The Centre on Wednesday deferred its decision to levy a 20% tax collected at source on purchases made outside India using credit cards.
The Ministry of Finance said that this is being done to give banks and card networks adequate time to put the required technical infrastructure in place.
The plan had been announced by the Centre on May 16 and was to be implemented from July. It will now be applicable from October 1.
Annual overseas spending of below Rs 7 lakhs will not be subject to taxes.
The government had said that the additional amount collected as tax can eventually be reclaimed when income tax returns are filed.
The new rule was expected to hurt Indians travelling abroad and those who buy securities overseas. It was criticised by several users on social media, including those who support the ruling Bharatiya Janata Party.
In Wednesday’s announcement, the government also clarified that no tax collected at source will be applicable on overseas remittances up to Rs 7 lakh under the Liberalised Remittance Scheme.
Under the Liberalised Remittance Scheme, Indians can remit up to $250,000 per annum without the authorisation of the Reserve Bank of India.
The tax will not apply to those who buy tour packages, which will continue to attract a 5% tax instead of 20% till October 1.