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?

 

[Tensor]

I am using my Magnus and IDFC Wealth for everyday transactions in UK for last 1 year, both online and offline and no tax deduction so far. Will see if there is any TCS post June 2023.

 

[Avid_snake]

I am using my Magnus and IDFC Wealth for everyday transactions in UK for last 1 year, both online and offline and no tax deduction so far. Will see if there is any TCS post June 2023.

Credit cards don't have TCS for now.

 

[Avid_snake]

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

It could be to force anyone who has travelled abroad to file taxes compulsorily. The short term cash inflow doesn't hurt them

 

[VGisHere]

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

It would be interesting to see how this works out!

Let's say if someone has about $100 in their account and shop for $99.9, technically their transaction should go through!
But would they end up in negative balance! (which doesn't make sense) 🤷‍♂️

 

[ramirami]

It would be interesting to see how this works out!

Let's say if someone has about $100 in their account and shop for $99.9, technically their transaction should go through!
But would they end up in negative balance! (which doesn't make sense) 🤷‍♂️

No, the transaction should not go through. The clear balance must be (item cost + TCS to be deducted).

 

[ramirami]

ICICI sent me this recently:

 

[WhoU]

But this is just TCS/TDS right? There are no applicable taxes for such transactions so we will get refund when we file income tax right?

 

[Avid_snake]

No, the transaction should not go through. The clear balance must be (item cost + TCS to be deducted).

I guess it will depend on how the bank chooses to implement it. Transactions should ideally go through. This 20% will be a separate entry and hence should not restrict the particular transaction

 

[VGisHere]

But this is just TCS/TDS right? There are no applicable taxes for such transactions so we will get refund when we file income tax right?

Yes, correct. You can claim refund while filing taxes for a amount remitted up to 7L in a year!

 

[VGisHere]

ICICI sent me this recently:

It is still confusing whether it would be applicable on DC/CC, as never before a TCD/TCS has been deducted on carrying out international transaction. It was only Forex mark + GST!

 

[WhoU]

Yes, correct. You can claim refund while filing taxes for a amount remitted up to 7L in a year!

And if it is more than 7L ?

 

[Avid_snake]

It is still confusing whether it would be applicable on DC/CC, as never before a TCD/TCS has been deducted on carrying out international transaction. It was only Forex mark + GST!

It is applicable on DC. Niyo Global charged me TCS for the Niyo Debit card

 

[VGisHere]

It is applicable on DC. Niyo Global charged me TCS for the Niyo Debit card

Oh, that's strange. I carried out couple of international transaction on CCs prev month, but it was only forex+gst. Don't know abt DC though!

 

[VGisHere]

And if it is more than 7L ?

AFAIK, you are then liable to pay 5% as tax unless the remittance is for medical/educational purposes!

 

[thanix]

Currently, TCS is applicable for only Bank remittance and Debit cards and forex cards and only after 7L. Credit cards are not part of this.

Recent announcement from July brings credit card on par with bank, Debit and forex cards so that there is level playing field.

Unfortunately, as usual the government manipulated the wordings and removed the 7L exemption. This means IT will start pushing financial institutions collect TCS from first dollar.

And under LRS, individual can spend or transfer upto 250K USD in FY. TCS is just withholding tax equivalent and you can claim it back on all forex spend irrespective of 7L or not. But LRS limit of 250K still stands.

So if you are business man, impact is less as you can adjust against advance tax each quarter. If you are salaried, you may produce TCS certificate to your employer and ask them to adjust against TDS. But this may open up can of worms or your employer may not agree and have to wait till IT filing to get it back.

I hope wiser sense prevails to government and they bring back the TCS exemption till 7L at least for regular ITR filers.

 

[Avid_snake]

Currently, TCS is applicable for only Bank remittance and Debit cards and forex cards and only after 7L. Credit cards are not part of this.

Recent announcement from July brings credit card on par with bank, Debit and forex cards so that there is level playing field.

Unfortunately, as usual the government manipulated the wordings and removed the 7L exemption. This means IT will start pushing financial institutions collect TCS from first dollar.

And under LRS, individual can spend or transfer upto 250K USD in FY. TCS is just withholding tax equivalent and you can claim it back on all forex spend irrespective of 7L or not. But LRS limit of 250K still stands.

So if you are business man, impact is less as you can adjust against advance tax each quarter. If you are salaried, you may produce TCS certificate to your employer and ask them to adjust against TDS. But this may open up can of worms or your employer may not agree and have to wait till IT filing to get it back.

I hope wiser sense prevails to government and they bring back the TCS exemption till 7L at least for regular ITR filers.

If employers are ready to adjust TCS against TDS, then this move may not such a bad move. The money will not get blocked for 1 year.

Will have to wait and see what happens post July.

Also FM has asked RBI to check how to bring Credit card as part of this. Don't think any official announcement has come on the modalities.

 

[thanix]

If employers are ready to adjust TCS against TDS, then this move may not such a bad move. The money will not get blocked for 1 year.

Will have to wait and see what happens post July.

Also FM has asked RBI to check how to bring Credit card as part of this. Don't think any official announcement has come on the modalities.

Yes as usual it is a hurriedly done announcement and details will emerge by end of June. Hope today's jolt will make them tread carefully 😄