If you are planning to go on an international trip with your family, be ready to bear a higher cost upfront due to a new rule of tax collected at source (TCS). This came into effect form October 1, 2023. In simple words, it is a tax collected by the agent from you when you book a tour package, which is subsequently remitted to the tax authorities. The agent can be an offline or online tour operator like Makemytrip, Yatra. When your overseas tour package costs under Rs.7 lakh, TCS will be levied at 5 per cent, followed by a 20 per cent TCS if the cost exceeds Rs.7 lakh. So, for e.g., if you book a tour package costing Rs.10 lakhs, the agent will collect 5 per cent on Rs.7 lakh (Rs.35,000) and 20 per cent on the remaining Rs.3 lakh (Rs.60,000). Considering the tax, you will be paying Rs.10.95 lakh to the agent.
TCS is not an additional tax though. It can be adjusted against your overall income tax liability or reclaimed when filing your income tax returns (ITR). To claim the TCS, the taxpayer should request the TCS certificate from the collector as evidence of such tax collected. Further, the TCS amount also gets reflected in Form 26AS of the taxpayer, which can be downloaded from the TRACES website to cross-check whether TCS has been paid or not.
Note that this TCS is applicable on bundled tour packages. If you opt for standalone bookings for overseas accommodation and travel tickets through different operators or websites or even do it yourself, then TCS is not applicable. It would be a hassle though just to avoid TCS. If you have the know-how and the time in booking separately through different agents, then go ahead.
It is also noteworthy that TCS rules are applicable per financial year, per individual. So, if your tour package exceeds Rs.7 lakh and you want to avoid additional 20 per cent TCS to be paid upfront, then you can divide the payment between 2 members in your family by booking the tour separately. In this way, the Rs.7 lakh threshold per individual is not crossed and you pay 5 per cent instead of 20 per cent. So, in the example mentioned above of Rs.10 lakh package, if the tour is booked by you and your spouse separately, then TCS applicable will be 5 per cent. In that case, the total TCS will come to Rs.50,000 and the total tour package will cost Rs.10.50 lakh.