What is TCS and why it is levied on foreign travel Tax Collected at Source (TCS) is a tool used by banks and registered dealers to withhold tax in advance when you pay for foreign trips or purchase foreign exchange. It is applied to credit/debit card transactions, wire transfers, and travel bookings. TCS assists the government to track massive international outgoings and curb tax avoidance, lower mismatches at filing of income tax return.
2/7
Fresh TCS rules for outbound travel during FY 2025-26 From April 1, 2025, the TCS limit on under Liberalised Remittance Scheme (LRS) has increased to ₹10 lakh from ₹7 lakh per financial year per PAN. Ordinary foreign remittances or travel expenses up to ₹10 lakh are TCS-free. Over ₹10 lakh, there is a 20% TCS on foreign exchange spending, 5% on education and medical remittances (with PAN), and 5% on tour packages—to increase to 20% on any amount above ₹10 lakh.
3/7
How TCS affects your cash flow TCS increases the upfront cost of your trip. Suppose, for instance, you book an FY 2025–26 ₹12 lakh overseas trip, and it is in the form of a tour package. You'll be charged 5% on the first ₹10 lakh and 20% on the next ₹2 lakh. That's ₹70,000 gathered as TCS. Not a tax additionally, yes, but it affects ready money liquidity. You can refund it later while filing your income tax return electronically.
4/7
You cannot avoid TCS, but you can optimize it Although you can't escape the TCS deductions after crossing the threshold, you can plan for it. Give your PAN while making bookings so that you are eligible to pay reduced 5% TCS on qualified expenses. Monitor your remittances and travel expenses during the year. Spreading your big spends over financial years or limiting forex expenses below ₹10 lakh helps save on advance tax collected on your bookings.
Reporting TCS in your tax return TCS is treated as advance tax and may be adjusted while filing your income tax returns. Make sure that your Form 26AS accurately reflects the TCS deducted under your PAN. You can get a tax refund if the tax you pay is lower than the TCS deducted. If it's higher, the TCS is set against your net tax liability. Keep remittance proof and booking invoices handy for hassle-free processing.
6/7
What should frequent travellers consider If you are travel abroad frequently or make large remittances, it is easy to cross the ₹10 lakh TCS threshold. You can avoid additional tax collection by spreading your travels or payments over two years. If your company reimburses you for any work-related journeys, make sure to keep proper records—this may reduce your net taxable burden. Smart timing and planning can reduce the overall cost effect of TCS when you travel a lot.
7/7
Prepare for your vacation ahead To stay tax-smart, use PAN-linked bank accounts and cards for all transactions done overseas. Maintain records of remittances and bills during the year. Book in advance if your yearly spending might exceed the limit. The TCS burden can be avoided by early planning, documentation, and awareness. If you are well planned, you can avoid cash flow disruptions when you travel and enjoy a hassle-free tax-filing experience later.
