Introduction to TCS (Tax Collected at Source)

Tax Collected at Source (TCS) is a provision under the Income Tax Act where the seller of specified goods or provider of specified services collects tax from the buyer at the time of sale/rendering of services. The tax collected is remitted to the government.

Understanding Overseas Travel Packages

It mandated that the seller of overseas packages shall collect TCS at 5% of the sale value without any threshold limit. This was applicable from 1st October 2020.

Since your company as a Partner Agent is Selling overseas tour package to PAN holder and Invoicing The Traveler, you need to collect the TCS and file it to Income tax department.

As a DMC, our responsibility is to ensure that TCS norms are followed , because we are sending funds overseas on your customer’s behalf, so we require a declaration from your side.

Changes in Finance Act 2023

In Budget 2023, the government made two key amendments to Section 206C (1G), which were to be effective 1st July 2023

Govt Setup a threshold limit of ₹7 lakhs in this change for another slab of TCS rate of 20%

1. Applicable TCS Rates

A flat 5% TCS was applied on overseas packages irrespective of booking amount. Now, bookings above ₹7 lakhs invite a higher 20% TCS.

2. All Modes of Payment Covered

The expanded TCS applies irrespective of payment method – credit card, forex card, cash, cheque, bank transfer, etc.

3. Aggregation of Spends

The ₹7 lakh limit applies to aggregating spending by a buyer across multiple overseas bookings in one financial year. So if someone books packages worth ₹5 lakhs in January and ₹3 lakhs in July through two agents, the second booking crosses the threshold and faces 20% TCS.