This is part 2 of the series – How increased TCS Rates Impact can be reduced on Remittance under LRS? We already discussed how parents of kids studying abroad can reduce the burden of increased TCS (Tax Collected at Source) through proper planning of remittance. Here we will discuss how travelers can reduce the TCS on Foreign Remittance on Tour Package.
How Parents Can Reduce TCS Impact- Details Here
RBI Circular on Foreign Remittance
What are the new TCS rates for travelers?
Purchase of overseas tour packages, in a financial year will attract a TCS of 5% below Rs 7 Lakhs. Above INR 7 Lakhs, the TCS rate will be 20%.
This is charged like income tax brackets. For eg if a package charge is Rs 18 Lakhs, for the first Rs 7 Lakhs TCS will be 5% and for the rest Rs 11 Lakhs the rate will be 20%.
The TCS is not applicable on any business trip or commercial transactions.
How to reduce the TCS on Foreign Remittance on Tour Package?
First of all, the limit of Rs 7 Lakh is for one person in a full financial year. All family members traveling together can share the limits and plan accordingly. Suppose 2 people are traveling together. They can split 5 Lakh each so that the Rs 7 Lakh limit is not breached and each avails a low tax of 5% only.
Also, TCS is not applicable on International Credit Cards & forex cards. So travelers can take the benefit of booking tours from international websites and paying via international credit cards.
The Act has also defined what constitutes a tour package.
A tour package consists of 2 elements – International Ticket & international stay & subsequent costs.
In case you book tickets, accommodation & sightseeing expenses separately, this will not be considered a tour package.
So, one can plan accordingly.
Also, since mere ticket booking or booking a hotel is not considered a tour package, each family member can book things separately. These will not be considered tour package bookings but commercial transactions. Hence no TCS will have to be paid.
Points to consider – TCS on Foreign Remittance on Tour Package
International Cards are beyond the ambit of TCS. But they incur costs other than the payment you make. These include currency fees, taxes & sometimes fees charged by websites. Please consider these expenses and be mindful of them.
Also, the limit of 7 Lakhs is for all the categories of payments made in the financial year by any mode of transfer. Hence, if you have made certain payments via bank transfer or any other mechanism, the limit of 7 Lakh will include these. Take a record of all the payments made under LRS in an FY.
Even if TCS is paid, one can use it against tax liabilities or get a refund. Details here.
Tourism is increasing day by day and one often plans weddings and celebrations abroad. Booking tour packages 7 holidaying is normal. But since it contains forex transactions, one must be on the right side of the law.
Hope this article will help you save TCS money & utilize the LRS limit better & minimize the impact of TCS on Foreign Remittance on Tour Package.
