Indian Govt Exempt 5% TCS On Foreign Tour Packages Sold To NRIs

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The government of India said that it has exempted tour operators from collecting taxes from Non-Resident Indians (NRIs) who visit India and book an abroad tour package through any Indian tour operator or travel agent.

As per the previous tax rules, domestic tour operators are required to collect 5% Tax Collected At Source (TCS) on the sale of foreign tour packages.

The Income Tax Act allows a vendor of an overseas tour package to collect tax from a buyer at a rate of 5% of the package’s value.

Notably, the Central Board of Direct Taxes (CBDT) received representations from domestic tour operators who were having difficulty collecting taxes from non-resident individuals visiting India and purchasing international vacation packages from them.

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Because such individuals may not have a PAN, higher tax rates were mandated. Furthermore, such non-residents may have difficulty filling their ITRs and claiming refunds, according to the CBDT.

The CBDT has stated that “a domestic tour operator is not required to collect tax on the sale of an international vacation package to a non-resident individual visiting India.”

According to Neeraj Agarwala, Partner at Nangia Andersen LLP, the goal of the TCS was to collect information and monitor tax compliances of high-spending individuals.

However, due to the way the laws were written, tour operators were also obligated to collect taxes from non-residents who are not normally taxable in India while booking their return tickets from India.

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“This is a positive step that would increase travel bookings from India,” Agarwala added.

TCS On Foreign Tour Package:

Nature of TransactionRemittance for buying an Overseas Tour Package
Person Responsible for collectionSeller of Overseas Tour Package
From whom to collectFrom buyer of Overseas Tour Package
Time of CollectionAt the time of debiting the buyer or receipt from the buyer, whichever is earlier
Rate of TCS– 5% of the amount received from the buyer
– 10%, in case no PAN of such person is available

Exemption of TCS

No TCS shall be collected if the buyer is

  • Liable to deduct tax TDS under any other provision of this Act and has deducted such amount;
  • The Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority etc.
  • Any Non-Resident Indians (NRIs) who visit India and book an abroad tour package through any Indian tour operator or travel agent.

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