Tax relief on tour operators: Govt exempts 5% TCS on overseas tour packages sold to NRIs visiting India

The government has exempted tour operators from collecting taxes from non-resident Indians visiting India and booking their overseas tour package from the country.

Nangia Andersen LLP Partner Neeraj Agarwala said the purpose of the TCS was to collect information and monitor tax compliances of high spending individuals. Pic: Reuters

The government has exempted tour operators from collecting taxes from non-resident Indians visiting India and booking their overseas tour package from the country.

Currently, domestic tour operators are required to collect 5 per cent tax collected at source (TCS) on sale of overseas tour packages.

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The Income Tax Act provides for collection of tax by a seller of an overseas tour package from a buyer at 5 per cent of the amount of the package.

The Central Board of Direct Taxes (CBDT) has received representations from domestic tour operators who were facing difficulties in collection of tax from non-resident individuals visiting India who were booking overseas tour packages from them.

Since such persons may not have a PAN, tax was required to be collected at higher rates. Further, such non-residents may find it difficult to furnish their ITR and claim refunds, the CBDT said.

"A domestic tour operator is not required to collect tax on sale of overseas tour package to non-resident individuals visiting India," the CBDT has said.

Nangia Andersen LLP Partner Neeraj Agarwala said the purpose of the TCS was to collect information and monitor tax compliances of high spending individuals.

However, the way the provisions were drafted, tour operators were even required to collect taxes from non-residents, who are otherwise not taxable in India, at the time of booking their return tickets from India.

"This is a welcome step and would encourage the travel bookings from India," Agarwala added.

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