The Budget 2024 simplified TCS on overseas tour packages to a flat 2% under Section 206C(1G) — no more tiered slabs, no PAN threshold for tour operators. Yet we still see agents either skipping TCS entirely or calculating it wrong. Here is what the law actually says, with a worked example.
- Budget 2024 removed the ₹7 lakh threshold and the 5%/20% slab structure. All overseas tour packages: flat 2% TCS, no PAN condition for tour operators.
- TCS is collected on the gross invoice value including GST — not on the base package cost.
- Agents must deposit TCS against their TAN by the 7th of the following month.
- Clients can claim TCS as advance tax credit in their ITR — it is not lost money.
- Failure to collect TCS makes the tour operator (not the client) liable for the uncollected amount plus interest at 1% per month under Section 206C(7).
What changed in Budget 2024 — old rules vs new
| Parameter | Old Rules (upto Budget 2023) | New Rules (Budget 2024 onwards) |
|---|---|---|
| PAN threshold | ₹7 lakh per FY; above ₹7L: 5% (with PAN) or 20% (without PAN) | No threshold. Flat 2% regardless of PAN |
| TCS rate (with PAN) | 5% above ₹7L | 2% on entire invoice value |
| TCS rate (without PAN) | 20% above ₹7L | 2% on entire invoice value |
| Scope | Overseas travel purchase by resident | Same — overseas tour package sold to resident Indian |
| Effective date | 1 October 2023 (post-Finance Bill 2023 amendment) | 1 April 2024 (Finance Bill 2024) |
Who must collect TCS?
Any "seller" as defined under Section 206C(1G) — which includes travel agents and tour operators selling overseas packages to resident Indians. If you book a Dubai package for a client who is a resident Indian individual, you collect TCS. Corporate clients who deduct TDS are exempt.
The law uses "seller" broadly. If you are an aggregator booking through a consolidator, the entity issuing the final invoice to the Indian resident is the collector.
Worked example — ₹85,000 Dubai package
In our testing with Indian DMCs and retail agents, the most common error is collecting TCS on the base cost rather than the gross invoice value. Here is the correct calculation, line by line.
Dubai Package — 5 Nights / 6 Days (2 adults) Base Package Cost : ₹ 80,000 GST @ 5% (SAC 998552, no ITC) : ₹ 4,000 ───────────────────────────────────── Gross Invoice Value : ₹ 84,000 TCS @ 2% on Gross Invoice Value : ₹ 1,680 ───────────────────────────────────── Total Payable by Client : ₹ 85,680 TCS Deposit (by 7th of next month) : ₹ 1,680 TCS Certificate (Form 27D) issued to client
Note: TCS is calculated on ₹84,000 (including GST), not ₹80,000. This is confirmed by the CBIC clarification under Section 206C — the "amount received" includes all taxes levied on the buyer.
Reference: Income Tax Act, Section 206C(1G) — Tax collected at source on overseas remittance and tour packages.
How to deposit TCS — step by step
- Collect TCS on the gross invoice value at 2% — add it as a separate line on your invoice.
- Deposit via Challan ITNS 281 at any authorised bank or on the Income Tax e-filing portal — by the 7th of the month following collection. For March collections, the deadline is 30 April.
- File TCS return (Form 27EQ) quarterly and issue Form 27D certificates to each client within 15 days of the due date for filing the quarterly return.
Client refund process — what to tell your travellers
TCS is advance tax, not an extra charge. Tell your clients three things:
- The TCS amount will appear in their Form 26AS and AIS once we deposit it.
- When they file their ITR, the TCS credit automatically offsets their income tax liability. If their total tax is less than the TCS paid, they receive a refund from the Income Tax Department.
- They do not need to do anything separately — the credit posts automatically once we file our quarterly return (Form 27EQ).
Use our TCS calculator to generate a client-friendly breakdown showing exactly how much TCS they are paying and what their Form 26AS credit will look like.
Penalties for non-collection
Under Section 206C(7) of the Income Tax Act, failure to collect TCS makes the tour operator liable for the uncollected amount plus simple interest at 1% per month from the date TCS was due to the date of actual deposit. The client's tax liability is not affected — the penalty falls entirely on the seller.
The most common audit trigger we see: agents who forgot to collect TCS on 5-10 large international bookings across a financial year. On a ₹10 lakh booking that went uncollected, that is ₹20,000 of TCS plus accruing interest.
Frequently asked questions
Is TCS applicable on domestic tour packages?
No. Section 206C(1G) applies only to overseas tour packages sold to resident Indians. Domestic tour packages — even to high-cost destinations like Andaman or Kashmir — do not attract TCS under this section.
Does TCS apply if a corporate company books the tour?
No. If the buyer is a company or firm required to deduct TDS under the Income Tax Act, TCS under Section 206C(1G) does not apply. You can collect a TDS declaration from the corporate buyer to document this exemption.
Does the 2% TCS rate change if the client does not provide PAN?
Under the Budget 2024 rules effective from 1 April 2024, the rate is a flat 2% regardless of whether the client provides PAN or Aadhaar. The old 20% rate for non-PAN buyers has been removed for tour packages under this section.