Cards under LRS to curb rising global spends

Concerns about “galloping” payments under The released transfer system (LRS) and the increasing overseas use of high-value credit cards with limits above $2,50,000 are factors behind Step center to bring credit cards Under LRS band with 20 percent tax collection at source (TCS). Debit cards are already covered under the LRS.

Outbound transfers from the LRS have doubled to $27.1 billion in the past two years and the center is uncomfortable with this, especially because it believes, for strong reasons, that the actual figure could be much higher because credit cards have been out of range. LRS limits. The feeling is that the high expense of the LRS could have macroeconomic consequences and should be stopped.

According to a high-ranking source, the center has identified several cases of taxpayers whose LRS payments are much higher than their declared income. There are small businessmen and merchants who make multiple overseas visits in the same year using credit cards to make ends meet. These cards often have higher credit limits than the LRS limits. The source explained that this category of taxpayers was the target of the center when it decided to introduce credit cards under TCS and not middle-class taxpayers or salary earners. In a damage control exercise, the center announced on Friday evening that credit card payments of up to $7 lakh will not be covered under the LRS.

The center clearly aims to make leisure travel abroad more expensive because this category, at just over $13 billion in 2022-23, accounts for half of all LRS overseas remittances – it was only a quarter of the latter in 2020-21. Accepting that the move was harsh, the person quoted above said it was done for “strong reasons”.

“There will be a little bit of friction, but it’s not something we’re unhappy about,” the source noted, adding that the idea was as much to control overseas transfers as it was to identify draft dodgers.