New 20% TCS rule from October 1, 2023: 4 tips to bring down TCS to zero during your next international trip

If you are planning to go on an international trip with your family, be ready to bear a higher cost up front due to a new tax collected at source (TCS) rule. When you book, offline or online, overseas tour packages of more than Rs 7 lakh in a financial year, you have to pay TCS at 20% from October 1, 2023. If the foreign tour packages cost up to Rs 7 lakh, TCS will be levied at 5%. Is there any way to reduce his additional upfront cost? Read on to find out. What is the new TCS rule on overseas tour packages from October 1, 2023? Let us first understand what constitutes an overseas tour package. The Ministry of Finance has refined the term clearly to make it easier for taxpayers. Explaining it, Lokesh Shah, Partner, IndusLaw, says, “To qualify as an overseas tour program package, there has to be at least two of the following: The Indian government has implemented a new Tax Collected at Source (TCS) rule that affects international travelers. The rule applies to various expenses related to overseas travel, including "international travel ticket; hotel accommodation (with or without food, boarding or lodging; any other expenditure of similar nature or in relation thereto.” It's important to note that the responsibility for collecting TCS falls on the travel agent, whether they operate offline or online, even when payments are made in Indian Rupees. This means that if you book your overseas tour through domestic online travel aggregators like MakeMyTrip, Yatra, or EaseMyTrip, you will still be subject to TCS at the specified rate. How to Plan Your Travel Abroad to Reduce TCS to Zero Given the increased upfront costs due to the new TCS rule, you might wonder if there's a way to avoid paying high TCS while traveling abroad. The answer is yes. If you choose to book your flights, hotels, and sightseeing activities separately instead of making a single bundled booking, it will not be considered a tour package. This means that the higher TCS rate will not be applicable to such individual bookings. Neeraj Agarwala, a Partner at Nangia Andersen India, advises, “The purchase of only an international travel ticket or purchase of only hotel accommodation by itself is not covered within the definition of 'overseas tour program package.' Accordingly, travelers should consider purchasing international travel tickets and booking hotel accommodations separately through different websites or travel agents.” Going on an International Vacation? How to Utilize the Rs 7 Lakh TCS Threshold It's essential to recognize that TCS is not limited to overseas tour packages. You will be required to pay the tax even if you remit money from India. Currently, there is no TCS for remittances up to Rs 7 lakh in a financial year. However, if you remit more than Rs 7 lakh within a year, a TCS of 20% will be imposed starting from October 1, 2023, with certain exceptions. Notably, there is no TCS applied to debit card and credit card spends of up to Rs 7 lakh in a financial year. According to Agarwala, "The threshold of Rs 7 lakh applies to the remitter."