RBI asked to monitor card spending under LRS for tax purposes

Subject : Economy

Section: External Sector

Concept :

Seeking to tighten the implementation of the increased 20% tax collection at source norm for foreign remittances introduced in Budget 2023-24, Finance Minister Nirmala Sitharaman on Friday said the RBI has been asked to monitor the use of credit cards for foreign travel purposes.
It has been represented that payments for foreign tours through credit cards are not being captured under the Liberalised Remittance Scheme (LRS) and such payments escape tax collection at source.

Liberalised Remittance Scheme (LRS)

This is the scheme of the Reserve Bank of India, introduced in the year 2004.
All resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April–March) for any permissible current or capital account transaction or a combination of both.
Not Eligible: The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc.
Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme.
Remitted Money can be used for:
Expenses related to travelling (private or for business), medical treatment, study, gifts and donations, maintenance of close relatives and so on.
Investment in shares, debt instruments, and buy immovable properties in the overseas market.
Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.
Requirements: It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS made through Authorized Persons.