Government exempts 5% from TCS on overseas package tours sold to NRIs visiting India

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

Currently, domestic tour operators are required to levy a 5% withholding tax (TCS) on the sale of overseas tour packages.

The Income Tax Act provides for the levying of a tax by the seller of a package tour abroad from a buyer at 5% of the amount of the package tour.

The Central Board of Direct Taxation (CBDT) has received representations from domestic tour operators who were having difficulty in collecting taxes from non-resident individuals visiting India who were booking overseas tour packages with them.

Since these people may not have PAN, tax had to be levied at higher rates. Additionally, these non-residents may have difficulty providing their ITR and requesting refunds, the CBDT said.

“A domestic tour operator is not liable to collect tax on the sale of overseas tour packages to non-residents visiting India,” the CBDT said.

Nangia Andersen LLP’s partner, Neeraj Agarwala, said the purpose of the TCS was to collect information and monitor the tax compliance of private spenders.

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 travel bookings from India,” Agarwala added.

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