If you or your family members are planning to travel to a foreign country, take note of this. From the 1st of July, Tax Collected at Source or TCS on the booking of foreign tour packages will increase from 5 per cent to 20 per cent under the Liberalised Remittance Scheme (LRS). This means that travelling abroad to foreign countries for the purposes of leisure or tourism will now be more expensive than before.
Travelling Abroad For Leisure Will Now Be Costlier
As of now, the tax remittance or payment that an individual has to pay on booking a foreign tour package is 5 per cent without any threshold limit. However, from the 1st of July, this will increase to 20 per cent. However, this will not apply to people who are going abroad for medical or educational purposes.
If you can prove that the reason for foreign travel is for the purpose of education and/or medical treatment, then the new policy will not be applicable to you. However, failure to do so will result in you having to pay higher taxes.
The primary purpose of this new policy is to target high-value discretionary spending. Discretionary spending refers to those expenditures that are not essential to an individual’s day-to-day life and are done for leisure or entertainment purposes. In other words, they are non-essential expenditures.
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About TDS And TCS
As mentioned above, TCS refers to tax collected at the source. It is paid when an individual makes an expenditure and has to pay a certain amount of tax to the government to qualify that payment. TDS, on the other hand, refers to Tax Deducted at Source. This is a tax that is collected when an individual receives a payment.
Parents usually send money to their children who are studying abroad. Proving that the money sent is for the purpose of education and hostel fees is easy enough, however, if the child lives in an apartment outside of the university campus, then proving this might be more difficult.
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Did you have any plans for foreign travel recently? Tell us about it in the comments below.
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