TCS on Foreign/Overseas Tour Package
Table of Contents
Tax collection at source on foreign/overseas tour package
- With effect From July 1, 2023, a 20 percentage Tax collection at source will be required on an international tour package from a travel agent.
- In order to increase Tax collection at source on some foreign remittances & on sale of international or overseas tour packages, Income tax act amendment has been made in section 206C(1G) of the Income Tax Act.
- Tax collection at source of 20 percentage has to be paid even if you buy foreign currency for international travel individually from an AD (authorised dealer).
- Foreign Currency(FCY) Cash or Forex Cards availed towards Foreign / international / Overseas tour programme, will also attract Tax collection at source @ 20 percentage.
- Tax collection at source is not an additional charge and can be adjusted against your total income tax liability & claimed while filing income tax returns. Person may also claim a income tax refund if the above remittance is from an income that is already TDS.
Present TCS rate & Budget Proposed TCS rate
Present Tax collection at source rate & Budget Proposed Tax collection at source rate are as below:
- If the matter related to education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E of income tax act , the present rate is 0.5 percentage of amount or total of the amounts in more than of INR 7,00,000/-. The proposed rate has remained unchanged in the budget.
- If the matter related to education, other than above or for the purpose of medical treatment, the present rate is 5 percentage of the amount or the total of the amounts in More than of INR 7,00,000/-. The proposed rate remains unchanged.
- Overseas tour package – present TCS Rate 5 percentage without any threshold limit. – Proposed Rate is now 20% without any threshold limit.
- Any other case – 5 percentage of the amount or the total amounts in more than of INR 7,00,000/-. Proposed rate us now 20% without any threshold limit.
- Above said income tax amendment applicable w.e.f. 1st July, 2023.
Conclusion on TCS on Overseas Tour Package:
- In case you are going to purchase a international or overseas tour package from a travel agent, than such person have to pay a TCS of @ 20 percentage with effect from July 1, 2023.
- So Now international tour packages become costlier: Travel costs to foreign countries are anticipated to increase soon with this sharp increase in tax collection at source. Since the tax collection at source will be paid by the party sending the money, not the tour originations themselves, there has been no negative impact on tour originations. Of course, the tour operators will insist on full payment and this will continue to be the policy moving into the future.
- The law’s definition of what a tour package is leaves some room for reinterpretation. As opposed to buying a full holiday package, it will be preferable to arrange individual tour components directly, such as hotel rooms & airline tickets.
- People may choose to book their flights, accommodations, and sightseeing separately in order to avoid making a package and being subjected to the Tax collection at source impose in light of the anticipated increase of this tax.
- Additionally, transactions made using credit cards typically take place outside of the LRS. The usual guidelines for revenue account transactions apply to them.
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