Payments made to a tour operator for overseas tour packages are subject to TDS under Section 206C(1G) of the Income Tax Act. For Tax Year 2026-27, the applicable rate is 20% collected at source on the full value of the package, with no minimum threshold exemption — unlike general LRS remittances, the INR 7 lakh exemption does not apply to overseas tour package transactions. This makes it one of the highest-impact withholding provisions for leisure and corporate travel spending.
The obligation to collect TDS falls on the seller of the overseas tour package, meaning travel agents, tour operators, and online travel platforms are responsible for deducting the tax at the time of receipt of payment. Buyers who have their PAN linked and active will have TDS reflected in Form 26AS and Annual Information Statement, which can be claimed as a credit against their total income tax liability when filing returns. Buyers without a valid PAN are subject to a higher withholding rate of 40% under the non-PAN provisions.
Travel businesses should review their billing and accounting systems to ensure TDS is collected at the point of payment rather than invoice, since the liability crystallises on actual receipt. Corporate clients booking overseas travel for employees should factor this withholding into cash flow planning, as the 20% deduction represents an upfront tax cost that is recoverable only at the time of annual return filing. Keeping Form 15CA filings aligned with tour package payments is also recommended where the package cost forms part of a broader LRS outflow in the same financial year.
