In a relief to the travel fraternity, the Union Ministry of Finance has said that there will be no change in rate of Tax Collection at Source (TCS) for overseas travel tour packages for up to Rs. 7 lakh and 20 per cent TCS will be charged for the packages above Rs. 7 lakh, which will come into effect from 1 October 2023.
The Union Ministry of Finance has finally come up with a change in its Tax Collection at Source (TCS) system on payments under the Liberalised Remittance Scheme (LRS) and on overseas tour packages.
According to this year’s budget, TCS on foreign remittance through the LRS was supposed to be 20 per cent from the existing 5 per cent, except in certain cases, which was to kick in from 1 July 2023. It was also announced in March that credit card payments would be brought under the LRS. However, as a
temporary relief to the travel fraternity and after numerous comments and suggestions from across industries, the government has made some changes.
As per the new directive, there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of mode of payment, for amounts up to `7 lakh per individual per annum. It has also been decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS. The increase in TCS rates, which were to come into effect from 1 July 2023 shall now come into effect from 1 October 2023.
Apart from that it has been decided that transactions through International Credit Cards while being overseas would not be counted as LRS and hence would not be subject to TCS.
Threshold of Rs. 7 lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose. Thus, for first Rs. 7 lakh remittance under LRS there shall be no TCS. Beyond this, Rs. 7 lakh threshold, TCS shall be: a) 0.5 per cent (if remittance for education is financed by education loan); b) 5 per cent (in case of remittance for education/ medical treatment); and c) 20 per cent for others.
For purchase of overseas tour program package under Clause (ii) of Sub-section (1G), the TCS shall continue to apply at the rate of 5 per cent for the first `7 lakh per individual per annum; the 20 per cent rate will only apply for expenditure above this limit.
Reacting over the issue, Guldeep Singh Sahni, MD, Weldon Tours and Travels and Founding President, OTOAI, expresses gratitude to the Finance Ministry saying that it is a relief for the whole travel industry, especially the outbound tour operators. “We were never against collecting taxes, but we just want that there should be no discrimination. I need to personally congratulate various individuals, organizations, media and also the travel fraternity as they kept on reacting, tweeting and approaching the ministry. One-in-all, a big victory of the whole travel fraternity,” he said.
Riaz Munshi, President, OTOAI, said, “It is somewhat of a relief for now, but the situation remains complicated. They have introduced an allowed threshold, which is good news to some extent. However, we still need to present our case and offer assistance and suggestions on how to proceed. It’s a complicated matter, the bank finds it challenging to recognize transactions and determine if they fall within the 20 per cent limit, or if someone has already exceeded the `7 lakh limit. It’s a problematic situation.”