCS Paid against your Advance Tax Liability
