You’ve picked your dream destination, scrolled through flight deals, and found a tempting tour package – but before you lock it in, there’s one number that can quietly inflate your travel bill: TCS, or Tax Collected at Source.
Let’s break down how it works, why it matters, and how you can plan smarter so that more of your travel budget stays with you.
Foreign Tour Package TCS in Brief
TCS on foreign tour packages refers to the Tax Collected at Source that is charged when a resident of India pays for an overseas tour package through an Indian travel operator. Under India’s tax rules, the tour operator is required to collect TCS at the time of payment on the total cost of the package, which typically includes travel, accommodation, meals, sightseeing, and other bundled services. This tax is collected to track and regulate foreign spending under the Liberalised Remittance Scheme. It is not an extra cost, as the amount paid as TCS can later be adjusted against the traveller’s income tax liability or claimed as a refund while filing the income tax return.
What is TCS on Foreign Tour Packages?
TCS (Tax Collected at Source) is a tax collected by sellers (like tour operators) when you purchase certain services. For foreign travel, it applies when you book a complete overseas tour package through a registered provider in India.
Union Budget 2026 – 27 has reduced the Tax Collected at Source (TCS) on overseas tour packages to a flat 2%, bringing it down from the earlier 5% and 20% slabs. This move is expected to lower the upfront cost of international travel for Indian residents and make overseas trips more financially accessible.
This tax change, brought under the Liberalized Remittance Scheme (LRS), is part of the Indian government’s effort to increase transparency and compliance around high-value international transactions.
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Why Was TCS on Foreign Tour Packages Revised?
The government restructured TCS on overseas tour packages to balance tax monitoring with traveller affordability. While earlier hikes were introduced to closely track foreign spending, the revised framework reflects a more moderate, compliance-focused approach.
The core objective remains transparency in high-value international transactions. By capturing overseas travel expenses under the tax system, authorities can map them against declared income and ensure adherence to foreign exchange and tax regulations.
Key policy drivers include:
- Strengthening the visibility of large overseas travel payments
- Aligning foreign spending data with income disclosures
- Enhancing reporting under the Liberalised Remittance Scheme (LRS)
- Encouraging voluntary tax compliance
Although the regulatory intent is oversight rather than restriction, TCS still affects travellers’ cash flow since the tax is collected at the time of booking. However, with the revised lower rate now in place, the upfront financial burden has eased significantly compared to the earlier structure.
Example: TCS on an Overseas Tour Package Under the New Rule
Let’s understand the impact with a practical scenario. Suppose you book a European family tour package worth ₹12 lakh.
Under Budget 2026, TCS on overseas tour packages is charged at a flat 2%.
Calculation (New Slab):
₹12,00,000 × 2% = ₹24,000
Total TCS payable = ₹24,000
This significantly lowers the upfront tax outflow, making international travel bookings more cash-flow friendly for Indian travellers.
How It Was Calculated Earlier (Previous Slabs)
Before the revision, TCS on overseas tour packages followed a tiered structure:
- 5% TCS on spending up to ₹10 lakh
- 20% TCS on spending above ₹10 lakh
Calculation (Old Slab):
First ₹10,00,000 × 5% = ₹50,000
Remaining ₹2,00,000 × 20% = ₹40,000
Total TCS payable = ₹90,000
Old vs New Impact at a Glance
- Earlier TCS: ₹90,000
- Revised TCS: ₹24,000
- Upfront savings: ₹66,000
The revised flat rate dramatically reduces the initial tax burden, improving liquidity for travellers even though TCS remains adjustable at the time of income tax filing.
Does TCS Mean Additional Tax Burden?
The good news: TCS isn’t an extra tax that disappears into thin air.
It’s simply an advance that you can reclaim when you file your income tax return.
- Adjust it against your income tax liability
- Claim a refund while filing returns
The key takeaway is that your cash flow gets hit temporarily, but you recover the money later.
