Government of India postpones implementation of 20% Withholding Taxes to October 2023

In May 2023, steps were put in motion by the Government of India to add a 20% withholding tax to all international credit card transactions made on India-issued credit cards. Per their notification, credit card issuers in India would have to deduct an additional 20% on each non-INR transaction and deposit it as Income Tax, which would be available against your tax filing for adjustment or refund. Then, there was a change to limit transactions up to INR 700K from the collection of tax. This move added a lot of confusion and dismay. And then, for five weeks, we did not hear anything. Now, the timeline and the goalpost have been moved.

The Government of India harmonises Tax Collected at Source from various sources and moves the date of implementation to October 1, 2023

The Ministry of Finance, on June 28, said that the higher Tax Collected at Source (TCS) on overseas spending will now be implemented effective October 1, 2023.

Also, a change of heart has occurred regarding International Credit Card spending when abroad. These transactions will no longer be counted under the Liberalised Remittances Scheme, which means if you present your card outside the country for spending, this 20% withholding tax is no longer an issue. However, this tax withholding will apply to spending on your cards when in India and spent in a non-INR currency.

As per a press release from the Ministry of Finance,

To give adequate time to Banks and Card networks to put in place requisite IT based solutions,the Government has decided to postpone the implementation of its 16th May 2023 e-gazette notification. This would mean that transactions through International Credit Cards while being overseas would not be counted as LRS and hence would not be subject to TCS. The Press Release dated 19th May 2023 stands superseded.

The press release also says,

Threshold of Rs. 7 Lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments through all modes of payment, regardless of the purpose: Thus, for first Rs 7 Lakh remittance under LRS there shall be no TCS. Beyond this Rs 7 Lakh threshold, TCS shall be

a) 0.5% (if remittance for education is financed by education loan);

b) 5% (in case of remittance for education/medical treatment);

c) 20% for others.

For purchase of overseas tour program package under Clause (ii) of Sub-section (1G), the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakhs per individual per annum; the 20% rate will only apply for expenditure above this limit.

The clarification from the finance ministry comes after weeks of confusion regarding the applicability of the higher TCS of 20% on certain transactions. If you are in India and pay vast amounts of money for international IT services, on your personal credit card, for example, post-October 1, you will get another 20% withholding tax on your account after you have exhausted the INR 700K limit.


As per the latest clarification, if a person is overseas and spends through a credit card issued in India, it would not count under their LRS limits and, therefore, would not attract TCS. However, if a person uses a credit card in India for permissible overseas transactions, that would count under LRS and attract TCS if it exceeds INR 700K in a year.

What are your thoughts on the change of stance for the LRS and withholding tax from the Government of India?

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About Ajay

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe. Ajay is a frequent contributor and commentator on the media as well, including ET Now, BBC, CNBC TV18, NDTV, Conde Nast Traveller and many other outlets.

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  1. Will this be applied to Corporate Cards and how that will impact the personal cards spending. Will they be tracked separately? This will be confusing at the time of filing Tax

  2. How are the banks going to get the data to figure out if you were in India or outside India when you pay for online services?

    • @T, I’ve been thinking of the same. They meant card present (swipe/tap) and card not present transactions (online). In which case, even when I am outside the country, and paying, let’s say, for a change fee on my ticket, it goes to the quota.

  3. Hi Ajay,
    I am trying to understand how will credit card companies track if you are using multiple cards to slip through 7L limit. Also how will different tour companies will know what limits you have utilised keeping the txn under 7L individual limit. Any thoughts ?

  4. Technical point – This is not withholding tax. WHT is applicable on interest paid on foreign borrowings. This is TCS as it is applied on expenses!

    Good to see that some sanity has prevailed here on LRS treatment. But 20% TCS is still stupid and ridiculous

    • @AA, Withholding Tax is not a technical term I believe. Anywhere they hold back a portion of money that belongs to you and pay it to the taxman is withholding tax.

      • The only reason why a 20% TCS would be applied is that government wants to discourage outward remittances through LRS. The foreign reserves aren’t low, so cannot understand this rationale.

        If the intention is to catch evaders then it is the stupidest way to do so. Easier would be to just apply a 0.1% TCS on all transactions and the income tax department will get details of all remittances which they can then match with the tax returns of the individual without burdening the tax payer unnecessarily. Credit card transactions are anyway done through banking channel and is reported in the 26AS since ages. The banks also bifurcate the expenses into domestic and foreign spends when reporting in the AIS.

        This 20% rule is going to majorly impact the salaried middle class only. The rich and the ultra rich already have large balances parked outside the country. Many use business expenses through associate entities to escape LRS all together. The non-savvy evaders purchase forex cash outside of system when traveling aboard. Once at the destination they purchase local prepaid cards with the cash (if needed) or just spend cash.

  5. Technical point – it’s not withholding tax. WHT is used/ applicable when interest is paid on foreign borrowings. This is TCS.

    Finally some sanity prevailed by keeping CC spends out of it when in foreign location. 20% rate is still ridiculous though!

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