Reinstatement of exception to transactions carried out through international credit cards

PUBLISHED ON: 05-07-2023

The Ministry of Finance (“MoF”) vide a notification dated May 16, 2023, had amended the Foreign Exchange Management (Current Account Transaction) Rules, 2000 (“Rules”), and omitted rule 7 of the Rules. The omission removed the exception created for transactions through international credit cards outside India and brought these transactions under the purview of the Limited Remittance Scheme (“LRS”) limits specified in Schedule III of the Rules.

The abovementioned amendment was made consequent to the changes announced to the system of Tax Collection at Source (“TCS”) under the Income-tax Act, 1961 on payments under LRS, and to subject the transactions carried out by individuals through international credit cards outside India to TCS.

Subsequently, basis numerous comments and suggestions received from various stakeholders, it was decided to postpone the implementation of the notification. Vide a notification dated June 30, 2023, the MoF has amended the Rules and added rule 7 with effect from May 16, 2023, superseding the earlier amendment and reinstating the position pertaining to international credit card transactions as it was prior to May 16, 2023.

The aforementioned was notified vide a notification dated June 30, 2023 (available here) and shall come into force with effect from May 16, 2023.