India’s travel and tourism sector is scaling new heights—with digital innovations, outbound growth, and global connectivity. However, amidst this progress, a major concern has emerged that is slowing down momentum: the Tax Collected at Source (TCS) on foreign remittances and international travel.
Intended as a fiscal monitoring tool under the Liberalised Remittance Scheme (LRS), the current structure of TCS is inadvertently creating confusion, financial pressure, and operational hurdles for travelers, travel agencies, and the entire ecosystem.
🔍 What Is TCS and How Does It Apply to Travel?
Under the revised provisions of the Income Tax Act, effective from October 1, 2023:
•A 20% TCS is levied on outbound remittances and international travel bookings (tour packages), with no threshold exemption, except for educational and medical expenses.
•This tax is collected at the time of payment, increasing the upfront cost for travelers significantly.
•Although refundable during annual income tax filing, the delay in refund processing makes the burden immediate and discouraging.
⚠️ Five Key Challenges Created by TCS in the Travel Sector
1. Financial Burden on Middle-Income Travelers
Travelers planning a ₹5 lakh family trip must now pay ₹6 lakh upfront (₹1 lakh as TCS). This sudden spike in initial payment has led to postponements or cancellations, especially among salaried and middle-income families.
2. Disruption in Booking Confidence
Customers are often unaware of TCS at the time of inquiry. When informed during final payment, it causes confusion, dissatisfaction, and mistrust toward travel consultants—even when they are only following compliance.
3. Loss of Business for Indian Travel Operators
Due to TCS:
•Customers shift bookings to foreign platforms not governed by Indian tax laws.
•Local tour operators, OTAs, and travel startups face a decline in conversions, despite offering competitive rates.
This results in a revenue drain out of India—the opposite of what the policy aims to achieve.
4. Increased Compliance Burden on Agencies
Travel companies must now manage:
•Monthly reconciliation of TCS deductions and payments
•Timely remittance to government accounts
•Clarifying tax components to clients in writing
This has increased operational overhead and legal responsibility without compensation.
5. Contradiction to India’s Tourism Growth Vision
While India aspires to be a global travel hub, hosting G20 summits and investing in tourism infrastructure, TCS on outbound travel creates a regulatory contradiction. Instead of facilitating global mobility, it discourages Indian travelers from exploring the world, impacting airlines, hotels, visa partners, and forex providers.
🧭 What the Industry Seeks: A Call for Rationalization
Leading platforms like OsakaConnect.com, along with national travel associations, recommend:
•Lowering the TCS rate for personal tourism from 20% to a reasonable 5% or 10%
•Reintroducing a minimum exemption threshold (e.g., ₹7–₹20 lakh annually per traveler)
•Allowing real-time TCS credit adjustment at the booking/payment level
•Government-led awareness campaigns to educate travelers about TCS refunds
🌍 The Path Forward: Aligning Policy with Progress
TCS, as a financial control tool, has its place. But when applied to international travel in its current form, it hurts the very stakeholders driving India’s global tourism footprint.
India needs a balanced approach—one that ensures transparency and tax compliance, without penalizing aspirations or limiting the freedom to travel.
At OsakaConnect.com, we remain committed to simplifying the travel journey—through real-time pricing, transparent invoicing, automated TCS handling, and clear customer communication.
Let travel be an experience, not a tax challenge. Let policy support progress, not stall it.
It’s time to make travel smoother—for the traveler, for the industry, and for India.
