From July 1, 2023, the Indian government will increase the tax collection at source (TCS) rate for foreign travel for Indians to 20% (except for education and medical purposes) when buying via tour operators.
This means that Indians have to pay 20 per cent more when buying foreign tour packages from tour operators and even foreign currency individually from currency traders but they can get it back when filing tax returns.
TCS will be applied to all foreign travel expenses except for airfare. This increase in TCS is intended to ensure that high-net individuals remitting large amounts of funds abroad can be traced and discharge their tax liability suitably.
However, as of now with the current information available about GOIndia regulation, it seems current rules can be circumnavigated if one buys an air ticket directly and also book the hotel directly via credit card.
However, more clarity is needed on how TCS will apply to money remitted abroad via forex cards.
Please note TCS is not a tax by itself, but it is adjustable against a taxpayer’s total income tax liability while filing yearly tax returns.
Taxpayers can get a refund of the TCS paid while filling their ITR. If the person is not filing the tax return, the TCS paid on the tour package will become an extra cost for them.
TCS will also encourage the citizens to travel within India and promote domestic tourism of India.