Some explained how the measure was unnecessary, while others simply ignored the decision, saying things like “20% TCS for the LRS. Why?” and “Stupid policy.”
Financial experts, analysts and others have been outraged on social media, especially Twitter, following the government’s recent notification that foreign currency spending on international credit cards would be subject to the Reserve Bank of India’s Liberalized Remittances Scheme (LRS). expressed. A higher withholding tax (TCS) rate of 20% will apply to spending with international credit cards effective July 1, 2023.
Some explained how the measure was unnecessary, while others simply ignored the decision, saying things like “20% TCS for the LRS. Why?” and “Stupid policy.” Some investors and analysts even claimed the government’s move was a preparation for the 2024 Sabah elections.
On May 16, the Ministry of Finance notified the Foreign Exchange Controls (Current Account Transactions) (Amendments) Regulations, 2023 to include international credit card payments in the LRS. RBI approval is required for remittances exceeding $250,000 or its foreign currency equivalent.
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The government’s decision has drawn a lot of criticism from several experts and people from all walks of life.
Sandeep Pravin Parekh, Managing Partner of Finsec Law Advisors, elaborated on some of the impacts of the tax changes on foreign spending, stating, “Tax credits for foreign spending are wrong, and their justification is even worse.” there is,” he said.
In a lengthy post, Parekh tweeted, “This will not prevent money laundering, it will cause it. Who wants to pay $125 for a $100 product?”
Writer and CPA Anupam Gupta, describing an example of the center’s recent sloppy tax changes, said, “The LRS was charged with a TCS of 20%. Why? people may be abusing the system, and now? everyone has to pay those costs.” abuser. Even 20%?
Rajeev Mantri, managing director of Navam Capital, expressed similar thoughts, tweeting that the government’s move was a “bad policy” and adding: “This ridiculous policy has no justification and it has been achieved. It does a lot more damage than it does,” he added. ”
“20% TCS for credit card use outside India. The biggest risk to the Indian story is financial think tanks. “The idea of speed breakers – instead of catching violators, make sure everyone does,” said CIO and money manager of Complete Circle Wealth. Zing Partner Gurmeet Chadha said.
Ajay Rotti, Founder and CEO of Tax Compaas, said: This affects many business travelers who spend on behalf of their company. Using TCS in his employee name won’t do him any good, and he can’t use it in his company name either. ”
Additionally, many users stressed how a 20% TCS for foreign credit card use hinders “ease of doing business.”
“A 20% TCS applies to overseas spending through credit cards and we want to replace the ‘dollar’ in Cavert High with ‘₹’,” said Basant Maheshwari, investor and portfolio management services at Small Case. Stated.
Former BharatPe co-founder and entrepreneur Ashnil Glover said withholding tax (TCS) rules never apply to political contributions, adding that Indian political contributions are exempt from income tax.
The 2023-24 Federal Budget increased the TCS rate to 20% from the current 5% for international travel packages and funds remitted under the LRS (excluding education and medical purposes).
In the face of backlash, the Treasury Department has issued FAQs on the 20% TCS. It said the TCS payment was not the final tax. If the TCS recipient is a taxpayer, he can claim the TCS deduction as a tax payment on his ordinary income and reconcile it with payments such as prepaid tax.