The Finance Ministry tweeted a series of frequently asked questions (FAQs) in an attempt to address the concerns surrounding the Foreign Exchange Management Act (FEMA) Amendment Rules 2023 released on May 16. These FAQs address that only personal expenditures incurred by a person using a credit card when abroad would fall under the amendment. They clarified that current account transactions undertaken by international credit cards in India were already covered under the liberalized remittance scheme (LRS) and added that business trips would not be included under the scheme. Why has this amendment been made: The government says that the amendment has been made in the interest of uniformity in the various modes of drawl of foreign exchange. It says that debit cards used abroad were already covered under LRS, and Rule 7, which exempted credit card transactions carried out abroad, led individuals to exceed LRS limits. It claims that data from top money remitters under LRS reveals that international credit cards are being issued with limits in excess of $250,000 (which is the limit post which transactions need to be approved by the RBI under FEMA). Confusion prevails, plenty of questions remain unanswered: These FAQs come in response to the removal of Rule 7 from FEMA, 2000. The removal of this rule brings international credit cards used abroad into the scope of the LRS and imposes a 5% (20% from July 1) tax collected at source (TCS) on them. This amendment left people questioning what would fall under the ambit…
