RBI Liberalized Remittance Scheme: Foreign tour packages are going to become expensive from October 1, 2023. Those who spend more than Rs 7 lakh on a tour package while traveling abroad will have to pay 20 percent TCS (Tax Collected at Source). Now 5 percent has to be paid.
Under the LRS (Liberalised Remittance Scheme) of RBI, 20 percent TCS will have to be paid on foreign remittances from October 1, 2023, on which till now 5 percent TCS had to be paid. Earlier this rule was going to be implemented from July 1, 2023, but the government had given an extension of three months and decided to implement it from October 1.
traveling abroad will be expensive
This decision of the government is going to hit those people the most who will go abroad with a tour package. On tour packages costing more than Rs 7 lakh, 20 percent TCS i.e. tax collected at source will have to be paid. At present, 5 percent TCS has to be paid on foreign tour packages and there is no minimum limit.
However, under the new rule, 20 percent TCS will have to be paid on tour packages costing more than Rs 7 lakh, while 5 percent TCS will continue on tour packages less than Rs 7 lakh. Tour operators believe that the government’s decision of 20 percent TCS may affect the tourism industry. Travel Agents Association of India has demanded the government to abolish 20 percent TCS on overseas tour packages. He says that domestic tour operators will suffer losses due to this.
This decision will not affect expenditure of more than Rs 7 lakh on medical or education abroad. But like the old regime, 5 percent TCS will continue to be levied on medical and education expenses of more than Rs 7 lakh.
Higher tax on foreign remittances
Currently, under RBI’s LRS, 5 percent TCS has to be paid on foreign remittances of more than Rs 7 lakh. But the government has increased this to 20 percent. Earlier, expenses incurred through international credit cards abroad were also brought under its purview. But due to delay in preparation by banks and card networks, the government has postponed the decision on TCS on credit cards for the time being.
The Finance Ministry had then argued that payments made through debit cards are included in LRS but expenses made abroad through credit cards are not included in it. Due to which many people used to exceed this limit while making credit card payments. RBI had several times written letters to the government asking it to end discrimination in making debit and credit payments abroad.
It was announced in the budget
In the budget presented for the financial year 2023-24 on February 1, 2023, Finance Minister Nirmala Sitharaman had announced to increase the TCS rate from 5 percent to 20 percent on foreign tour packages and money sent abroad under LRS, which was implemented on July 1. It was to be implemented from 2023.
But the government had given an extension of three months which is going to be implemented from October 1, 2023. The government had completely rejected the demand for reduction in TCS rate.
