3 Smart Strategies To Avoid 20% TCS On Overseas Tour Packages Starting July 1, 2023 

Starting July 1, 2023, a new tax regulation will be implemented, requiring individuals booking overseas tour packages to pay a tax collected at source (TCS) of 20 per cent. This is a significant increase from the current rate of five per cent. While the TCS can be claimed as a refund when filing your income tax return, the refund process can be time-consuming. 
 
To help you save your hard-earned money, here are three smart ways to avoid the 20 per cent TCS and make your international trips more cost-effective.
 
Utilise The Rs 7 Lakh Limit On International Debit Or Credit Cards:
One effective way to minimise the impact of the increased TCS is by utilising the Rs 7 lakh threshold for international debit or credit card payments. The finance ministry announced that starting from July 1, 2023, individual payments made through international cards up to Rs 7 lakh in a financial year will be exempt from TCS. “To bypass the 20 per cent TCS, you can evade the tax by making tour package reservations through international websites and settling the payment using an international debit or credit card, all while ensuring it remains within the prescribed limit. Remember to keep track of your expenditure and ensure it remains within the threshold,” says Renu Maheshwari, chief executive officer and principal advisor, Finzscholarz Wealth Manager and a Sebi-registered investment advisor. 
 
Opt For Segregated Bookings And Payments:
The definition of a tour package under the new TCS regulation is not entirely clear. To avoid being subject to the 20 per cent TCS, consider booking your flights, accommodations, and sightseeing separately rather than opting for a bundled package. “To circumvent the TCS, simply bypass it by directly acquiring your flight tickets from airlines such as Air India, Vistara, or IndiGo, and making hotel reservations directly through the official hotel websites. Ensure that the payment is made through a debit or credit card within the Rs 7 lakh threshold to enjoy the exemption. If you are traveling in a group, consider dividing the expenses in a way that each individual utilises their Rs 7 lakh limit, maximising savings for everyone,” says AK Narayan, CEO of AK Narayan Associates, a financial planning firm. 
 
Purchase Foreign Exchange By June 30, 2023:
Many travelers prefer carrying foreign currency or using forex cards instead of relying solely on debit or credit cards while abroad. To avoid paying the higher TCS rate, make sure to purchase foreign currency or obtain a forex card before June 30, 2023. It's important to note that there may be a surge in currency exchange requests in June, potentially causing delays in currency delivery. To save time and money, plan ahead and exchange your currency in advance before heading to the airport.
 
As the 20 per cent TCS on overseas tour packages comes into effect from July 1, 2023, it is essential to be proactive and explore ways to minimise the impact on your travel expenses. Stay informed, plan ahead, and make wise financial decisions to make your international trips both memorable and cost-effective.