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20% Increase in Tax Collected at Source (TCS) rate

by Koushik Gope
Published: Last Updated on 0 comment

The Union Budget 2023-24 proposed to increase the Tax Collected at Source (TCS) rate on overseas tour packages and funds remitted under the Liberalised Remittance Scheme (LRS) from 5% to 20%. The notification in this regard was issued by the Finance Ministry on May 12, 2023.

The new TCS rates will come into effect from July 1, 2023. This means that if you use your credit card to make a purchase in foreign currency outside India, you will have to pay a TCS of 20% on the amount spent.

The TCS will be collected by the credit card issuing bank and will be paid to the government. The TCS amount can be claimed as a deduction while filing your income tax return.

The increase in TCS rates is expected to raise additional revenue for the government. It is also expected to discourage people from making unnecessary foreign currency transactions.

The following are some of the key points to note about the new TCS rates:

  • The TCS will be applicable on all credit card transactions in foreign currency, irrespective of the amount.
  • The TCS will not be applicable on credit card transactions for education and medical purposes.
  • The TCS will be collected by the credit card issuing bank and will be paid to the government.
  • The TCS amount can be claimed as a deduction while filing your income tax return.
  • The new TCS rates are likely to have an impact on people who frequently travel abroad or who make online purchases in foreign currency. It is important to be aware of the new rates and to plan your finances accordingly.

How 20% TCS hike affect the travel sector?

The 20% hike in TCS on overseas travel is likely to have a negative impact on the travel sector. The hike will make foreign travel more expensive for Indian citizens, and it is likely to discourage some people from traveling abroad.

The hike is also likely to make it more difficult for travel agents and tour operators to do business. The agents and operators will have to pass on the additional cost to their customers, which is likely to make their services less competitive.

The hike is also likely to have a negative impact on the tourism industry in India. The hike will make it more expensive for foreign tourists to visit India, and it is likely to discourage some people from traveling to the country.

The overall impact of the hike on the travel and tourism sector is likely to be negative. The hike is likely to discourage people from traveling, and it is likely to make it more difficult for travel agents and tour operators to do business. The hike is also likely to have a negative impact on the tourism industry in India.

Here are some of the specific impacts of the 20% TCS hike on the travel sector:

  • Increased travel costs: The hike will make foreign travel more expensive for Indian citizens. This is because the TCS is paid by the traveler, and it is not refundable. The hike is likely to discourage some people from traveling abroad, especially those on a budget.
  • Reduced demand for travel services: The hike is also likely to reduce demand for travel services, such as travel agents and tour operators. This is because the hike will make it more expensive for these businesses to operate. The reduced demand is likely to lead to job losses in the travel sector.
  • Negative impact on the tourism industry: The hike is also likely to have a negative impact on the tourism industry in India. This is because the hike will make it more expensive for foreign tourists to visit India. The reduced tourism is likely to lead to job losses in the tourism sector.

The 20% TCS hike is a significant development that is likely to have a negative impact on the travel sector. The hike is likely to discourage people from traveling, and it is likely to make it more difficult for travel agents and tour operators to do business. The hike is also likely to have a negative impact on the tourism industry in India.

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