• Prepare for Increased Costs: Higher Taxes on Foreign Tour Packages from July 1, 2023

    Starting July 1, 2023, travelers should brace themselves for higher expenses on international tour packages. The Liberalized Remittance Scheme (LRS) will introduce an increased tax collection at source (TCS) rate of 5% to 20% on international remittances, excluding education and medical purposes. Specifically affecting bookings for international trip packages, the TCS on remittances will surge from the current 5% to a significant 20%. However, if travelers independently purchase overseas flights (not as part of a package), no TCS will be applied to the ticket. This change will impact the overall cost of vacation packages, as TCS will be levied on all international travel expenses, excluding tickets, such as lodging, meals, and other travel costs abroad.

    Implications on International Travel:

    Come July 1, 2023, a 20% TCS will be applicable for those purchasing international tour packages from travel agents. This includes individuals buying foreign currency for international travel independently. The increased TCS is expected to elevate the budgetary allocation for international travel by a substantial 15%.

    Example Illustration:

    Consider planning a Rs. 10 lakh family holiday package to Europe. With the new 20% TCS, an additional Rs. 2 lakh (20% of Rs. 10 lakh) must be provided to the travel agent, bringing the total cost of the travel package to Rs. 12 lakhs, plus applicable taxes and fees. The entire amount, including Rs. 2 lakhs for TCS, must be paid at the time of booking, demonstrating a tangible impact on the overall cost to the customer.

    Strategies to Mitigate Increased Costs:

    1. Book Individual Components: Opt for arranging individual tour components separately, such as flights and accommodations, rather than purchasing a comprehensive tour package to avoid TCS implications.

    2. Credit Card Payments: Credit card purchases often do not fall under the Liberalized Remittance Program (LRS) and are governed by general regulations for revenue account transactions. Paying for your tour with a credit card may exempt you from TCS.

    3. Understanding TCS Clarifications: It’s crucial to recognize that TCS is not an independent tax; it can be adjusted when filing tax returns against the overall income tax burden. Individuals who file taxes can offset TCS against their tax liability for the financial year.


    As international travel costs witness a sudden increase due to elevated TCS rates, travelers are advised to consider alternative booking methods and payment options. By understanding the nuances of the new regulations and exploring strategic approaches, individuals can navigate the evolving landscape of international travel expenses effectively.