Are you planning your next dream vacation abroad? If so, prepare for an additional strain on your budget. As of October 1, 2023, a new rule will impose a 20% Tax Collected at Source (TCS), affecting not only foreign travel but every transaction you make abroad, regardless of the payment method.
Understanding Tax Collected at Source (TCS)
The government enforces TCS to collect taxes directly from the source of the sale on specific transactions. The goal is to ensure a smooth tax collection system, reducing the chances of tax evasion and guaranteeing a continuous flow of revenue to the national treasury.
How Will the 20% TCS Affect Your Travel Plans Starting Next Month?
Beginning on October 1, 2023, TCS regulations will undergo a significant change. The rate will climb from the current 5% to a hefty 20%.
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This substantial hike will subsequently lead to a rise in costs for those considering international travel packages. Therefore, it would be wise to keep this in mind while budgeting for your overseas trip.
Expert Advice for Travellers
Travel experts suggest that travellers ensure their travel package stays under the 7 lakh threshold per person. Additionally, they stress the significance of careful and strategic trip planning to maximize budget efficiency.
For packages priced at or below 7 lakhs per fiscal year per person, the 5% TCS rate will still be applicable. Generally, these packages cover the expenses related to an annual overseas leisure trip.
Decoding the 20% TCS Rule
Any payments exceeding ₹7 lakhs annually, made in a foreign land through international credit and debit cards, will now be levied a 20% TCS, effective from October 1, 2023.
Can Taxpayers Reclaim the 20% TCS?
Certainly! Taxpayers can easily reclaim TCS refunds by either incorporating them into their advance tax payments or requesting refunds during the tax filing process. When making payments to your travel agent or service provider, make sure you obtain a TCS certificate, which can later be submitted during tax filing to reduce your tax liability.
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For salaried individuals whose companies manage their tax filings, they can simply provide them with the certificate for adjustment against the outstanding TDS.
The Union Budget 2023-24 introduced a significant hike in TCS rates, raising them from the existing 5% to 20% for overseas tour packages and funds remitted under the Liberalized Remittance Scheme (LRS), excluding those intended for education and medical purposes.
The impact of this tax revision will be felt by globetrotters and international spenders alike as they navigate the evolving fiscal landscape.
