Yes, LRS or the Reserve Bank’s Liberalised Remittance Scheme is applicable to credit card payments for foreign travel. This is to ensure that such expenses do not escape TCS or tax collection at source. The LRS is a scheme that lays down the guidelines for outward remittance from India.
How Does The LRS Work?
A TCS of 20% was proposed for foreign outward remittance under LRS in the Union Budget 2023, besides education and medical purposes. This will be coming into effect from July 1, 2023. Prior to this, the TCS of 5% was applicable on foreign outward remittances of more than Rs. 7 lakhs.
When a person selling specific items is bound to collect tax from a buyer at a specified date and deposit the same with the government, it is called TCS.
The outgo from LRS was initially USD 250,000. There have been changes in the LRS limit to adjust to the prevailing macro and micro economic conditions.
Using LRS, Indians can remit up to USD 250,000 (About 2.05 crores) every financial year for current or capital account transactions or a combination of both. If you exceed this specified limit, you have to take permission from the RBI beforehand.
LRS rules define abroad investments as capital account transactions. Only specific capital account transactions are allowed under LRS rules such as
- Opening a bank account abroad i.e. a foreign currency account
- Buying real estate property abroad
- For making investments overseas. This includes investing in shares, mutual funds, and debt instruments amongst others.
LRS also provides forex services to Indian citizens for medical expenditure or travel apart from remittances. But, corporates, partnership firms, HUFs, and charitable trusts do not come under the purview of LRS.