Dreading having to pay 15% more for your upcoming international trip? Here is the purpose of the regulation and what you should do in its place.
Traveling is a cultural, culinary, and adventure pursuit, but it is also prohibitively expensive for many Indians. The Finance Ministry has boosted the existing Tax Collected at Source (TCS) from 5% to 20% during a modification of the rules 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, simply claim them back during tax returns.
The term TCS, or Tax Collected at Source, refers to a fee that the provider of a service, in this case travel agencies, charges in addition to the sale price. For instance, your booking partner (if situated in India) will charge you an additional 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% mean?
The new rule 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.
Source- Hindustan times