The 20% Tax Collected at Source (TCS) rule for overseas tour packages seems to have a loophole. Booking such a package with an Indian tour operator attracts TCS right away. With a foreign tour operator, you can escape TCS until international payments on your credit card cross Rs 7 lakh a year.
Legal experts have noted that businessmen who frequently travel abroad may cross the Rs 7-lakh limit easily, and upon crossing it may choose to source foreign exchange from informal markets.
Credit card spends outside India have been brought under the ambit of the LRS under which all resident individuals, including minors, can remit up to $2,50,000 (approximately Rs 2.06 crore) abroad per year without prior approval from the RBI
International transactions via credit cards have been brought under the RBI’s Liberalized Remittance Scheme or LRS from May 16, 2023. From July 1, 2023, there will be 20 percent TCS on them with no minimum threshold.