Clarifying the New 20% TCS on International Credit Card Purchases: Facts and Misconceptions

20% Tax Collected at Source (TCS) on international credit card purchases.

There is a lot of misinformation being spread today by certain groups in Congress about a new notification regarding a 20% Tax Collected at Source (TCS) on international credit card purchases. Let me clarify some important points and answer all the questions.

20% Tax Collected at Source (TCS) on international credit card purchases.


Suppose your child is studying at a foreign university and you want to send money to support them. Under the Liberalised Remittance Scheme (LRS), you are allowed to send up to USD 250,000 per year for this purpose.


Previously, debit card transactions were covered under the LRS scheme, but credit card transactions were not included. This was because credit cards typically don’t have such high limits. However, it was discovered that some people were exploiting this loophole and spending disproportionately to their income using credit cards.


To address this issue, the government has now included credit card transactions in the LRS scheme, while debit card transactions were already included. Previously, a 5% TCS rate was applicable, but now it has been increased to 20%. It’s important to note that this 20% TCS can be claimed in the income tax return.


Now, let’s discuss where this TCS will be applicable and where it won’t be:


TCS will not be deducted on:

– Payments for the purchase of foreign goods or services from India, such as newspapers or online streaming services.

– Company or business trips (employees in the IT sector are unaffected).

– Payments for education and medical purposes.


TCS will be applicable on:

– Purchases made by wealthy individuals for buying property, shares, and foreign travel.

– Investments in assets like real estate, bonds, and stocks outside India by high-net-worth individuals.

– Tour travel packages or gifts to non-residents.


Important things to note:

– This notification does not affect the use of international credit cards by residents while they are in India.

– Overseas tour packages booked using Indian credit cards (in rupees) are not affected. For example, if you book a package through MakeMyTrip or other similar platforms.


The purpose of implementing this 20% TCS is to curb money laundering, and it will primarily impact only the super-rich. I hope this clears up any confusion.


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