Tips to Reduce TCS Impact While Travelling Abroad
Even though TCS on overseas tour packages is now a flat 2%, smart planning can still help you manage cash flow better. Here are practical ways travellers optimise their TCS exposure:
- Opt for Unbundled Bookings: Book flights, hotels, and activities separately, rather than purchasing a bundled overseas tour package, where applicable.
- Split Expenses Among Travellers: When travelling as a family or group, distribute payments across individuals to manage remittance reporting and cash flow.
- Use Eligible LRS Categories: Payments made for genuine education or medical travel abroad may fall under different TCS rules or thresholds under LRS.
- Claim TCS Credit in ITR: TCS is adjustable against your final tax liability. You can claim credit or a refund while filing your income tax return.
- Evaluate Business Travel Claims: If the trip is work-related, entrepreneurs or freelancers may explore classifying it as a business expense, subject to tax rules.
None of these tactics are loopholes; they’re simply smarter ways to plan travel within the law.
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Who Collects TCS on Tour Packages?
The travel agency, tour operator, or platform that sells you the package is responsible for collecting TCS. They deduct it at the time of booking and deposit it with the government under your PAN number.
You can view the collected amount in your Form 26AS or AIS (Annual Information Statement) on the Income Tax portal.
Tip: Always cross-check your PAN on the invoice; that ensures the deduction is reflected properly in your Form 26AS.
How TCS on Foreign Tour Packages Compares with Other Remittances
TCS rates differ based on the purpose of the remittance. The tax framework distinguishes between discretionary overseas spending and essential payments such as education or medical needs.
Here’s how overseas tour package TCS now compares with other common foreign remittances:
- Overseas Tour Packages: 2% (flat rate under Budget 2026)
- Foreign Education (via education loan): 0.5%
- Medical Treatment Abroad: 5%
- Foreign Investments / Shares / Assets: 20%
- International Gift Transfers: 20%
The revised 2% rate significantly lowers the burden on leisure travel compared to the earlier structure. However, discretionary spends like investments and gifting abroad still attract the highest TCS rates, reflecting tighter monitoring of capital outflows versus necessity-driven remittances.
Find out how to legally avoid paying 20% TCS on foreign remittances
What if You Cancel Your Tour?
Travel plans change, and so do bookings. If you cancel your trip, your TCS amount doesn’t vanish. You should receive a TCS certificate (Form 27D) and ensure it’s reflected in your Form 26AS.
In short, as long as your PAN and refund entries are correctly reflected, getting your TCS back is routine.
TCS Refund Process
Here’s how travellers are typically claiming their TCS refunds without hiccups:
- File your ITR (Income Tax Return)
- Declare the TCS amount paid under “TDS/TCS Details”
- Adjust it against your tax liability or claim a refund
Always verify that your tour operator has deposited the tax under your PAN before filing it; this prevents refund delays.
Learn how to claim a refund on TCS for international remittances
Why Use HOP Remit by moneyHOP for Your International Transfers?
Managing travel payments isn’t just about the package you book; it’s about how you move your money internationally.
If you’re planning to travel abroad, managing payments smartly is just as important as booking the right itinerary. HOP Remit by moneyHOP is an all-digital remittance platform designed specifically for individuals who want a faster, more transparent, and cost-effective way to send money overseas.
With HOP Remit, you can:
- Track all charges transparently – no hidden fees
- Get the best exchange rates with near-zero markups
- Transfer funds for travel, education, or family maintenance purposes
- Upload all documents digitally for TCS compliance and record-keeping
- Enjoy 24/7 human assistance
In a market crowded with remittance options, HOP Remit by moneyHOP stands out for combining regulatory compliance with consumer transparency.
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Final Thoughts
International travel taxation is far more moderate under the revised framework. With TCS on overseas tour packages now set at a flat 2%, the upfront tax impact is significantly lower than before. Travelling abroad in 2026 no longer requires setting aside large sums toward tax collection; it simply calls for awareness of the updated rules and planning payments accordingly.
Plan early, distribute expenses smartly, and claim what’s rightfully yours.
And when it’s time to move your travel funds abroad, trust a platform like HOP Remit by moneyHOP, where every rupee is accounted for, and every transfer is fully compliant.
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