TCS on LRS continues to face questions and resistance... CBDT continues to evolve this aspect or roll back little [Sec 206C of ITA'61 - Sec 394 of ITA'25]

In order to apply TCS on foreign remittances and foreign spends under LRS, an amendment applicable from 1st July 2023 is was made in Section 206C(1G) of the Income Tax Act wherein TCS @20% is leviable on remittances for foreign spends. The payment for these foreign spends can also be made vide international credit cards which was not under RBI scanner apropos Rule 7 of FEMA (Current Account Transaction) Rules 2000. Now, by deleting this Rule all foreign spends even by international credit cards will also be liable to TCS @20% or any other rate as per Section 206C(1G). Spends vide International Debit Cards and Travel Cards would continue to be liable to TCS. A process may possibly be laid for this wherein the holder of international credit card, before making any payment, would be asked by a pop-up message on the nature of the transaction and when he does so, TCS would be automatically triggered and instead of say $10,000 and extra $2000 is collected. It may be just like an online payment made for say spending on hotels abroad wherein while your spend value is $10,000, but a final payment approval of an excess amount is sought before payment is processed. It is important to note that while TCS is merely advance collection of tax on a payment made, the purpose is to track whether people making high-value remittances reflected proportionately high income in their tax returns. Further, after widespread backlash, the CBDT has decided to exempt international spending of up to Rs 7 lakh from TCS of 2%, but the saga is far from over still.