Are you planning an international trip with your family? Then, you should check out the new tax regime upon TCS (Tax Collected at Source) on international travel that came into effect on October 1, 2023. If you purchase international travel packages totaling above INR 7 lakh per fiscal year, either through offline or online booking, a 20% Tax Collected at Source (TCS) will be levied. For packages costing up to Rs 7 lakh, the TCS rate is 5%. Are there strategies to mitigate these upfront costs? Continue reading to discover ideas to minimize this financial burden to a great extent.
What is an overseas tour package?
A tour package becomes an overseas package when you travel outside of your home country. It includes these two factors, such as international travel tickets and hotel accommodations. Meals included or merely providing a place to reside, as well as any other related or similar costs, would be covered in this accommodation criteria.
Who is responsible for collecting TCS?
The travel agent is responsible for collecting the TCS, depending on the package chosen by the customer. Thus, irrespective of whether you arrange your international trip through offline or online travel platforms like MakeMyTrip, Yatra, or EaseMyTrip, you are required to pay the TCS at the given rate.
How do I minimize taxes on foreign travel?
Now we are clear about the terms under which TCS is applicable, let’s explore some practical strategies to minimize the same. They are
1. Book travel and stay separately
Is there a method to avoid paying the elevated TCS when traveling overseas? Indeed, there is. All you need is meticulous planning. The idea is to arrange your flights, accommodations, and sightseeing activities individually rather than as a unified booking. Then, these won’t fall under the tour package category. Thus, higher TCS rates will not apply to these separate bookings. Make sure to go with random websites or travel agents while making your commute and hotel bookings.
2. Set the foreign travel spending limit to 7 lakhs in a financial year
You may think you can ditch tour packages and book as many international stays and flights as possible. But there is a catch! TCS is not merely limited to foreign travel. It applies to any international remittance from India. If your annual remittance exceeds INR 7 lakhs, you are supposed to pay 20% as TCS.
You need to plan a foreign trip by keeping the limit of INR 7 lakhs in mind to save on taxes. If you are going on an international journey with family or in a group, various members can take up different bookings to wisely leverage this exemption limit per person per year for TCS. For example, one individual can cover the flight costs, while another can manage the hotel expenses.
3. Use an international credit card
Choosing an international credit card for overseas travel expenses could help you avoid extra tax liabilities because it is exempt from TCS. However, it’s important to be aware of the additional fees associated with credit card transactions. You can learn about the extra charges by consulting with the respective bank or financial institution before your foreign trip.
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Conclusion
To sum up, dealing with the intricacies of international travel tax in India demands a well-planned approach. You can lower the tax burden significantly by opting for individual bookings and using international credit cards. By traveling safely and planning smartly, you can save vastly on your next overseas trip.
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