It’s not only the foreign tour packages that have 20 per cent TCS, this rule also applies to international transactions using credit cards.
New Delhi: The Union Budget 2023 has increased the Tax Collected at Source (TCS) rate on foreign remittances, including bookings for tour packages, sharply from 5 per cent to 20 per cent of the total transaction amount. The increased tax is effective from July 1, 2023. Suppose you’re booking a flight for Rs 50,000, the corresponding TCS amount would be Rs 10,000, which is 20 per cent of the flight charge.
It’s not only the foreign tour packages that have 20 per cent TCS, this rule also applies to international transactions using credit cards. The ministry on May 16 notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to include international credit card payments in the LRS, according to a PTI report.
“The rate of TCS on LRS remittances including foreign travel bookings is all set to increase four-fold from 5 per cent to 20 per cent effective 1st July 2023. TCS at 5 per cent on LRS remittances was first introduced in October 2020, and it has already led to a significant loss of business for domestic travel and tour agents (DTAs) as customers now prefer booking overseas travel services with Global Travel Agents (GTAs), who have been escaping TCS compliance and hence can offer better pricing on their platforms. The proposed four-fold rate increase will widen the pricing gap as the upfront cost for travellers will increase further on DTAs, motivating them to book with GTAs,” Mohit Kabra, Group CFO, MakeMyTrip told Business Today.
The Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) is used for investments and expenditures abroad. Through this scheme, an individual can remit up to $250,000 per financial year for such transactions.
Indian travellers will be subjected to 20 per cent TCS by authorisedbanks or travel agents when making payments for international travel bookings, including airfare, hotel accommodations, or tour packages once this rule comes into effect.
“The tax collected at source (TCS) shall be accumulated as an aspect of the payment and subsequently transmitted to the government. It is imperative for Indian travellers to take into account these supplementary financial obligations while strategizing their global adventures. The imposition of a 20 per cent TCS is likely to augment the overall expenditure incurred by individuals on their travel. However, the traveller can claim TCS credit while filing their tax return. So no overall impact will be seen,” says Rikant Pittie, Co-founder, EaseMyTrip, reported Business Today.
The new Tax Collected at Source (TCS) rules will also apply to transactions made with credit cards, added Pittie. As a result, from 1 July 2023, foreign travel will incur greater expenses.
“It is mandatory for Indian globetrotters to take into account this supplementary financial obligation while devising their overseas excursions. The imposition of a 20 per cent TCS is likely to augment the immediate total expenditure incurred by individuals on their travel. However, there will be no difference in their travel costs as they can claim it while filing their return,” says Pittie.
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