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Foreign Trip On Credit Card To Cost A Bomb!
By: Tupaki Desk | 19 May 2023 2:11 PM GMT
The emergence of credit cards changed our lifestyle. Cardholders also prefer going on foreign trips for quick vacations. Earlier only celebrities and rich people used to go abroad for foreign trips. But the same is not the case now and people with credit cards with decent limits can achieve their foreign dreams. The offers the banks give on credit cards are also one of the major reasons behind users taking them.
In what could be a big blow to the credit card users, their foreign trip would cost a bomb as credit card transactions would attract a Tax Collected as Source of around 20 percent. With this, the foreign trips and the money spent there would increase, which would make the users spend more.
Going into details, the government announced that Credit Card Transactions Internationally would charge as much as 20 percent Tax Collected as Source(TCS) and this will come into effect from the 1st of July this year. With this, the transactions and money spent internationally on credit cards would cost a bomb.
To explain how the new announcement would work, taxes are two kinds- TDS - Tax Deducted as Source and TCS - Tax Collected as Source. TDS is a tax employer charge while giving salaries to employees and what the bank deduct on the Fixed Deposit Interest. TCS - Tax Collected as Source is the charge bank deducts on the transactions we make internationally.
So every Foreign Remittance comes with TCS making it more costly than usual spending. Like how interest is attracted when we take loans from banks, foreign transactions attract TCS.
To give an example of how this TCS works, let's say a person named Shubham has a credit card and its limit is 5 lakh. He went to Dubai on a vacation. His vacation cost him 2.5 lakh which included his stay, travel, shopping, and food. Usually, he has to pay Rs 2.5 lakh. But the total amount would be 3 lakhs as foreign transactions attract 20 percent TCS.
Total Spends/Bill - ₹2.5 Lakh
20% TCS - ₹50,000
Total Amount - ₹3 Lakh.
On top of this, credit card users might also get charged additional amounts like additional Forex Markup, and GST in some conditions.
In the second example, a person named Aman wants to go Maldives for a Honeymoon trip. He approached a Travel Agency for the quotation and the representtaives said that the total cost would be around Rs 5 lakhs. But he doesn't want to pay using a credit card and he wants to use Debit Card/Cash/Net Banking. However, he cannot miss the TCS and he too should pay the charges. His trip would be Rs 6 lakh instead of 5 lakhs.
What's The Way Out:
A few companies offer great deals and offers on credit cards for users. So this makes the Value back on Foreign Spends great despite Markup & Taxes. What Credit Card users can do here is they should carefully plan everything because their spending comes with 20 percent TCS.
In what could be a big blow to the credit card users, their foreign trip would cost a bomb as credit card transactions would attract a Tax Collected as Source of around 20 percent. With this, the foreign trips and the money spent there would increase, which would make the users spend more.
Going into details, the government announced that Credit Card Transactions Internationally would charge as much as 20 percent Tax Collected as Source(TCS) and this will come into effect from the 1st of July this year. With this, the transactions and money spent internationally on credit cards would cost a bomb.
To explain how the new announcement would work, taxes are two kinds- TDS - Tax Deducted as Source and TCS - Tax Collected as Source. TDS is a tax employer charge while giving salaries to employees and what the bank deduct on the Fixed Deposit Interest. TCS - Tax Collected as Source is the charge bank deducts on the transactions we make internationally.
So every Foreign Remittance comes with TCS making it more costly than usual spending. Like how interest is attracted when we take loans from banks, foreign transactions attract TCS.
To give an example of how this TCS works, let's say a person named Shubham has a credit card and its limit is 5 lakh. He went to Dubai on a vacation. His vacation cost him 2.5 lakh which included his stay, travel, shopping, and food. Usually, he has to pay Rs 2.5 lakh. But the total amount would be 3 lakhs as foreign transactions attract 20 percent TCS.
Total Spends/Bill - ₹2.5 Lakh
20% TCS - ₹50,000
Total Amount - ₹3 Lakh.
On top of this, credit card users might also get charged additional amounts like additional Forex Markup, and GST in some conditions.
In the second example, a person named Aman wants to go Maldives for a Honeymoon trip. He approached a Travel Agency for the quotation and the representtaives said that the total cost would be around Rs 5 lakhs. But he doesn't want to pay using a credit card and he wants to use Debit Card/Cash/Net Banking. However, he cannot miss the TCS and he too should pay the charges. His trip would be Rs 6 lakh instead of 5 lakhs.
What's The Way Out:
A few companies offer great deals and offers on credit cards for users. So this makes the Value back on Foreign Spends great despite Markup & Taxes. What Credit Card users can do here is they should carefully plan everything because their spending comes with 20 percent TCS.
