Q. My name is Neha, employed in an IT company for the last 10 years. I have been investing in mutual funds for 7 to 8 years to meet my short-term and long-term goals. I plan to travel abroad with my husband for Christmas this year. How will the recent change in TCS from 5% to 20% affect me?
Effective October 1, 2023, TCS on overseas travel will be 20% if the travel cost is above ₹7 lakhs. The rate will be 5%, if the travel cost is below ₹7 lakhs.
As you plan to travel during December, let us assume the total cost of the trip will be ₹10 lakhs. As it exceeds ₹7 lakhs, you are liable to pay 20% on the amount by which the cost exceeds ₹7 lakhs.
Therefore, you will be liable to pay a tax of ₹60,000 (20% of 3 lakhs, which is the component of the cost above the ceiling of 7 lakhs). You can claim this tax in your returns for the financial year 2023-2024.
If you purchase foreign currency worth ₹8 lakhs, the bank or the dealer will deduct ₹20,000 (8,00,000-7,00,000 = 1,00,000*20%) as TCS.
If your total annual tax liability works out to ₹30,000, you will be liable to pay only ₹10,000 after deducting the TCS of ₹20,000.
You can avoid the new TCS rate if you buy a Forex Card before October 1, 2023.