No tax on overseas package tours sold to NRIs

HIGHLIGHTS

  1. Tax legislation provides for the collection of a tax by a seller of an organized trip abroad from a buyer at 5% of the amount of the organized trip.
  2. The CBDT received representations from domestic tour operators who were experiencing difficulties in collecting taxes from non-residents visiting India.
New Delhi: The Indian government has exempted domestic tour operators from collecting taxes from Non-Resident Indians (NRIs) when they book overseas package tours here in India.
The Central Board of Direct Taxes (CBDT) has relaxed the five percent withholding tax (TCS) provision on the sale of overseas tour packages under the Income Tax Act .

Tax legislation provides for the collection of a tax by the seller of an organized trip abroad from a buyer at 5% of the amount of the organized trip.

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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.

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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.