An Indian rupee note is seen in this illustration. File | Photo credit: REUTERS
In another attempt to address lingering doubts about the applicability of the new 20% tax levy on overseas spending from July 1, the government will soon issue a further clarification to allay concerns that have not been resolved by previous statements on the matter, a Finance Ministry official said on Friday.
The Union budget had increased the withholding tax (TCS) collection rate from 5% to 20% on overseas package tours and outings under the Liberalized Remittance Scheme (LRS) which allows to send abroad 2.5 lakh dollars per year. Subsequently, the government included overseas credit card spending as part of the LRS, allowing a 20% TCS tax on all such overseas spending.
In the face of outcry from industry and taxpayers over the high tax, the Ministry of Finance issued detailed clarifications on the matter in mid-May and defended the decision, before deciding to modify the provisions somewhat in waiving credit and debit card spending up to ₹7. lakh per year from TCS requirement.
“Everyone is aware of the issue and we will definitely provide clarification or FAQs [Frequently Asked Questions] on this and it will clarify the position beyond reasonable doubt on what, how and in what manner the TCS will be implemented and to what extent a threshold is available on which it should not be collected,” said Raman Chopra, co-secretary in the Department of Revenue.
Stressing that there have been many discussions within the ministry on the issue, including with Finance Minister Nirmala Sitharaman and Chief Economic Advisor V. Anantha Nageswaran, Mr. Chopra assured that the matter would be clarified “soon”. .
“At this point, I cannot share with you what needs to be clarified and to what extent it needs to be clarified, but it needs to be done,” he said at a Confederation event. Indian industry in response to a question on how the government will distinguish between personal and business expenses when employees travel abroad for work.
The ministry had previously said that bona fide business visits abroad by employees would not be affected by the TCS tax.