TCS On Sale of Overseas Tour Pacakage

Tax Collection at Source (TCS) under Section 206C(1G) applies to sellers of overseas tour program packages, requiring them to collect tax from buyers at the time of debiting or receipt of payment, whichever is earlier. An overseas tour package must include at least two of the following: international travel ticket, hotel accommodation (with/without food), or other related expenses. All sellers, including individuals, HUFs, companies, LLPs, firms, and associations, are liable to collect TCS regardless of turnover. Exemptions exist for buyers already liable to deduct TDS or for certain government entities. TCS rates vary by purpose, with applicable rates increasing over time and higher rates if PAN is not provided. The threshold limit for remittances under LRS has been increased from ₹7,00,000 to ₹10,00,000 effective 1 April 2025. TCS applies even in B2B transactions, sponsored tours, or when minors travel, with liability always on the “buyer” rather than the traveler. Refunds of TCS on cancellations must be claimed via income tax return.

1. Duty to collect tax

Every person being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package.

2. Timing of tax collection

Tax is to be collected at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier. Even where authorised dealer receives an amount whether or not exceeding `7,00,000 either in aggregate or singly from a buyer towards purchase of an overseas tour program package then he has to collect tax at specified rate where such amount is received under LRS. The threshold limit has been increased from ₹700,000 to ₹10,00,000 w.e.f 01.04.2025.

3. Person liable to pay tax

Tax is to be collected from a buyer who purchases the overseas tour programme package.

4. Meaning of Overseas tour programme package

Overseas tour programme package’ means any tour package which offers visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. The overseas package will include the travel by road also like tour package for Bhutan and Nepal etc. Overseas tour package has been defined to include tour to any place outside Indian Territory.

The CBDT has clarified CBDT vide Circular No. 10/2023 dated 30.06.2023 that the term ‘overseas tour program package’ is defined as to mean any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. It is clarified that purchase of only international travel ticket or purchase of only hotel accommodation, by in itself is not covered within the definition of ‘overseas tour program package’.

To qualify as ‘overseas tour program package’, the package should include at least two of the followings:-

(i) international travel ticket,

(ii) hotel accommodation (with or without food)/boarding/lodging,

(iii) any other expenditure of similar nature or in relation thereto.

5. Who is seller of overseas tour package

Any person selling an overseas tour package is liable to collect tax at source. The term seller has not been defined separately for the purposes of Section 206C(1G). Therefore, every person be it individual/HUF/Company/LLP/Firm/ AoP/BoI is liable to collect tax if it is selling an overseas tour package. Even individual or HUF when selling overseas tour package irrespective of turnover whether or not their total turnover from business exceeds `1 crore or not during the preceding financial year is liable to collect tax.

6. Cases where TCS on overseas tour program package shall not be applicable,

(a) If the buyer is liable to deduct tax TDS under any other provision of this Act and has deducted such amount;

(b) Where buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of Section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

7. Rates of TCS

Rate of TCS

NOTE: Where aggregate of remittances covered in 206C(1G)(a) are not exceeding the limit of 7 lacs, then there is no TCS to be collected. Finance Act, 2025 has increased the limit to 10 Lacs for previous year 2025-26. This limit is for aggregate of all remittance covered in points (a) to (d) in the table above

NOTE: There is no exemption limit of 10 lacs under Sec 206C(1G)(b)

>TCS if the buyer of tour package is a Business House who is offering it as an incentives to their customers:

In such case, the person travelling would be someone else but the buyer would be different. TCS provision under section 20C(1G) is applicable on the “buyer” & not on traveller. In case the package is sold to a Business House for incentivizing their dealer or customers, the TCS would be required to be done from such Business House only.

Similar situation may arise if there are four persons in the family who are travelling then whether TCS would be required to be done from all four persons or simply from one person who is making the payment?

In such a case, the buyer would be subject to TCS. If only one person makes the payment, he alone may be treated as “Buyer” and would be subject to TCS alone. However, if the 4 persons want to do their payment separately or want their tour package to be billed separately then TCS could be collected from all the 4 persons individually.

Likewise, if the tour package is sponsored by someone else like the tour of newly married couple sponsored by the parents then the sponsorer (i.e., buyer) of the tour package who is making the payment to the seller will be covered by TCS provision.

> If The Tour Package Is Subsequently Cancelled:

There is no provision as such to refund the amount of TCS to the buyer by the booking agent. The buyer would be required to claim it back in their income tax return at the time of filing their income tax return. However, if the cancellation is in the same quarter then the seller can carry out the rectifications entry in its books & refund the amount to the buyer.

• Even if the buyer doesn’t have taxable income, still the TCS provision will be applicable. There is no declaration form like 15G/15H in such cases so as to avoid the applicability of TCS.
• If the tour package is purchased for the travel of minor (like in case of overseas tour package arranged by school in direct arrangement with the tour operator) then the PAN of the parents can be submitted. If the minor is buying a Tour package then also the TCS would be applicable wherein PAN of the parent can be provided.
• If the tour packages includes domestic tour to Indian destinations prior to going overseas then TCS shall be applicable on domestic tour as well as it is the part of International overseas tour package e.g. If a person in Ahmedabad is given a tour package to Bangkok wherein tour package will include the tour from Ahmedabad to Kolkata and then to Bangkok, then entire amount would be subject to TCS as domestic tour is the part of complete overseas tour package.

TCS on Overseas tour Package is applicable even on B2B transactions

It may be easily understood that section nowhere says that the TCS is required to be done from the “person who is going on overseas tour”. It may happen that the buyer is Mr. A and the person going on overseas tour is Mr. B. TCS under section 206C(1G) is required to be done from Mr. A and not Mr. B. It is to be noted that in travel industries, there could be two intermediaries.

One who is acting as a pure agent and Second, where such intermediary is dealing on a principal to principal basis. Let us discuss the TCS applicability in both the cases.

In the first case, where the intermediary is acting as a pure agent whereby he will be getting the commission from the company on sale of the tour package. In short, the amount and all the details of the person who is going on overseas tour will be available with the main principal company and so in such case, the principal company will be doing TCS from the customer who is going on overseas tour. Agent will be getting commission from the principal company. In such cases, since the TCS is done directly by the principal company from the customers, the agent will not be liable for TCS again. In such cases, the buyer is the customers directly and not the agent. In short, TCS will be done only once and that too from the direct buyer.

However, the position will be different in the second case. If the intermediary is acting on a principal to principal basis, then the customer planning for overseas tour will be dealing with the intermediary and not the main company. In such a case, intermediaries will be liable for TCS on the customer who will be planning to go on an overseas tour package. The liability will be on the intermediary upfront. Now, it may be noted that intermediaries are basically trading overseas tour packages in such cases and are buying the package from the main company. For the main company, the intermediary only is the buyer and so the main company will also be required to do TCS. At the cost of repetition, TCS under section 206(1G) is required to be done from the “Buyer”. If the person is a buyer then TCS would be applicable. Section nowhere says that the TCS is required to be done from the “person who is going on overseas tour”. However, there is just one exception. If the B2B transaction is liable for TDS then the TCS provision Under section 206C (1G) will not be applicable. For example, X Travel is a retailer of tour packages which is purchased by it from Y Travels and if X travel is doing TDS while making the payment to Y travels under section 194C then the TCS provisions may not be applicable in such cases.

If the transactions by X travels & Y travels is without TDS Under section 194C then there will be two occasion of TCS. First, TCS will be applicable on payment by X travels to Y Travels. Second, by customer of X Travels on payment to X Travels.