FEMA updates

Reserve Bank of India (RBI) amends the repatriation timeline from International Financial Services Centres (IFSCs) under Liberalised Remittance Scheme (LRS)

RBI has amended the timeline for the repatriation of idle funds lying in the foreign currency account in IFSC from the existing 15 days to 180 days in line with general LRS provisions. 

Source: A.P. (DIR Series) Circular No. 3 dated 26 April 2023 

Applicability of tax collection at source (TCS) to debit/credit transactions under LRS

The highlights of the notification/clarification are summarized as below:

• The Union Budget 2023 increased the TCS to 20% (as against 5%) on all remittances under LRS (including overseas tour packages) other than for medical and educational purposes with effect from 1 July 2023. 
  
• The payment through international credit cards has been brought under the purview of LRS limits and the applicability of TCS trigger accordingly. 
  
• It has also been clarified that the payments made through international debit or credit cards up to Rs. 7 lakhs per financial year will be excluded from the LRS limits and, hence, not attract any TCS.
  
• The existing beneficial TCS treatment for education and health payments will also continue.
  
• Further, the necessary changes to the Foreign Exchange Management (Current Account Transactions) Rules, 2000 will be issued separately in this regard.
  

Source: Gazette notification and clarification issued by Ministry of Finance on 16 May 2023 and 19 May 2023