Till now there was no compulsory requirement to mention the foreign tour. It was optional to mention the amount spent on foreign tour and hence no one really used to mention it in his return of income.
Hence, many people who used to take foreign travel of 3-4 lakh in a year would not file return of income and they used to escape income tax as such people used to earn in cash and spend the same in cash.
Therefore to bring a check point on such foreign travel CBDT vide budget 2020 introduced sub section 1G to section 206C for collection of TCS @5% on any foreign tour package sold (applicable from 01.04.2020).
Thus every person being a seller of overseas tour package shall collect an amount equal to 5% at the time of receipt of payment or debiting the account, whichever is earlier.
The buyer will get the credit of such TCS when he files his return of income for the relevant financial year.
Thus, this will increase the initial price of foreign tour package and would also discourage Indian traveler to purchase tour package from Indian Travel agent.
FAQ:
Q. Who needs to collect TCS?
A. Any person selling foreign tour packages.
Q. What is a foreign tour package?
A. means any tour package which offers visit to a country or countries or territory or territories outside India and
includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.
Q. Is there any minimum threshold limit for such foreign tour package?
A. There is no minimum limit for collection of TCS, thus any sale of Rs. 100 foreign tour package would attract TCS.
Q. If the person selling such tour package has turnover below 1 crore then also he has to collect TCS?
A. Yes.
Q. What if the tour package has been sold before 01.04.2020 for tour after 01.04.2020?
A. No TCS would be applicable, as TCS is applicable on tour packages sold after 01.04.2020.
Q. What if only flights tickets are booked?
A. If only flight tickets are booked then no TCS would be applicable as TCS is applicable only for tour package and not a single flight ticket.
Q. If a tour package has been booked for going to Nepal via road, will it also attract TCS?
A. Yes, any foreign tour package would attract TCS.
Q. What if a father purchases a tour package for his son or a company purchases a tour package for its clients/ director?
A. TCS would be collected from the buyer of the package, it has nothing to do with who is travelling. Thus if son is travelling or director is travelling but tour package has been purchased by father or company, TCS would be collected from them.
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