Tax collection at source, or TCS, is a provision of the Indian Income Tax Act. In accordance with these laws, certain individuals are compelled to collect from their customers a predetermined amount of tax on extraordinary transactions. The majority of these transactions are commercial or trading-related. Recently, the government has made new changes to the TCS laws in the overseas travel arena. In this article, we will touch upon changes you may face in TCS if you are an overseas traveler.
What is the new TCS rule 2023?
In Budget 2023, the percentage of tax deducted at source (TCS) for international transfers made under LRS increased from 5% to 20%. This covers overseas travel, remittances, and other transfers, aside from those for health, education, and medical needs. On July 1st, 2023, The new regulation was supposed to come into effect from 1st July, 2023 which has now been postponed to October 1, 2023. For remittances under Rs. 7 lakhs, TCS formerly offered an exemption. This is no longer there.
From October 1, 2023, a 20% TCS will be required if you purchase an international tour package from a travel agent. You must pay TCS of 20% even if you buy foreign currency for your international travel individually from an authorized dealer.
How to calculate TCS on tour package?
20% of TCS will be deducted without any upper bound.
If parents want to send money to their children who are studying overseas, they must pay 5% TCS on transfers over Rs. 7 lakh. As long as the parents can demonstrate that the money is being sent for educational purposes.
Here are five points to note related to changes in TCS on international travel packages:
- Beginning October 1, 2023, a 20% TCS on an overseas tour package purchased through a travel agent will be necessary.
- Sub-section (1G) of Section 206C of the Income Tax Act has been amended to enhance TCS on the sale of abroad travel packages and on some international remittances.
- TCS of 20% must be paid even if you purchase foreign currency separately from an authorized dealer for international travel.
- TCS @ 20 will also apply to FCY Cash or Forex Cards used for overseas or foreign tour programmes.
- You can deduct TCS from your total income tax liability and claim it when filing tax returns. TCS is not an additional fee. Any remittance that has already had tax deducted at source (TDS) is also eligible for a refund.
In conclusion, the new changes in Tax Collected at Source (TCS) on overseas travel packages in India have significant implications for both customers and travel companies. The increase in TCS rates on overseas travel packages from 5% to 20% will impact the cost of travel for customers, while travel companies will need to ensure compliance with the new regulations and adjust their pricing accordingly.