The reduction in the rate of tax collected at source (TCS) from 5 per cent (and 20 per cent) to 2 per cent for booking overseas tour packages would boost international travel, particularly group travel and destination weddings, tour operators said on Sunday. The decision means travellers will have to pay less upfront.
“I propose to reduce TCS rate on the sale of overseas tour programme package from the current 5 per cent and 20 per cent to 2 per cent without any stipulation of amount,” said finance minister Nirmala Sitharaman in the Parliament while presenting the Union Budget on Sunday.
For international tour packages, TCS is levied at 5 per cent on amounts up to ₹10 lakh and 20 per cent on amounts above that.
At the time of booking the tour package, taxpayers must pay the TCS, which is an advance tax that can be adjusted while filing the income tax return against the overall tax liability.
TCS is an extra tax collected upfront when people buy packages or spend abroad under the liberalised remittance scheme (LRS). When TCS is high, tour packages become more expensive upfront, and travellers’ money gets blocked until the tax refund.
“The reduction of TCS will ensure better cash flow for travellers. Earlier, people had to pay a large extra amount and wait months for a refund,” said Anil Piunjabi, chairman, Travel Agents Federation of India, eastern region.
“It will be a real game changer for the travel industry. It will significantly ease the cash-flow burden, discourage cash transactions, and motivate travellers to use legal, transparent payment channels. What this really means is more trust, more compliance, and a clear push for organised growth. I also see this move giving a strong boost to outbound tourism in the coming months,” said Anil Punjabi.
The TCS reduction could also boost overseas destination weddings, he said.
Tour operators said the rupee depreciation against the US dollar had hit international travel this season.
“The rupee depreciation saw many travellers cancelling their international travel plans. The TCS reduction could give some relief, and international travel should again go up,” said Anjani Dhanuka, chairman, Travel Agents Association of India, eastern region.
“We welcome the government’s decision to rationalise the TCS rate on foreign remittances for education-related expenses in the Union Budget 2026. This is a progressive step that will ease the financial burden on Indian families supporting overseas education aspirations,” said Gagan Malhotra, COO, BookMyForex.com
“The rationalisation of TCS on overseas tour packages is a welcome step that addresses upfront liquidity impact on Indian outbound travellers. The government’s infrastructure-led investments have played an important role in supporting the growth of domestic tourism, and it is encouraging to see this momentum being sustained. Continued focus on regional connectivity and destination development, along with an emphasis on the creation of a national digital repository for destinations, will help improve destination discovery and enhance the overall traveller experience,” said Rajesh Magow, chair, FICCI Tourism Committee and co-founder and group CEO, MakeMyTrip.