Lenders have sought a one-month extension from the government to comply with the Liberalised Remittance Scheme (LRS) for international credit card spends, said people familiar with the matter.
The scheme allows Indian residents to remit up to $250,000 abroad in a financial year for permissible purposes such as education, travel and investment. Last year, the government announced that forex transactions through credit cards would be covered under the scheme and charged 20% tax collected at source (TCS) beyond the threshold of ₹7 lakh per fiscal.
Senior bank executives decided, at a meeting held earlier this month, to seek an extension till June 30 to fully calibrate their systems to report such transactions. “Earlier this month a communication was received from the RBI on the preparedness for implementing the guidelines,” said one of the executives, who did not wish to be identified.
Banks need more time for customer awareness, staff training and system calibration for smooth implementation, the executive said. In its communication to banks and the Indian Banks’ Association (IBA), the RBI suggested that they work out a standard operating procedure for uniformity and smooth implementation, the executive said.
ET’s queries to the RBI did not elicit a response till press time.
Another bank executive said the lenders have not yet included international credit card spending under LRS because the government hasn’t issued any final guidelines. “There is an informal communication from the government that they will be coming out with final notifications within the first week of the formation of the new government,” the executive said.
In June last year, to give banks and card networks adequate time to put in place the requisite IT-based solutions, the government had decided to postpone the implementation of its May 16, 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 tax collection at source (TCS),” the statement said.
