On Saturday (May 20), Trinamool Congress (TMC) spokesperson Saket Gokhale courted controversy after he spread disinformation about the 20% TCS (Tax Collected at Source), introduced by the Indian government, over the use of credit cards for international purchases.
Despite the clarification by the Union Finance Ministry that TCS will only be applicable if the expenses on a credit card in foreign countries cross ₹7 lakhs in a year, Gokhle claimed that the exemption up to ₹7 lakhs is an eyewash.
In a tweet (archive), the TMC spokesperson alleged, “Banks cannot verify whether you’ve spent less than 7 lacs in a year. Ergo, u will be charged 20% TCS on EVERY transaction. Just that if your annual spends are less than 7 lacs, you can claim refund.”
Gokhale further accused the BJP and Modi government at the Centre of misleading the public. He claimed, “Nothing has changed with the “new” announcement – you will continue to be taxed 20% on every transaction, that amount will be blocked & billed to your card, & you will be able to claim a refund only when you file returns.”
What is the Truth
Soon after, the Press Investigation Bureau (PIB), a nodal agency under the Indian government’s Ministry of Broadcasting and Information Technology, took to social media to debunk the outrageous claims made by the TMC spokesperson.
“This claim is false. Liberalised Remittance Scheme (LRS) spends of an individual are compiled & monitored by @RBI,” it said. “Any payments by an individual using their international Debit or Credit cards upto Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any Tax Collection at Source (TCS),” PIB further added.
Any payments by an individual using their international Debit or Credit cards upto Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any Tax Collection at Source (TCS).
— PIB Fact Check (@PIBFactCheck) May 20, 2023
Read more: https://t.co/JjgEmttrdK
On 16 May, the ministry issued a gazette notification, which said that rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 has been omitted.
Rule 7 of the FEMA (CAT) Rules, 2000 said, “Nothing contained in rule 5 shall apply to the use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.”
This means, under rule 7, the usage of international credit cards for making payments for fulfilling expenses during travel outside India was not included in the LRS limit earlier, but now they will be included in the same as the exemption granted to international credit card payments has been withdrawn.
Under the liberalised remittance scheme of the RBI, Indian residents are allowed to remit up to $250,000 per year without any prior approval from the RBI. Earlier, only debit cards, forex cards, and bank transfers were included in the LRS, and now credit card payments are also allowed under LRS.
But this has also meant that there will be a tax collected at source (TCS) on international credit card payments. The rate of TCS will be 20% from July 1, while the same will be 5% from now till July 1.
The TCS amount thus paid will be refunded by the government after the user files the tax return after the end of the financial year and is eligible for such returns.
While initially not known, the finance ministry also clarified later that the TCS will not be applicable to transactions. It will be applicable only if the expenses on a credit card in foreign countries cross ₹7 lahks in a year.
It is notable that Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are different. TDS is deducted from earnings, like salary, interest and other payments received, while TCS is collected at the time of spending money to make purchases etc.
However, the TCS is different from other taxes paid at the time of purchase, like GST and excise. For end consumers, GST and excise are essentially part of the price which can’t be reclaimed, while businesses can claim credit for GST.
On the other hand, TCS is linked to an individual’s PAN and it can be claimed back while filing the income tax return, and therefore it is not a final tax payment.
Saket Gokhale spread fake news about the Morbi tragedy
In December last year, the Trinamool Congress leader was caught sharing fake news about an RTI query and its response, which did not exist.
He had claimed that ₹30 crores were spent on PM Modi’s Morbi visit, sharing a purported news clipping from Gujarat Samachar. Soon after, Gujarat Samachar made it clear that they did not publish such a report. Citing the fabricated report, Gokhale claimed that ₹ 5.5 crore was purely for “welcome, event management, & photography”.
He also claimed that “Modi’s event management & PR costs more than life of 135 people”, as the families of the 135 victims of the tragedy were given ex-gratia of ₹4 lakh each, totalling ₹5 crore. He was later arrested by the Gujarat police for peddling fake news.
