Introduction New TCS Rule
Traveling overseas is an exhilarating journey that gives you access to a wide range of cultures, cuisines, and experiences. Every turn in this exciting kaleidoscope reveals a fresh tale that will help you create lifelong memories. The Finance Ministry has boosted the current Tax Collected at Source (TCS) from 5% to 20% during a modification of the provisions under the Foreign Exchange Management Act (FEMA). Although the amount that travelers will need to pay up front has grown as a result, experts advise that the easiest way to adjust to the new law is to plan ahead, use strategies to reduce the tax, or else, just claim them back during tax returns.
TCS: What is it?
The term TCS, or Tax Collected at Source, refers to a fee that the provider of a service, in this case travel companies, charges in addition to the sale price. For instance, your booking partner (if situated in India) would charge you an extra 160,000 rupees if you are arranging a vacation to the Maldives that costs 800,000 rupees.
What does the new TCS rule of 20%?
The new regulation states that a 20% TCS will be added to the total cost of the vacation package and that the same rule will apply if you load your Forex card or buy foreign currency before traveling abroad. “According to the new tax provision, Tax Collection Source (TCS) at a 20% rate will be applicable from October 1, 2023, on purchases of overseas tour program packages with a value of over Rs. 7 Lakh, and a 5% TCS rate will still be applicable for such packages with a value up to Rs. 7 Lakh.
How can you get your TCS money back after your trip?
“If you are planning to travel after the new TCS regulations are imposed, you can simply claim them back by adjusting them in your advanced tax payments or claiming them in tax refunds,” says Ravisutanjani Kumar, a personal finance and credit card specialist.
“Be careful to get a TCS certificate when paying the travel agent or service provider so you may include it in your tax return and use it to offset your tax obligation. If you are a salaried worker and your employer files your taxes on your behalf, you may merely send it to them so they can make the necessary adjustments for the due TDS, he continues.
How to lower the TCS incurred on your international trip?
Plan the vacation such that the total cost per person doesn’t go above the 7 Lakh limit. The RBI states that you can purchase foreign currency up to 60 days in advance of your trip. Consider purchasing the currency or replenishing your forex before the TCS hike if you want to travel in the upcoming weeks or before 1 October.
Booking your package on overseas websites with foreign cards to take advantage of the 7 lakh threshold is another approach to get around the 20% TCS. You may purchase your flights and hotels individually using their own websites to avoid TCS fees and make sure your total is within the 7 lakh restriction because the word “tour packages” is not defined. This will help you stay under the 7 lakh limit.
Travelers have difficulties as a result of the recent rise in Tax Collected at Source (TCS) to 20% for international travel costs. Although it could seem like an additional financial burden, with smart preparation, its effects can be lessened. To avoid paying the higher TCS rate, travelers should make sure their expenses remain below the 7 Lakh mark. The new rules can also be navigated by purchasing foreign cash beforehand and utilizing foreign cards for online reservations. Additionally, preserving TCS certificates and seeking the advice of tax experts will help with reclaiming the TCS on tax returns. Despite these changes, traveling abroad is still a thrilling experience that should be enjoyed.
Contributed by Sanal Pillai
Edited by Imtiaz Ullah