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20% TCS rule

20% TCS rule: If you are planning an international trip in October, then be ready to loosen your purse strings more. This is because the new rule levying 20% tax collected at source (TCS) will kick in from 1 October 2023. This applies not only to foreign trips but to every transaction you make abroad via whatever method.

What is tax collected at source (TCS)?

The tax collected at the source is implemented by the government to collect taxes directly from the seller at the source of certain transactions.

How will 20% TCS from next month impact your travel?

Commencing from October 1, 2023, there will be a significant alteration in TCS regulations, witnessing a steep rise from the existing 5% to an elevated 20%. This results in a 15% escalation in expenses for individuals seeking international travel packages

Rikant Pittie, Co-founder, EaseMyTrip said that in light of these changes, travelers are advised to:

1) Ensure that the cost of their travel package does not exceed the 7 Lakh threshold per individual.

2) We highly recommend meticulous and strategic trip planning to maximize budget efficiency.

“For packages valued at or under 7 lakh per financial year per individual, the 5% TCS rate will remain applicable. This typically encompasses the costs associated with an annual overseas leisure tour,” he added.

Read Also: Income Tax dept sending notices to Salaried Individuals

What does 20% TCS rule mean?

Any payments done in the foreign land exceeding ₹7 lakh a year through international credit and debit cards will be subject to TCS levy at the rate of 20 per cent effective 1 October 2023.

Read Also: Income Tax new rules for salaried taxpayers from 1st September

Can taxpayers claim ‘20% TCS’ back?

Yes, taxpayers can claim a TCS refund in your Income Tax Return. “Individuals will see a higher bill on their cards, potentially blocking money for several months until a return is filed/refund is claimed and tax already collected is adjusted. Taxpayers may now have to keep track of these TCS entries in their Form 26AS,” said Archit Gupta, Founder, and CEO, Clear.

The Union Budget 2023-24 had hiked TCS rates to 20%, from 5% currently, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes).