From 1st July,2023 on wards, any payment made using credit cards while on travel to a foreign country , 20% tax is chargeable on such a transaction. Where does the FOREX cards stand in this regard ? Will FOREX card will be treated as CREDIT card ?
Ans: In terms of Section 5 of the FEMA, persons resident in India are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by Central Government.
In FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT TRANSACTIONS) RULES, 2000, "Drawal" is defined as drawal of foreign exchange from an authorised person and includes opening of Letter of Credit or use of International Credit Card or International Debit Card or ATM Card or any other thing by whatever name called which has the effect of creating foreign exchange liability.
As per provisions of TCS in Sec 206C, authorised dealer, who receives an amount for remittance from a buyer under LRS is required to collect TCS.
Thus, in my view, FOREX cards will also be subject to TCS, however, it can not be considered as Credit card.