Finance Ministry has announced that it will waive the 20% tax
on overseas credit card spending for individuals up to ₹7 lakh
per financial year, following criticism and concerns raised by taxpayers
and businesses.
Key Highlights:
The Reserve Bank of India had introduced a provision to capture
overseas credit card spending under the LRS, which allows
individuals to remit forex up to $2.5 lakhs annually.
However, the government’s plan to impose a 20% tax on such
spending faced backlash, leading to its current decision to exempt spending
up to ₹7 lakh and the continuation of beneficial treatment for education
& health payments, under the LRS.
LRS remittance refers to the transfer of foreign exchange (forex)
by resident individuals in India for various purposes.
The LRS sets the limit on the amount of money that can be remitted by
individuals without requiring specific approvals from regulatory
authorities.
Under LRS Indian individuals can send money outside up to a maximum of
$250,000 in a year.
Aim:
Simplify the process of remitting money outside India and
encourage foreign investments by Indian individuals
Permissible Transactions Education, travel, medical treatment,
gifting, investment in shares or property, etc.
Non-Permissible Transactions Trading in foreign exchange or
buying lottery tickets
Ineligible Entities Corporations, partnership firms, Hindu
Undivided Family (HUF), Trusts, etc.
Benefits:
Diversify investments and assets, finance foreign education or travel
Issues Outward remittances may pressure Forex reserves.
