Taxes on Foreign transaction

[VGisHere]

I've recently got Fi DC with account upgraded to Infinite which gives 0% foreign markup on international transaction.
As per new regulations, there would be 20% TDS charged on foreign transaction from July onwards, is the same applicable on DC transactions too?

So say, if I withdraw money at an international ATM withdrawing some dollars in July, how would that fair out? Would I get 20% money less from ATM or an extra 20% would be deducted from my account?

Also, to understand, there is capping of INR 7L (under LRS?) upto which no tax is applicable and beyond that it is 5%!
Is the withdrawal or any POS transaction carried out internationally also accounted under the 7L limit?

Also, does anyone know about the Niyo credit card which advertises itself as "No TDS applicable" ? What exactly do they mean by that?

 

[WhoU]

Isn’t TDS charged only for remittance? AFAIK, there will be no TDS on DC/CC txns.

 

[VGisHere]

I came across this link, which states otherwise.
Hence, a bit confused!

 

[WhoU]

I came across this link, which states otherwise.
Hence, a bit confused!

Oh okay, then ignore my statement. Let someone informed answer your query.

 

[Copycat]

Isn’t TDS charged only for remittance? AFAIK, there will be no TDS on DC/CC txns.

CC transactions are going to attract TDS, unfortunately

Foreign trip booking: Credit card users may soon have to pay 20% TCS on forex transactions

If RBI brings credit card payments for overseas tour packages under LRS, then all the transactions done through credit cards are likely to attract TCS at 20 per cent. If you often use a credit card to book foreign tour packages, here are the key things that you need to keep in mind.

economictimes.indiatimes.com

 

[Dragon_slayer]

CC transactions are going to attract TDS, unfortunately

Foreign trip booking: Credit card users may soon have to pay 20% TCS on forex transactions

If RBI brings credit card payments for overseas tour packages under LRS, then all the transactions done through credit cards are likely to attract TCS at 20 per cent. If you often use a credit card to book foreign tour packages, here are the key things that you need to keep in mind.

economictimes.indiatimes.com

It just mentioned foreign tour packages. What if someone uses his CC to buy stuff like groceries, electronics, etc in a foreign country? Would that attract 20% TCS ?

 

[akshayhs]

I used my card for 4$ to buy some great wallpapers. The bank charged me exactly 4$ in INR. After converting to INR, I noticed no additional charges have been levied.

 

[Copycat]

It just mentioned foreign tour packages. What if someone uses his CC to buy stuff like groceries, electronics, etc in a foreign country? Would that attract 20% TCS ?

Don't know yet
From what I've read:
a) Booking a tour package with a CC (definitely will attract 20%)
b) Expenses incurred using a CC while in a foreign destination (likely to attract 20%; the authors of the articles were themselves unsure)
c) Other foreign transaction (non tour) paid for with a CC when the buyer is in India (no one knows, should not attract the 20% charge hopefully)

Even in the case of (a) the government still has to decide the mechanism of how to collect the 20% as that was not there in the original proposal. The FM mentioned (a) a couple of days after the original proposal was introduced.

 

[Copycat]

I used my card for 4$ to buy some great wallpapers. The bank charged me exactly 4$ in INR. After converting to INR, I noticed no additional charges have been levied.

The bank charges you the Visa rate for the day (https://www.visa.co.in/support/consumer/travel-support/exchange-rate-calculator.html)
In the case of Magnus, a day later they will add the Foreign currency transaction charge and GST on that. Maybe there is a minimum limit and for USD 4 they don't charge the FCT charge

 

[akshayhs]

The bank charges you the Visa rate for the day
In the case of Magnus a day later they will add the Foreign currency transaction charge and GST on that. Maybe there is a minimum limit and for USD 4 they don't charge the FCT charge

My assumption is they might be planning to check MCC in the future to add TCS of 20%. It does not make any sense to me otherwise to levy 20% TCS for every transaction not involving any travel-related purchase.

Not that it makes any difference in this context, I just wanted to add that my card is on Mastercard network.

 

[VGisHere]

I used my card for 4$ to buy some great wallpapers. The bank charged me exactly 4$ in INR. After converting to INR, I noticed no additional charges have been levied.

I guess that is the case today and would be till 30th June. But what would happen from 1st July? 😅

 

[Copycat]

My assumption is they might be planning to check MCC in the future to add TCS of 20%. It does not make any sense to me otherwise to levy 20% TCS for every transaction not involving any travel-related purchase.

Not that it makes any difference in this context, I just wanted to add that my card is on Mastercard network.

Agreed, it doesn't make sense

Mastercard uses a similar calculation

Mastercard Currency Converter | Currency Exchange Rate Calculator

Mastercard currency converter tool calculates foreign exchange rates for all the major currencies worldwide to enable cross-border purchases and ATM transactions.

www.mastercard.us

P.S. I think I initially misunderstood the context of your remark. I now know that the context in which you made that remark was because of the 20% TCS.

 

[akshayhs]

I guess that is the case today and would be till 30th June. But what would happen from 1st July? 😅

We only have to wait and watch. My next actual foreign transactions come during the black friday.

 

[VGisHere]

And more importantly how would DC be treated?
As asked earlier,

So say, if I withdraw money at an international ATM withdrawing some dollars in July, how would that fair out? Would I get 20% money less from ATM or an extra 20% would be deducted from my account?

would be the question to look out for post 1st July!
Or if anyone has proper answer backed up with some circulars from ministry/RBI!

 

[miles_guy]

Does that mean that if I purchase a sandwich for 10$ while Travelling outside India with my credit card, I will be charged 2$ more every time?

 

[Avid_snake]

Right now TCS is charged only on Debit card transactions outside India. It is 5% if transaction is above 7 lacs till 30th June. The proposal is to increase the same to 20% flat from 1st July.

In case you do any transaction from 1st July, an additional charge of 20% will be levied on your account which can then be claimed back during tax filing but the amount is blocked by the government till then.

In the current proposal, Credit Card spends are not part of the TCS charges and hence there will be no TCS levied on the same even after 1st July. Niyo is claiming this as a feature in their credit card. It is for every credit card.

But the Finance minister is already evaluating ways to bring even CC spends under TCS so there is no guarantee the current stance will continue

 

[Avid_snake]

It just mentioned foreign tour packages. What if someone uses his CC to buy stuff like groceries, electronics, etc in a foreign country? Would that attract 20% TCS ?

Yes right now any transaction in foreign country using a debit card will attract TCS.

I had used Niyo Debit card last year and all international spends have come under TCS, be it grocery or food or tour

 

[Avid_snake]

Does that mean that if I purchase a sandwich for 10$ while Travelling outside India with my credit card, I will be charged 2$ more every time?

Yes. You'll be charged 2$ more from your account but you can claim that back while filing tax returns

 

[miles_guy]

This 20% thing can have very adverse implications.
1. NRI's would be skeptic of sending money back home, given if they need it back, they might have to wait a year for 20% of their cash
2. What if other countries do something reciprocal of this. If you send money to India, you should pay 20% tax which you will get back later

 

[Copycat]

This 20% thing can have very adverse implications.
1. NRI's would be skeptic of sending money back home, given if they need it back, they might have to wait a year for 20% of their cash
2. What if other countries do something reciprocal of this. If you send money to India, you should pay 20% tax which you will get back later

I think the Finance Ministry people have probably thought about this. We aren't sure whether this rule was introduced to catch tax evaders, to prevent forex outflows, to promote Indian businesses, to provide more short term funds to the government or all/some/none of the above