20% TCS Policy: If you are planning to travel abroad in October, be prepared to loosen your purse strings even more. This is because the new law that imposes a 20% tax collected at source (TCS) will start from 1 October 2023. This applies not only to foreign travel but also to any business you do abroad, regardless of format.
What is tax collected at source (TCS)?
The government implements withholding tax to collect tax directly from the seller at the source of certain transactions.
How will 20% TCS from next month affect your travel?
From October 1, 2023, the TCS policy will see a major change, with a significant increase from the current 5% to a higher level of 20%. This translates into a 15% increase in spending for those looking for international travel packages.
Rikant Pittie, co-founder of EaseMyTrip said that due to these changes, travelers are advised to:
1) Make sure that the price of their travel package does not exceed the limit of 7 Lakh per person.
2) We highly recommend meticulous and strategic travel planning to maximize budget efficiency.
“For packages worth Rs 7 lakh or less per annum, TCS rate of 5% will continue to be applicable. This generally encompasses costs associated with an annual leisure tour abroad,” he added.
What does the 20% TCS rule mean?
Any foreign payments exceeding ₹ 7 lakh per year through international credit and debit cards will be subject to TCS tax at the rate of 20% starting from October 1, 2023.
Can taxpayers claim “20% TCS” refund?
Yes, taxpayers can claim TCS refund in your tax return. “Individuals will see high charges on their cards, may tie up money for several months until the documents/refunds are written and the taxes collected are reversed. Taxpayers have can now track these TCS entries in their 26AS format,” said Archit Gupta, founder and CEO, Clear. The Union Budget 2023-24 has increased the TCS rate to 20 per cent, from the existing 5 per cent, on foreign travel and remittances under LRS (other than for education and health).