New TCS rule to apply from October 1, 2023: Travel to get costlier

If you have an international trip on your radar for October, it's time to prepare for a slightly heavier financial load. This adjustment is necessitated by the introduction of a new regulation imposing a 20% Tax Collected at Source (TCS) starting from October 1, 2023.

It's important to note that this rule isn't limited to just foreign travel but extends to any financial transactions conducted abroad, regardless of the payment method employed.

Tax Collected at Source

TCS, short for Tax Collected at Source, is a government initiative aimed at collecting taxes directly from sellers at the source of certain transactions. In the context of international travel, this implies that a portion of your foreign expenses will be deducted as tax.

The Impact of the 20% TCS on Your Travel Budget

The upcoming change in TCS regulations is significant. It represents a notable increase, elevating the existing 5% rate to a substantial 20%. In practical terms, this translates to a 15% surge in expenses for individuals planning international travel.

What Does the 20% TCS Rule Encompass?

Beginning October 1, 2023, any payments exceeding ₹7 lakh per year made abroad through international credit and debit cards will be subject to a 20% TCS levy.

Can Taxpayers Seek a Refund for the 20% TCS?

Yes, taxpayers are eligible to claim a TCS refund when filing their Income Tax Returns. However, this might result in travellers facing higher bills on their cards, potentially tying up their funds until the return is filed and the tax collected is adjusted. It is vital for taxpayers to diligently monitor these TCS entries in their Form 26AS, as advised by Archit Gupta, Founder, and CEO of Clear.

As you gear up for your international escapade next month, it is essential to factor in the 20% TCS, make prudent financial plans, and keep a watchful eye on your financial transactions to ensure a smooth and fiscally responsible journey.