Will the 20% TCS Rule Affect Your Upcoming Overseas Travel?

Traveling abroad for many Indians is a cultural and culinary adventure, but it can be dreadfully expensive. Recently, the Finance Ministry revised the rules under the Foreign Exchange Management Act (FEMA), increasing the Tax Collected at Source (TCS) from 5% to 20%. While this means travelers must pay more upfront, experts suggest proactive planning and smart practices to either avoid the tax or claim it back during tax returns.

Understanding TCS: TCS, or Tax Collected at Source, is an additional amount charged by service sellers, like travel agencies, on top of the sale amount. For instance, if your Maldives trip costs 800,000 rupees, a booking partner based in India may charge an additional 160,000 rupees.

The New 20% TCS Rule: Under the new rule, a 20% TCS applies to the total tour package cost, and the same rate applies when purchasing foreign currency or loading your Forex card before international travel. As of October 1, 2023, a 20% TCS will be levied on overseas tour packages exceeding Rs. 7 lakhs, while a 5% rate continues for packages under Rs. 7 lakhs, according to Mr. Rikant Pittie, Co-Founder of EaseMyTrip.

Claiming Back TCS: You can claim back TCS by adjusting it in your advanced tax payments or during tax refunds if you plan to travel after the new regulations take effect. Collect a TCS certificate when making payments to travel agents or service providers and submit it during your tax filing to reduce your tax liability. Salaried employees can provide it to their companies, which can adjust it with payable TDS.

Reducing TCS on Your Trip: To avoid surpassing the Rs. 7 lakh cap per individual, plan your trip accordingly. You can buy foreign currency up to 60 days before traveling, so consider doing so if your trip is before October 1. Another option is booking your package on international websites using international cards to stay under the 7 lakh threshold.

As 'tour packages' aren't explicitly defined, you can book flights and hotels separately on official websites to avoid TCS charges and stay within the 7 lakh limit.

Also Read: Airlines Test ‘No-Kids’ Zone: Would Travelers Pay Extra to Avoid Children on Flights?

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