New 20% TCS to affect international travelers starting next month
Starting October 1 this year, international travelers will face a tax collected at source (TCS) of 20% on transactions made abroad, as announced in the Union Budget 2023-24. This new rule is applicable to all transactions, regardless of the payment method used. This is expected to result in a 15% increase in costs for individuals seeking overseas travel packages.
TCS rate hike for overseas packages, remittances
The TCS rate for international tour packages and funds remitted under the Liberalized Remittance Scheme (LRS), excluding education and medical purposes, has been increased from 5% to a whopping 20%. This means that any payments exceeding Rs. 7 lakh a year through international credit or debit cards will be subject to the increased TCS levy effective from next month.
Tips to dodge higher TCS on travel packages
To avoid the higher TCS rate, travelers are advised to ensure that their travel package costs do not exceed the Rs. 7 lakh threshold per individual. Strategic and meticulous trip planning is highly recommended to maximize budget efficiency. For packages that are valued at or under Rs. 7 lakh per individual, per financial year, the 5% TCS levy will remain applicable, typically covering the costs of an annual overseas leisure tour.
Claiming TCS refunds and tracking payments
Taxpayers will be able to claim a TCS refund in their Income Tax Return. However, they will witness a higher bill on their cards, potentially blocking money for many months until a return has been filed and a refund claimed. Archit Gupta, the founder and CEO of Clear, advises taxpayers to keep track of TCS entries in Form 26AS and adjust the tax already collected accordingly.
