TCS on Foreign Travel: Limits & Regulations Explained

Abroad travel has its associated financial preparation, and one such awareness for an Indian traveling abroad is the Tax Collected at Source on foreign travel. This, basically, is the system adopted by the Government of India for keeping track and collecting taxes on a number of transactions, including foreign travel. Go through this guide to know the limits and provisions on TCS for foreign travel so you go for a smooth, informed journey.

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What is TCS on Foreign Travel?

TCS stands for Tax Collected at Source. It is a mechanism under the Income Tax Act, 1961, wherein the seller has to collect the tax from the buyer at the time of selling and remit it to the government. Now, in the case of foreign travel, TCS is levied on the purchase of overseas tour packages and remittances that go out under the Liberalised Remittance Scheme

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TCS Applicability and Rates

The Indian government has changed the TCS rates with respect to foreign travel packages and such provisions are effective from 1 October 2023. The rate structure of the same is as follows:

Tour Packages:

• In any overseas tour package, a TCS of 20% would be levied if such a package exceeded INR 7 lakh in a financial year.

• 5% TCS is applicable on less than INR 7 lakh.

This change has been introduced to rationalize the provision of tax collection and to bring more people under the tax regime.

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Exemptions and Limits

Though TCS is a quite wide term, there are some exemptions:

1. Foreign Education and Medical Treatment: In case of remittance for education or medical treatment abroad, the rate for TCS for an amount above INR 7 lakh in a financial year is 5%.

2. Business Travel Abroad: Business travelers who are employees of a company can claim credit for TCS against their overall tax liability.

You may refer to following table for better understanding of rates:

S. No.	Type of Remittance Abroad	New TCS rate (w.e.f. 1 October 2023)
1	For the purpose of education, if the amount being remitted is from a loan obtained from any specified institution	Threshold limit - NIL up to Rs. 7 lakh. 0.5% of the amount or the aggregate amount over Rs. 7 lakh per financial year
2	For the purpose of education, other than (1) above (or) for the purpose of medical treatment.	Threshold limit - NIL up to Rs. 7 lakh. 5% of the amount or the aggregate amount over Rs. 7 lakh per financial year
3	Any other purpose under LRS	Threshold limit - NIL up to Rs. 7 lakh. 20% of the amount or the aggregate amount over Rs. 7 lakh per financial year
4	Overseas tour packages	5% up to Rs. 7 lakh. 20% of the amount or the aggregate amount over Rs. 7 lakh per financial year

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TCS on foreign remittances

LRS: the Liberalized Remittance Scheme

Under the present Liberalized Remittance Scheme, any Indian resident, whether minor, can remit up to USD 250,000 (INR 2,09,30,000*) in any financial year for the permissible transactions, which include, among others, travel, education, maintenance of relatives abroad, and by way of gifts.

The following are the applicable rates of TCS in respect of remittances under LRS. For:

1. General Remittances: 5% TCS, if above INR 7 lakh in a financial year.

2. Education Loans: In case of remittance covered by an education loan, the rate of TCS is lowered to 0.5 percent on the amount over and above INR 7 lakh.

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Travelers Concerns

Suppose that you remit USD 100,000 (INR 83,72,000*) for your child's overseas education. Here is how much TCS the amount would attract: 5% of the amount exceeding INR 7 lakh, which is about INR 3.83 lakh (approx.). If an education loan is taken for the amount, the TCR will be significantly lower at 0.5%, thus amounting t ly around INR 38,360 (approx.).

FAQs on TCS for Foreign Travel

TCS on foreign travel is a levy that is collected from the seller of an overseas tour package/remittances under the LRS at the point of sale, which in turn is remitted to the government.

As on October 1, 2023, TCS is levied at the rate of 20% for tour packages above INR 7 lakh in a financial year and 5% for amounts less than INR 7 lakh (Economic Times, 2023).

Yes, there is a reduced TCS rate of 5% on remittances for education and medical treatment abroad if the amount is more than INR 7 lakh. Business travelers are allowed to take credit for TCS against their overall tax liability (Forbes India, 2024).

Under LRS, Indian residents can remit up to USD 250,000 per financial year. Now, for transactions above INR 7 lakh, a TCS of 5% applies; in the case of an education loan, it is 0.5%.

Yes, one can claim TCS back during the filing of annual income tax returns as a reduction from overall taxes payable.

You will have to show the proof of source of funds through bank statements or exchange receipts and fill in the Currency Declaration Form, if necessary.

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Advantages of Using a Forex Exchange Provider

Being a Forex exchange provider, we do understand how complex foreign travel and remittances could get. Here's how we can help:

1. Expert Guidance: We provide up-to-date information on the TCS regulations and guide you regarding the same, helping you ace the rules effortlessly.

2. Best Rates: Our Forex exchange rates are competitive so that you get the best value for your money.

3. Convenience in Services: With several branches and online services at work, we assist in the smooth and hassle-free currency exchange and remittance processes.

4. Secure Transactions: Your transaction's security concerns are at the forefront; hence, the risk of fraud or loss is reduced to a minimum.

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Conclusion

Knowing the regulations and limits for TCS on foreign travel is very important for hassle-free journeys. Staying informed and availing of the services from a reliable forex exchange provider helps in being compliant with the tax laws while you get the most from your journeys. Right from booking a tour package to even remitting money abroad, awareness about the rules on TCS comes in handy to keep track of one's expenses.

Want to plan your next trip abroad or send money abroad? With us, you get competitive exchange rates with the guidance of experienced professionals. Be assured of highly secured transactions that will leave you in peace while you travel and remit from India. Safe travels, smooth remittances!

With the right information and support, managing TCS on foreign travel really becomes very simple, leaving you free to enjoy your journey or support your loved ones abroad.

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References:

* Based on Google Finance data, 1 United States Dollar equals 83.72 Indian Rupee as of 26 Jul, 7:30 am UTC.

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Source:

Indian Finance Ministry
Economic Times
Forbes

TCS and Traveling Abroad: Key Guidelines with Limitations and Regulations

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