Government Monitors Rise in International Credit Card Spending Under LRS

·       The increasing use of international credit cards by Indians traveling abroad is under close scrutiny by the government, although a final decision on including these transactions under the Liberalised Remittance Scheme (LRS) is yet to be made. A senior government official stated, "As more and more Indians go abroad, spending through cards is on the rise. Certainly, it is on our radar."

·       In May, the Finance Ministry issued a notification to bring credit cards under LRS, with a 20% Tax Collected at Source (TCS). While debit cards are already included under LRS, the implementation for credit cards was postponed to allow banks and card networks to develop necessary IT solutions. This postponement means international credit card transactions are not currently counted as LRS and are not subject to TCS.

·       Under LRS, residents can remit up to $250,000 per financial year for any permissible current or capital account transaction. The Reserve Bank of India (RBI) has instructed banks to prepare for the inclusion of international credit card spending under LRS.