The Tax Buzz: India’s Government Imposes 20% TCS on International Credit Card Expenditures
Indian tax payers watching Finance minister Nirmala Sitharaman & Indian Government imposing
— Vishal Verma (@VishalVerma_9) May 18, 2023
- 30% Income Tax on Hard Earned Salary
- 5-12% GST on Flight Tickets
- 12-18% GST on Hotels & Travel related Services
And now Pay Extra 20% TCS on Credit Card spend in a Foreign country! pic.twitter.com/qsH2JebfCN
The landscape of international transactions in India has been transformed by introducing a 20% Tax Collected at Source (TCS) on international credit card expenditures. This new directive from the Indian government has caused a buzz among consumers and financial experts alike, with implications that could be far-reaching.
Yes the 20% TCS will be captured along with your TDS credit. Yes you’ll be able to adjust it against your tax liability when you file your return. Yes you’ll get a refund if you’ve paid over what you’re actually liable to pay. Yes it still makes zero sense.
— Lavanya Mohan (@lavsmohan) May 18, 2023
Foreign travel pe 20% TCS; foreign credit card spend pe 20% TCS and LRS limit me lana bahut hi interesting rule hai. Haan political donations pe kabhi TCS nahi lagne waala - yeh tay hai ! Wahaan aapko ulta income tax mein rebate milegi.https://t.co/xvIptzEp5z
— Ashneer Grover (@Ashneer_Grover) May 18, 2023
The TCS is essentially a method of collecting income tax directly from the source of income rather than from the individual who has earned it. With this new policy, a TCS of 20% will now be levied on all international transactions made through credit cards. This effectively means that for every international transaction, the card issuing entity will collect a fifth of the amount as tax, which will then pay it to the government.
This development has stirred up some debate. Critics have questioned the high percentage of the TCS and its potential to discourage international transactions. One vocal critic, Ashneer Grover, slammed the move, drawing attention to disparities in taxation policies, particularly in relation to political donations.
In a broader context, this move could have profound implications for the future of international transactions in India. With a growing number of Indians using credit cards for international transactions, this 20% TCS could have significant economic impacts. For one, it could cause a decline in international spending, as the additional tax may dissuade consumers. On the other hand, it could potentially increase government revenue through taxation.
However, the implications of this change are not just economic. It also underscores the government's stance on promoting domestic transactions and minimizing capital outflow. This could, in turn, contribute to the larger goal of economic self-reliance and domestic growth.
In conclusion, the 20% TCS on international credit card transactions represents a significant shift in India's financial landscape. While it has its critics, it also presents opportunities for greater economic control and revenue generation. However, it is also a reminder of the constantly evolving nature of economic policy and the need for consumers and businesses to stay informed and adaptable.