While many of the concerns of international credit card users are valid, from a taxation point of view, TCS collected is not the final tax as it can be claimed back by filing Income Tax Return (ITR). Even the Government said this yesterday.
“The payment of TCS is not a final tax. If the TCS payee is a taxpayer, he can claim credit for the TCS as his tax payment against regular income and adjust it against the advance tax etc. payments accordingly,” the Finance Ministry said.
According to Dr Suresh Surana, Founder of RSM India, TCS is levied to keep track of high-value transactions and for administrative purposes.
“It is pertinent to note that such TCS collected does not amount to the final levy but an interim levy which is imposed for the purpose of keeping track of the high-value foreign transactions and administrative purposes. Thus, the taxpayers not liable to pay tax should furnish their income tax returns in order to claim a refund of such TCS deducted u/s 206C(1G) of the IT Act. Non-furnishing of the tax return may entail such TCS as an additional cost burden for the taxpayers,” said Dr Surana.
Also Read: TCS on Foreign Education: Rate, exemption limit on remittance for study abroad from July 1
But, is there a way to reduce TCS or save taxes while travelling abroad?
While 20% TCS can temporarily result in a liquidity crunch for a user, tax experts believe there may be some strategies that one can follow to reduce high TCS outgo while travelling abroad. But there is no way to save actual taxes as it is charged basis your annual income and tax slab rates.
“The new tax rate of TCS under the LRS has increased the tax burden on foreign expenses, but there are still ways to save taxes while potentially spending with international credit cards abroad,” said Abhishek Soni, Co-founder and CEO of Tax2win, a Fisdom company
Soni suggested the following strategies one can consider to reduce TCS outgo:
- Firstly, instead of purchasing a complete foreign tour package, booking different components of your tour separately and directly, like a hotel, flight tickets, etc., is highly recommended.
- While credit card transactions are subject to TCS, other payment methods may not attract the TCS deduction. For example, consider using traveller’s cheques, prepaid Forex cards, or digital wallets that may not have the TCS application.
- However, do keep in mind any fees or other charges associated with these alternative payment methods. We still need clarity on money remitted abroad by these means.
Also Read: LRS limit 2023: Full list of transactions on which TCS applies under Liberalised Remittance Scheme
Soni further said that extra TCS can be utilized against your total income tax liability while filing ITR.
“Hence, maintaining proper documentation of your expenses, including invoices, receipts, and credit card statements, is beneficial. These records will be helpful when filing your Income Tax Return (ITR) and claiming deductions or offsets for the TCS amount paid,” he said.
(Disclaimer: The views and suggestions shared here are those of the respective commentators. The facts and opinions do not reflect the views of www.financialexpress.com)