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Will the 20% TCS Rule Impact Your International Trip?

The 20% TCS (Tax Collected at Source) rule can affect your international trip by increasing overall expenses, potentially influencing travel budgeting and spending considerations.

  • 3,205 Views | Updated on: Mar 11, 2024

Key takeaways

  • Under the recently implemented regulation, a 20% Tax Collection at Source (TCS) will be allocated to the total cost of the tour package exceeding ₹7 Lakh in value.
  • Taxpayers can seek a TCS refund when filing their Income Tax Return.
  • The TCS rule might create cash flow constraints for travelers, especially if they have not considered the additional 20% deduction when planning their expenses.
  • Travelers must stay informed, plan their budgets carefully, and explore alternative payment options.

International travel has always been exciting for individuals seeking new experiences, cultures, and landscapes. However, recent developments in tax regulations, particularly the implementation of the 20% Tax Collected at Source (TCS) rule in some countries, have sparked concerns among globetrotters.

All About the New TCS 20% Rule and its Impact

Tax Collected at Source (TCS) represents an additional fee imposed by service providers, such as travel agencies, on top of the total sale amount.

Under the recently implemented regulation, a 20% Tax Collection at Source (TCS) will be allocated to the total cost of the tour package. Whether acquiring foreign currency or loading funds onto your international card, this percentage will be enforced in preparation for an international journey.

For instance, if you plan a journey to the Maldives with a total cost of ₹800,000, your booking partner in India will apply an extra charge of ₹160,000 as TCS.

This new rule is effective from October 1, 2023. It mandates a 20% TCS on acquiring overseas tour packages exceeding ₹7 Lakh in value. For packages valued less or up to ₹7 Lakh, a 5% TCS rate will persist by the updated regulations.

Can Taxpayers Recover the ‘20% TCS’ amount?

Absolutely, taxpayers have the option to seek a TCS refund when filing their Income Tax Return. However, it is essential to note that individuals might face an increased card bill, tying up funds for an extended period until the return is filed and the refund is processed, with the already collected tax being adjusted.

Challenges for Travelers

Introducing the 20% TCS on international trips has undeniably presented challenges for travelers. Some of them are as follows:

Increased Financial Burden

Travelers might face an increased financial burden due to the upfront deduction of 20% TCS on their international expenses. This could impact the affordability of the trip and necessitate careful budgeting.

Cash Flow Constraints

The TCS rule might create cash flow constraints for travelers, especially if they have not considered the additional 20% deduction when planning their expenses. This could lead to unexpected financial challenges during the trip.

Refund Process Complexities

While there is a provision for claiming a refund for excess TCS deducted, the process can be complex and time-consuming. Travelers might have to go through bureaucratic procedures to reclaim the deducted amount, adding to the post-travel complexities.

Wrapping Up

The 20% TCS rule undoubtedly introduces a new dimension to financial considerations for international travelers. While it aims to streamline tax compliance, its impact on the upfront cost of an international trip cannot be ignored. Travelers must stay informed, plan their budgets carefully, and explore alternative payment options to navigate the complexities introduced by the TCS rule and ensure a seamless and enjoyable international travel experience.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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