Focus on tour operators to manage tax at source on overseas travel

The 2020 budget proposes many changes in tax legislation with implications for individual taxpayers. While some preferred taxpayers, others imposed more taxes or obligations. One of the many proposals, one of which has attracted taxpayers’ attention, is the new withholding tax (TCS) provision on foreign package tours.


Most taxpayers are familiar with the concept of a withholding tax (STI), i.e. a payer of income or a recipient of services who retains a certain percentage of that income or consideration and deposits it with the tax authorities as an STI. The rp currently applies to a wide range of income, such as interest, rent, fees, payments to contractors, etc. The rp applies to a wide range of revenues.


TPC is invoiced by the seller of the goods or services and invoiced by the buyer at the same time as the price of the goods or services exceeds the price of the goods or services. The concept of TKS is less common and applies to activities related to the sale of alcohol, spirits, forest products, scrap and others.

Focus on tour operators to manage the source deduction for foreign travel


In 2016 the TKS was expanded with the purchase of cars worth more than Rs. 10. The proposed amendment now extends the applicability of the TBS to the purchase of a foreign package and requires the seller of such a package to collect the TBS from the customer when selling the package.


How will the TKS work?


From the first. By April 2020, the tour operator will levy an additional amount of income tax on each purchase of a foreign package holiday, in addition to the cost of the package. The tax thus collected shall be deposited with the tax authorities. A foreign travel arrangement is defined as a travel arrangement that allows you to travel to countries other than India and includes travel or hotel, room or board expenses or other similar expenses.


How fast is the TKS?


The tax is collected by the tour operator, if applicable, at the rate of 5% (plus the applicable surcharge and discount for non-residents) of PAN/Aadhaar. In other cases where the NAP/Aadhair is not provided or is not available, the rate of TKS is 10% (plus the applicable surcharge and discount for non-residents).


Mr. B., an Indian, for example, is planning a holiday trip to Singapore, and the cost of the trip is 3 rupees. In this case, if Mr B. provides his NAP or Aadhaar to the tour operator, the latter receives from Mr B. 3 lah + 5%, i.e. Rs. 3.15.000. The tour operator pays Rp 15.000 to the tax authorities and Rp 3 is withheld by the tour operator for the reservation or booking and its costs for travel abroad. If Mr B does not have a PAN or Aadhaar card, the tour operator receives 3 Laha + 10%, i.e. Rs. 30,000 from Mr B, Rs. 30,000 is the sum of TKS.


Are there any exceptions?


Contrary to other cases, there is no minimum threshold for the application of the certification system for international package travel, i.e. it is not intended that the certification system for international package travel should apply only if the value of the trip exceeds a certain amount. The TCS therefore applies to all bookings of trips abroad, regardless of the cost of the trip. The only exceptions to this rule are: firstly, if the buyer is required by another provision of the law to deduct the tax at source and has deducted this amount; secondly, the central government, the provincial government, an embassy, a high commission, an office, a commission, a consulate, a foreign trade agency or any other person designated for this purpose by the central government in a gazette, under the conditions set out in this notice. In this case, the tour operator will not charge TKS for the costs of a package holiday abroad.


How can you apply for TCS benefits?


Once the means of transport has been collected, the tour operator is obliged to transfer the amount collected to the tax authorities at the latest on the seventh day of the month following the month in which the payment was received. For example, if, according to the Tax Act, collection takes place in April 2020, the tour operator must collect it before the 7th tax year. May 2020 at the tax office. They must also submit a TCS reimbursement form containing detailed information on the TCS and the amount charged for the payment of the travel package. It must specify the client’s NAP. The tour operator must also issue the buyer with a TBS certificate containing a detailed description of the TBS collected. On the basis of the NTP, the amount of TKS paid in this way is stated on the buyer’s form 26AS and the buyer can offset this tax when submitting his tax return. If the buyer’s income is below the tax threshold, the buyer must complete an income tax return and an income tax return in order to claim a refund of the income tax levied in the tax year in question.


When will these provisions enter into force?


From the first. The JTS provisions on the international travel package will enter into force in April 2020. TPCs must be received by the Seller at the time that the Buyer’s account is debited or the amount is received by the Buyer in whatever form, whichever occurs first.


TKS on trips abroad certainly has an extra burden in terms of increased cash flow for taxpayers planning to travel abroad, as from 1 January 2008 they will be subject to a cash flow tax. April 2020 should release more money. It also increases the burden on tour operators with regard to the collection and payment of taxes, the filing of CIT declarations and the issuing of CIT certificates.


Homi Mistry is a partner at Deloitte India. Musami Nagarsenkar is director, Richa Udaypuri is deputy director at Deloitte Haskins & Sales LLP.

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