NEW DELHI :
Your next foreign trip would soon be a bit costlier as Finance Minister Nirmala Sitharaman has announced in Budget 2020 that money flowing out of India will be taxed at source on services like foreign tour packages.
Budget 2020: The new provision
The Budget has imposed a 5% tax on foreign travel packages bought from tour operators with effect from 1 April. Tour operators are liable to charge the amount as TCS when the package is bought. If PAN or Aadhaar is not produced by the buyer, the TCS will be charged at 10%. The Budget 2020-21 has also mandated a 5% tax collection at source for remittances of over ₹7 lakh.
Even if the buyer is being asked to pay the TCS upfront, his or her overall tax burden in a year will remain the same as the TCS amount will be set off against the overall annual tax outgo. Directionally, it looks like that money flowing out of India is being taxed in the form of remittances or travel.
Change in the LRS
A new TDS provision has been introduced on foreign remittance. Authorized foreign exchange dealers receiving an amount of ₹7 lakh or more in a financial year for remittance out of India under the LRS scheme of the RBI shall collect TCS (tax at source) of 5% from the buyer.
LRS is used for sending money for children studying abroad, buying property abroad and buying stocks listed in exchanges abroad. The liberalised remittance scheme (LRS) is limited to $250,000 per year per person. On sending more than ₹7 lakh per year, 5% of that amount will be deducted by the forex dealer and paid as TCS to the income tax department.
The provision will not apply in case the operator is liable to deduct tax at source under any other provision of the Act and the amount has been deducted. It will also not apply if the buyer is the government or any another person notified by the government.
There is no lower limit on this provision. Travel operators are cribbing that this will hurt their business. Some people have said that they will make the remittances for education by March 31 as the provision kicks in from April 1.
With inputs from agencies