In a recent development, travelers embarking on foreign tours will face additional expenses starting from July 1.
The tax collected at source (TCS) on foreign tour packages will be raised to 20 percent, resulting in a significant financial burden.
For instance, if the value of your foreign tour package amounts to 3 lakhs, you will be required to pay an extra 60 thousand rupees.
This marks a considerable increase from the current TCS rate of 5 percent.
While it is possible to claim a refund on TCS during the Income Tax Return filing, the funds will remain locked until the next financial year’s filing.
However, there are ways to potentially avoid these charges.
1) Utilize International Debit or Credit Card Limits
When booking a tour abroad, you have two options: either book through a domestic travel agent or opt for a foreign travel agent.
If you choose to book via a domestic travel agent, the 20 percent TCS will apply.
However, there is a potential benefit if you book through an international website that offers travel packages.
As announced by the Finance Ministry on May 19, 2023, individuals who make payments up to Rs 7 lakh using their international debit or credit cards will be exempt from TCS. T
herefore, it is advisable to be mindful of this Rs 7 lakh limit and consider booking your tour package through an international website.
2) Opt for Individual Bookings
To avoid TCS, it is recommended to book your foreign tour components separately rather than as a complete package.
Purchase your air ticket independently and make separate arrangements for hotel accommodations.
If you are traveling in a group, you can take advantage of the Rs 7 lakh limit by using the debit or credit card of a friend or family member.
By booking components individually, you can circumvent the tour package classification and avoid the 20 percent TCS charge.
3) Purchase Foreign Exchange by June 30
Many travelers acquire foreign currency or utilize forex cards during their foreign tours.
In this regard, it is advised to obtain foreign exchange or arrange for a forex card before June 30.
According to the Reserve Bank of India’s regulations, individuals can obtain foreign exchange or a forex card up to 60 days prior to their scheduled foreign tour.
By planning ahead and securing foreign exchange or a forex card now, you can shield yourself from the 20 percent TCS charge.
