Here is how you can save on foreign travels if you’re planning to visit abroad before September 30
Beginning October 1, the tax collected at source on foreign tour packages will increase to 20 per cent from the current 5 per cent
- Sep 20, 2023,
- Updated Sep 20, 2023 8:55 AM IST
Who doesn’t love to go on foreign trips? But what if you have to pay a few lakhs more upfront to book a foreign tour package? Yes, that’s right. From October 1, the Government of India (GOI) will impose a 20 per cent Tax Collected at Source (TCS) on foreign tour packages.
However, you must understand that TCS isn’t an additional tax. You can either adjust it against your total income tax liability or claim it back while filing income tax returns (ITR). Certainly, the opportunity cost of funds gets blocked until you get the refund after 8-10 months later.
In simple terms, it is a tax collected by the agent (issuer) from you (buyer) on booking tour packages, and the agent then deposits the TCS with the tax authorities. Agents can collect this Tax from you upfront and are not liable for paying it themselves.
How to save on foreign travels: While life was simple in booking a comprehensive package via agents or aggregators, now you will have to shell out more if you find an easy way to map your foreign trips. But, some easy permutations, combinations, and planning can help you save on your foreign travels. Let's take a look at how:
While The GOI has announced that international credit card payments would not be under the purview of the Liberalised Remittance Scheme (LRS) until further notice, this amendment might impact your next planned trip.
Under Indian law, international tour operators are obligated to collect TCS (Tax Collected at Source) on overseas tour packages. However, with this new update, they are unlikely to execute this task.
Further, according to experts, limiting your total expenses to Rs 7 lakhs would be wise to optimise your trip expenses. The Rs 7 lakh limit is on an individual per financial year basis, so the total expenditure should fit within this limit for each person going on the trip. A strategic division of payments, such as flight ticket payments through your credit card and hotel reservations through your spouse's card, could help you efficiently manage your costs while staying within the legal bounds.
However, before implementing this strategy, you must take tax advice from an expert to clarify the potential impacts beforehand. The implications can vary depending on whether you and your spouse file returns jointly under HUF (Hindu Undivided Family).
Moreover, it’s important to understand all the charges associated with foreign transactions on your credit card. Charges could be incurred for foreign currency conversion or international transactions. Picking a credit card with nominal or no foreign transaction fees would be beneficial.
Lastly, avoid the trap of dynamic currency conversion. It is better to pay in the local currency to circumvent dynamic conversion fees when presented with the option to pay in your home currency. By being mindful of your spending and understanding the nuances of international credit card usage, you can have a hassle-free, affordable overseas travel experience.
Who doesn’t love to go on foreign trips? But what if you have to pay a few lakhs more upfront to book a foreign tour package? Yes, that’s right. From October 1, the Government of India (GOI) will impose a 20 per cent Tax Collected at Source (TCS) on foreign tour packages.
However, you must understand that TCS isn’t an additional tax. You can either adjust it against your total income tax liability or claim it back while filing income tax returns (ITR). Certainly, the opportunity cost of funds gets blocked until you get the refund after 8-10 months later.
In simple terms, it is a tax collected by the agent (issuer) from you (buyer) on booking tour packages, and the agent then deposits the TCS with the tax authorities. Agents can collect this Tax from you upfront and are not liable for paying it themselves.
How to save on foreign travels: While life was simple in booking a comprehensive package via agents or aggregators, now you will have to shell out more if you find an easy way to map your foreign trips. But, some easy permutations, combinations, and planning can help you save on your foreign travels. Let's take a look at how:
While The GOI has announced that international credit card payments would not be under the purview of the Liberalised Remittance Scheme (LRS) until further notice, this amendment might impact your next planned trip.
Under Indian law, international tour operators are obligated to collect TCS (Tax Collected at Source) on overseas tour packages. However, with this new update, they are unlikely to execute this task.
Further, according to experts, limiting your total expenses to Rs 7 lakhs would be wise to optimise your trip expenses. The Rs 7 lakh limit is on an individual per financial year basis, so the total expenditure should fit within this limit for each person going on the trip. A strategic division of payments, such as flight ticket payments through your credit card and hotel reservations through your spouse's card, could help you efficiently manage your costs while staying within the legal bounds.
However, before implementing this strategy, you must take tax advice from an expert to clarify the potential impacts beforehand. The implications can vary depending on whether you and your spouse file returns jointly under HUF (Hindu Undivided Family).
Moreover, it’s important to understand all the charges associated with foreign transactions on your credit card. Charges could be incurred for foreign currency conversion or international transactions. Picking a credit card with nominal or no foreign transaction fees would be beneficial.
Lastly, avoid the trap of dynamic currency conversion. It is better to pay in the local currency to circumvent dynamic conversion fees when presented with the option to pay in your home currency. By being mindful of your spending and understanding the nuances of international credit card usage, you can have a hassle-free, affordable overseas travel experience.