IT Dept Plans New Reporting System for Credit Card Expenses Abroad, TCS to be Imposed

NEW-DELHI: The Income Tax Department is planning to introduce a new system that will require individuals to provide information about the purpose of their expenses made abroad using credit cards. This move is in line with the tax collection at source (TCS) regulations. Discussions are underway between the Income Tax Department, the Reserve Bank of India, and other stakeholders to establish an appropriate mechanism for this purpose.

Under the proposed system, individuals will be required to communicate the purpose of their spending abroad to the issuing bank within a specified timeframe. Depending on the nature of the expenses, different TCS rates will be applied. If the expenditure is for education or medical treatment purposes, a 5% TCS will be levied. On the other hand, if the expenses are for any other purpose, a 20% TCS will be imposed. These TCS provisions are set to be implemented starting from July 1, targeting expenses made through credit cards overseas.

This move aims to enhance transparency and ensure proper taxation of foreign expenditures. By providing relevant information to the card issuing banks, the Income Tax Department aims to streamline the process of tax collection on foreign transactions. This initiative will also help in curbing any potential misuse or tax evasion related to credit card spending abroad.

The Income Tax Department is actively working towards finalizing the necessary framework in collaboration with the Reserve Bank of India and other stakeholders. The proposed mechanism will facilitate the effective implementation of TCS regulations and enable the government to monitor and regulate the flow of funds for different purposes abroad. It is advisable for individuals who frequently use credit cards for foreign expenses to familiarize themselves with these upcoming changes and ensure compliance with the new reporting requirements.