Booking a Foreign Trip with Credit Card? Here’s How to Avoid 20% TCS.

The government has hiked the TCS applicable to foreign trips booked through credit cards. It was 5% earlier, but from 1st July 2023, the rate would surge to 20%. However, there are ways to avoid TCS. Find out how.

• From 1st July 2023, 20% TCS would apply to foreign tour packages booked through credit cards.
• You can avoid the TCS if you book the package from an international tour operator, provided specific conditions are met.
• You can also book flights and hotels independently and save on TCS liability.

Going on an international trip is exciting, fun and also relaxing. However, it involves considerable expenses, so most middle-class households save up for the trip in advance.

When you finally plan to take the trip, you look for tour packages and book suitable ones. However, if you book the trip using a credit card, be prepared to pay for a TCS too.

What is TCS?

Tax Collected at Source (TCS) is a form of tax which entities collect from their buyers for specified transactions. Booking foreign trips with a credit card qualifies as an eligible transaction on which tour operators collect TCS.

TCS norms for international travel

International package tours, when booked through tour operators in India using a credit card, attract a TCS. Earlier, the TCS rate was 5%, but from 1st July 2023, the rate has been increased to 20%. So, if you book a tour worth ₹5 lakhs, you must pay an additional ₹1 lakh for the TCS liability. The rule is also applicable to purchasing foreign currency from an authorised dealer.

However, the rule does not apply to trips taken for educational or medical purposes. Such trips are TCS-free.

Also Read- Read more about the latest changes in TCS rules

Avoiding TCS on international travel

Though TCS applies to your international travel bookings, there are ways in which you can avoid it altogether. Have a look at them –

• If you book a trip with an international tour operator, you can avoid the TCS if the aggregate global spend on your credit card is up to ₹ seven lakhs.
• TCS applies on foreign tour packages, including travel and accommodation. However, you can avoid the TCS if you book your flights and hotel accommodations independently (not in a package).
• If you book the trip yourself, without the help of a tour operator, no TCS would be levied.
• You can use multiple credit cards to book the trip. As long as the overall limit per card is maintained at ₹7 lakhs and you book through an international agent, you can avoid TCS.
• You can ask your friends or relatives abroad to book your trip. You can reimburse them for the expenses and save on the additional TCS.

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The bottom line

Though TCS rates are hiked and applicable on international trip bookings, you can use the ways above to avoid tax liability. TCS is an added expense which increases the overall cost of the trip. So, use these methods and avoid TCS altogether.

Also, read - Know about TCS on foreign remittances

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.