Foreign Exchange Industry Calls for Clarity on Proposed 20 percent TCS: Seeks Parity with Debit and Credit Cards

Bhaskar Rao P, General Secretary of The All India Association of Authorised Money Changers & Money Transfer Agents, said, "The money exchange industry expects the government to ensure a level playing field for all overseas transactions with small values of Rs. 7 lakhs, regardless of the instrument used. Common people utilize foreign currency cash (up to the maximum of USD 3000), prepaid Forex Travel Cards, and wire transfers, while the upper class uses international debit and credit cards."

According to the immigration data published by DGCA, more than 60 percent of overseas travelers are first time flyers. These people are from the economically weaker section from the bottom of the pyramid who are less educated, who do not hold debit or credit cards and hence deserve parity with the debit and credit card holders. The notification will directly impact individuals travelling abroad for employment especially the labour/working class, who generally belong to the low-income group and are ineligible for credit cards. These travelers generally procure foreign exchange in the form of cash or prepaid card from money exchange outlets operating at international airports or city outlets. The imposition of 20% TCS will have a major impact on them as they do not fall under the income tax bracket.

With the relaxation given for Credit and Debit cards, the upper middle class & rich customers will be able to avoid paying TCS up to Rs. 7 lacs per credit card/ debit card in their possession. At the same time lower middle-class customers, housewives, and senior citizens who avail foreign exchange by paying from their account will be subject to a 20% TCS. This will prove extremely detrimental to these customers, who may have no requirement to file taxes and this will significantly compromise the business viability of licensed Money changers in India. The industry expects the Ministry/Government to provide further clarification that the exemption of TCS up to Rs. 7 lacs per annum also applies to cash forex purchases, wire transfers, and prepaid forex cards.