How TCS will impact international students and foreign travel from October 1
Whether you are packing your bags for travel or heading to another country for studies, know the new Tax Collection at Source (TCS) rules that go into effect on October 1. Virender Bisht, Co-founder & CTO at Niyo breaks down the implications
Effective October 1, 2023, new rules relating to TaxCollection at Source (TCS) on Liberalised Remittance Scheme (LRS)and onpurchase of overseastour program package will be applicable. Threshold of ₹7 lakhs per financial year per individual will be restored for TCS on all categories of LRS payments through all modes of payment, regardless of the purpose.
In an exclusive interview, Virender Bisht, Co-founder & CTO at Niyo, explains all that one needs to know about the new TCS rate and how it will impact financing education and buying international travel packages.
As per the Central government’s June 30, 2023, notification, remittances for education include:
- Remittance for purchase of tickets of the student for travel between India and the country of education
- Tuition and other fees paid to the educational institute
- Day-to-day expenses: food, accommodation, local transport, health services, etc.
The regular remittance by students for education purposes is not expected to have any major impact post October 1 TCS changes. However, multiple remittance in a year to cover day to day expenses can be cumbersome and expensive so students take Indian international cards (for example, Niyo Global cards) which have no TCS applicable up to aggregate Rs. 7 lakhs in a financial year and come with zero forex markup charges.
How to navigate it? What are the solutions?
Pursuing international education can be an expensive affair. Most of the payments are made on international portals hence attracts forex fees. The way to navigate this for students is to get zero forex international cards that have no TCS applicable up to aggregate Rs. 7 lakhs in a financial year and come with zero forex markup charges.
For parents remitting money to their children abroad, ensure that you understand what falls under TCS. Keep track of transactions, use the correct LRS code and categorise them correctly while remitting.
You can file for TCS in ITR, hence it’s important to keep a track of necessary forms/ documents.
What’s the impact of TCS on international travel packages?
The TCS effective from October 1, 2023, is:
Purchase of overseas tour package:
- Up to ₹7 lakhs per financial year (FY): 5% on both debit & forex card
- Above ₹7 lakhs per FY: 5% on both debit & forex card
Other international spending types:
- Up to ₹7 lakhs per financial year (FY): 0% on both debit & forex card
- Above ₹7 lakhs per FY: 20% on both debit & forex card
Is there a tip to beat the TCS?
The best option for students and leisure travellers is to take international cards that come with zero forex markup feature. These cards will help you save 3-5% on every international transaction + ATM withdrawal charges. If two PAN card holders of the same family travel together, they can split expenses and get a cumulative limit of Rs. 14 lakhs on which TCS will not be applicable.
Credit card is definitely option two because not all credit cards come with zero forex markup, so you pay annual card charges, forex markup and 36% interest on ATM withdrawal internationally. Even though credit cards are exempted from LRS, if you don't have a card which also gives zero forex markup, your overall spend will be significantly higher. Further, not everyone is eligible to get a credit card and every time one needs to get their credit bureau score checked which affects their credit score unnecessarily.
If a prepaid forex card is taken, then one needs to pay 20% TCS.
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First Published:1 Oct 2023, 11:34 AM IST
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