As more Indians look to travel abroad for vacations, it’s essential to grasp the concept of Tax Collected at Source (TCS) related to international travel packages. Although TCS is charged upfront, many travelers remain unaware of its functioning, its presence in Form 26AS, and how they can claim it as a credit against their income tax obligations.
How does TCS function?
TCS is collected upfront by the travel agent or tour operator at the time of booking, regardless of whether the payment is made in INR or foreign currency. It applies to packages containing at least two elements, like flight tickets and hotel accommodations.
For the financial year 2025-26, the TCS rates are as follows:
- 5% on payments up to ₹10 lakh per individual per financial year.
- 20% on any amount exceeding ₹10 lakh.
Vinay Bagri, CEO & Co-founder of Niyo, clarifies, “The reduced rate of 5% is applicable on overseas travel packages up to ₹10 lakh for individual residents. If the total payment surpasses ₹10 lakh, the rate of 20% is imposed on the amount exceeding that limit.”
Shefali Mundra, a Tax Expert at ClearTax, notes that if a package costs ₹12 lakh, TCS would be 5% on the first ₹10 lakh and 20% on the additional ₹2 lakh.
It is the operator’s responsibility to deposit TCS with the government and provide Form 27D to the traveler.
Why TCS credits are frequently overlooked
Many travelers miss out on claiming TCS because they do not recognize it as an advance tax already settled on their behalf rather than an additional cost.
Bagri points out several common challenges:
- Travel agents might incorrectly associate TCS with the wrong PAN.
- Travelers may neglect to check Form 26AS or AIS before submitting tax returns.
- Mistakes in income tax return (ITR) filing could hinder claiming the credit.
He advises, “After booking a tour package, confirm that your PAN is correctly registered with the travel operator. Review Form 26AS/AIS to verify that TCS is accurately reflected, and enter the credit exactly as displayed when submitting your ITR.”
Mundra adds, “Even if your income falls below the taxable threshold, filing the ITR guarantees full adjustment of TCS against tax liability, with any excess refunded.”
How to Claim TCS Credit
Mundra outlines a systematic process:
- Obtain Form 27D from the travel agency, which includes PAN, TCS amount, and date.
- Check Form 26AS under ‘e-File’ → Part VI to validate TCS entries.
- Select the correct ITR form based on your income sources.
- Input TCS details in the “Taxes Paid” section if not auto-filled.
The system will adjust TCS against your tax liability, with any excess amount refunded.
Bagri mentions, “Utilizing digital tools with clear foreign exchange spending tracking aids in maintaining accurate documentation and eases reconciliation.”
Recovering Unclaimed TCS from Previous Years
Unclaimed TCS can be retrieved if it was recorded under the correct PAN.
A revised return can be filed if it falls within the revision period.
If the revision time has lapsed, a condonation request can be presented to the Income Tax Department.
Bagri underscores, “Without TCS being reported under your accurate PAN, reclaiming the credit becomes incredibly challenging.”
Strategies to Prevent Overpayment of TCS
For efficient TCS management, Bagri and Mundra recommend:
- Select the appropriate payment method: Credit cards currently incur no TCS; debit or forex cards are subject to the ₹10 lakh limit.
- Make payments in rupees to Indian operators to stay within the 5% bracket.
- Keep your PAN consistently updated across all operators.
- Regularly check Form 26AS/AIS and immediately raise any discrepancies.
- Maintain clear records of all flights, accommodations, forex transactions, and TCS.
- Consider TCS as a credit rather than a cost: It can lower tax liability or be refunded if there is no tax owed.
