India to Impose 20% Tax on Credit Card Spend During Overseas Travel
Starting from July 1, 2023, India is scheduled to impose a 20% tax on overseas credit card expenses, excluding education and medical treatment. The tax will be collected at the source, and it is expected that the implementation of this tax will severely impact individuals traveling overseas.
This new tax has come into effect as part of the Finance Act, 2023. The Indian government believes that this tax will help in curbing the outflow of foreign exchange from the country and will also help in boosting the domestic economy.
It is important to note that the tax will only be applicable to credit card spending and not to debit card transactions. The tax will also be applicable to payments made towards hotel bookings, shopping, and other expenses incurred during overseas travel.
Individuals who wish to avoid this tax can use their debit cards for transactions during overseas travel, as debit card transactions are exempted from this tax. However, this might not be a viable option for all individuals, as debit cards come with their own limitations.
The implementation of this tax has garnered mixed reactions from various stakeholders. While some individuals believe that this tax will help in curbing unnecessary expenses during overseas travel, others believe that this tax will restrict individuals from traveling abroad and will limit their spending power.
It is important to note that this tax is not applicable to education and medical treatment expenses incurred during overseas travel. This exemption has been provided as a relief measure for students who are studying abroad and individuals who need to travel abroad for medical treatment.
Furthermore, the tax will not be applicable to transactions made using foreign currency, and there will be no tax on the conversion of foreign currency into Indian Rupees.
In conclusion, the new tax on overseas credit card expenses is a significant development that will impact individuals traveling overseas. While the tax is expected to help in curbing the outflow of foreign exchange from the country, it remains to be seen how effective it will be in achieving this objective. Individuals traveling overseas should carefully consider their options and choose the most viable option for their particular circumstances.