Are you planning to enjoy an exotic abroad trip or plan to study abroad? Here maybe a piece of bad news for you, your dream to enjoy an exotic holiday or study abroad will soon become costlier.
As per the new provisions proposed by the minister of finance Nirmala Sitharaman in Budget 2020, the provision of collecting TCS (Tax collected at Source) has been proposed from 1st April 2020.
The new provisions regarding TCS on Foreign Travel, Tour Packages, and Remittance requires that a seller of overseas tour package shall collect TCS at the rate of 5 or 10%.
TCS is going to be collected on:
- Remittance under Liberalised Remittance Scheme (LRS) of RBI for the amount exceeding Rs 7 Lakh during a financial year;
- Sale of a foreign tour package through a tour operator.
Note: The scope of Section 206 (C) of the Income-Tax Act, 1961 has been widened to incorporate certain transactions within the ambit of TCS provisions:
“These provisions will lead to greater funding requirements of financial goals for a large group of people by a minimum of 5 percent and will also increase the compliance requirements for those responsible for deducting and depositing TCS,”
TCS on Remittance
Sethi said that the Liberalized Remittance Scheme (LRS) of the reserve bank of India (RBI) allows resident individuals to remit a particular amount of money during a fiscal year to another country for investment and/or expenditure. according to the prevailing regulations, resident individuals may remit up to $250,000 during a fiscal year.
“There was no TCS earlier, but now if a resident individual has got to send money abroad through a licensed dealer in more than Rs 7,00,000 (either just once or in totality during the financial year) then the authorized dealer must collect TCS at the rate of 5 percent at the time of remitting the amount or at the rate of 10% if the remitter doesn’t have a PAN /Aadhaar,” he said.
TCS on Tour Packages
The new provisions regarding TCS on overseas tour packages requires that a seller of overseas tour package shall collect TCS at the rate of 5 percent or 10 percent (if PAN /Aadhaar isn’t available) on total amount from the purchaser at the time of receiving the payment for the tour package and includes expenses for travel or hotel stay or boarding or lodging.
Can you minimize cash outflow?
If you’re planning an overseas tour this year, or send foreign remittance over Rs 7 lakh this year, you can do this before April 1 to avoid paying a further 5 percent as TCS. Sethi said that from April 1, 2020, one must distribute additional funds for tour packages and foreign remittances (exceeding Rs. 7 Lakh during a financial year). However, the credit for the tax collected at source is going to be available to the person to offset tax liability while filing ITR.
“Even as the credit for the taxes collected are going to be available to offset your tax liability while filing your income tax return, it’ll be certainly lighter on your pocket if you’ll plan your tour in advance and book it by March 31, 2020, and front load the remittances within the current financial year to save lots of the extra cash outflow of 5 percent,” Sethi said.
(Source: Financial Express)
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Also Read, Budget 2020 for Travel and Tourism Industry