Introduction

Travelling abroad is Exciting, but are you aware of the tax rules? Visiting foreign countries comes with a lot of financial considerations, including Tax Collected at Source (TCS) regulations. The Government of India has implemented TCS rules to regulate Foreign remittances under the Liberalized Remittance Scheme(LRS). So if you are planning your next international escape, understanding these rules can help you plan your finances effectively and avoid unexpected tax liabilities.

What is TCS?

TCS, or Tax Collected at Source, is a mechanism where a seller collects a certain percentage of the transaction value from the buyer at the time of payment. This amount is subsequently paid to the government. For Indian residents, Tax Collected at Source (TCS) mainly applies to foreign remittances made through the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS). Under this scheme, Indian residents can remit up to USD 250,000 per financial year for approved purposes such as travel.

In simpler words, it is an advanced tax that can be adjusted against your total tax liability when filing your Income Tax Return (ITR), ensuring transparency in foreign remittances. 

Recent Changes in TCS Rules

When you book an “overseas tour package,” which typically includes a combination of international travel tickets, hotel accommodation, and other incidental expenses like sightseeing, specific TCS rules are applied. It’s important to note that booking flights or hotels separately generally does not qualify as an overseas tour package for TCS purposes.

As of recent updates in the union budget (effective from April 1, 2025), the following key changes have been introduced, particularly affecting international travelers.

Up to INR 10 Lakh: 5% TCS is applicable on the total amount of the overseas tour package.

Above INR 10 Lakh: 20% TCS is applicable on the amount exceeding INR 10 Lakh.

This threshold of INR 10 lakh applies per individual, per financial year (April 1st to March 31st). So, if your total tour package expenditure for the year crosses this mark, the higher 20% rate will apply to the excess amount. 

At the time of booking, the tour operator collects this TCS, and then it is deposited with the government.

Can You Get the TCS Amount Back?

Yes! Since TCS is treated as an advance tax, you can claim it as a refund while filing your Income Tax Return (ITR). If your overall tax liability is less than the TCS amount paid, the excess will be refunded to you.

Conclusion

Understanding TCS regulations is crucial for travelers to avoid unexpected tax burdens. By staying informed and planning your finances wisely, you can make the most of your international trips without incurring unnecessary tax deductions. Before finalizing your next international trip, understanding how TCS applies will help you navigate the financial aspects of your journey smoothly.