What Does the New 20% TCS Rule Mean for Indian International Travellers?
Team Niyo
Overview
Under the new regulation, starting October 1st, a 20% TCS will be applicable to the total cost of the tour package. This rule also extends to the purchase of foreign currency or loading your Forex card before embarking on an international journey.
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Overview
Under the new regulation, starting October 1st, a 20% TCS will be applicable to the total cost of the tour package. This rule also extends to the purchase of foreign currency or loading your Forex card before embarking on an international journey.
Team Niyo
Introduction
Travelling overseas offers an opportunity to explore diverse cultures and cuisines and seek extraordinary adventures, but for many Indians, it can be a little expensive. In a recent update to the Foreign Exchange Management Act (FEMA), the existing Tax Collected at Source (TCS) has been increased from 5% to 20%. While this increases the initial payment burden for travellers, experts recommend preplanning, adopting strategies to minimise the tax impact, or reclaiming these expenses during the tax return process as the best approaches to adapt to the new regulation.
What is TCS?
TCS, Tax Collected at Source, is a tax collection mechanism in which the bank, business, or financial institution providing services is responsible for collecting a percentage of the payment as tax from the buyer at the time of sale and remitting it to the government. TCS typically applies to various transactions, such as the sale of goods, services, or travel packages, and is collected by the seller or service provider on behalf of the government.
What is the New 20% TCS Rule?
Starting from 1st October 2023, the updated tax regulation stipulates that a Tax Collection at Source (TCS) of 20% will be imposed on the acquisition of overseas tour packages exceeding ₹7 lakh in value, while a 5% TCS will still be in effect for packages valued up to ₹7 lakh.
How to Claim This Tax From Your Trip?
If you intend to travel abroad after the implementation of the new TCS regulations, you have the option to reimburse these taxes. You can do this by either adjusting them within your advanced tax payments or including them when you file your Income Tax Returns (ITR) at the end of the financial year.
Remember to request a TCS Certificate when making payments to your travel agent or service provider. This certificate can be submitted during tax filing to reduce overall tax liability. If your employer handles your taxes as a salaried employee, you can provide them with this certificate for adjustment against the payable TDS.
