An Indian family books a 10-day Bali holiday for ₹3,80,000 through MakeMyTrip. At checkout, the price increases by ₹19,000 — that is 5% TCS on the entire amount. The same family books the same Bali holiday by separately purchasing flights from Air Asia, hotel from Booking.com, day-tours from Klook — total ₹3,80,000, zero TCS. The structurally-identical trip costs ₹19,000 differently depending on the booking channel. The Section 206C(1G) TCS rule on overseas tour packages is the most-confused bucket in Indian travel taxation because the legal definition of "tour package" is narrow but the public assumption is broad. Layer on the post-October-2023 cliff (5% up to ₹7 lakh, 20% above), the ITR-refund reclamation mechanic, and the corporate-vs-personal-payment distinction — and the rule looks more complicated than it actually is. Here is the 2026 plain-English explainer.
What counts as an "overseas tour package"
Section 206C(1G) and CBDT clarifications define overseas tour programme as a tour where the customer purchases at least two of the following components from a single tour operator as a bundle:
- Travel (flight, train, or other transport)
- Hotel / lodging accommodation
- Boarding (meals)
- Any other expenditure of a similar nature
The key triggers are bundled + single seller. A trip that combines two or more components purchased from different sellers typically does not meet the definition of "tour programme package" — even if functionally equivalent to a packaged tour. CBDT Circular No. 10 of 2023 clarified that the term "overseas tour programme package" does not extend to a self-curated combination of separately-purchased components.
Examples — what is and is not a package
| Booking | Tour package? |
|---|---|
| MakeMyTrip "Singapore 5N/6D" — flights + hotel + tours bundled | Yes |
| Yatra "Maldives Romantic Getaway" — flights + resort + breakfast bundled | Yes |
| Cox & Kings "European Highlights" — flights + hotels + tours bundled | Yes |
| Cruise package (Royal Caribbean) — sea travel + cabin + meals included | Yes |
| Pilgrimage tour to Saudi Arabia (Hajj/Umrah package) — flights + hotel + transport bundled | Yes |
| Flight-only booking from Indigo / SpiceJet / Vistara for international route | No |
| Flight from Indigo + Hotel from Booking.com (separate sellers) for the same trip | No — separate sellers |
| Airbnb-only booking abroad | No |
| Hotel-only booking via Agoda / Booking.com / Hotels.com | No |
| Day-tour or activity booking via Klook / GetYourGuide / Viator | No |
| Foreign-employer-paid business-travel package booked by employer's travel desk | Treatment depends on whether employer pays / charges back; typically no employee-side TCS as employer is the buyer |
| Personal trip via foreign-based tour operator (no Indian seller) | Foreign operator typically not subject to Indian TCS collection mechanism — but Indian payment-instrument issuer (bank for wire) may apply LRS-TCS to the outward remittance |
2026 rates — pre and post October 2023
| Period | Tour package amount | TCS rate |
|---|---|---|
| Up to 30 September 2023 | Any amount | 5% (introduced FY 2020-21) |
| From 1 October 2023 | Up to ₹7 lakh in FY | 5% |
| From 1 October 2023 | Above ₹7 lakh in FY (incremental amount) | 20% |
The ₹7 lakh threshold is per individual per financial year, cumulative across all tour packages purchased. The TCS rate jumps at the threshold — only the incremental amount above ₹7 lakh attracts 20%.
Example: A family buying tour packages worth ₹3 lakh + ₹6 lakh in the same FY (total ₹9 lakh). First ₹7 lakh: 5% TCS = ₹35,000. Next ₹2 lakh: 20% TCS = ₹40,000. Total TCS = ₹75,000 on ₹9 lakh of tour spend = 8.3% effective.
Who collects the TCS
The tour operator (seller of the tour package) collects TCS at the time of receiving payment from the buyer. The operator must:
- Have Tax Deduction Account Number (TAN)
- Collect TCS at the prescribed rate at the time of payment receipt
- Deposit TCS to the government within 7 days of the end of the month of collection
- File Form 27EQ quarterly
- Issue TCS certificate to the buyer (Form 27D)
- Report the TCS in the buyer's PAN-linked TDS / TCS database, visible in Form 26AS and AIS
For tour operators based outside India (e.g., a foreign tour operator with no Indian establishment), the TCS collection mechanism does not directly apply. However, the buyer's outward remittance via Indian bank may attract LRS-TCS at the bank level if the cumulative LRS spend exceeds ₹7 lakh.
Who can claim the TCS at ITR refund
The TCS is credited to the PAN of the buyer (the person who paid). At ITR filing:
- Individual buyer: TCS shows in their PAN's 26AS; offset against total tax liability of the year; excess refunded.
- Corporate buyer (booking employee travel): TCS shows in company's PAN; reclaimable on corporate ITR.
- Joint payment: TCS goes to whichever PAN was provided at booking; the family head typically takes the full TCS reclaim through their ITR.
For Indians with low aggregate Indian-source income (NRIs filing nil ITR, retirees), the TCS effectively becomes an interest-free deposit at the government for 12-18 months until ITR refund clears. Plan cash-flow timing.
Common edge cases
Flight-only tickets bought from a foreign airline directly
Not a package by definition. No 206C(1G) TCS. However, if paid via bank wire and total LRS outflow exceeds ₹7 lakh in the FY, the bank may apply 20% LRS-TCS on the remittance amount.
Pre-Oct-2023 booking, post-Oct-2023 payment
The TCS rate is determined by the date of payment receipt by the tour operator, not the booking date. Payments received after 1 October 2023 attract the post-October rate structure.
Partial cancellation / refund
Refunded portion: TCS already deposited is generally not refunded by the operator. The buyer reclaims via ITR by reporting actual taxable tour spend versus the TCS-collected amount.
Pilgrimage and medical travel
Pilgrimage trips (Hajj, Umrah, Vaishno Devi external) booked as packages count as overseas tour packages. Medical travel booked as a tour package (rare) similarly counts. Note: medical travel via bank wire for treatment (not as a tour package) is separately subject to Section 206C(1G) at 5% above ₹7 lakh.
Educational trips for school groups
If sold as a tour package (transport + accommodation + activities bundled), TCS applies. Schools sometimes structure these as separate per-component bookings to avoid the package classification.
Corporate-paid business travel
If the company books and pays for the tour package, TCS is collected in the company's PAN; company reclaims via corporate ITR. Employee is not the buyer.
Honeymoon packages
Standard tour package classification — flights + resort + meals + activities. TCS applies as per the cliff.
Backpacking trip with separate component bookings
A do-it-yourself international trip with flights from one site, hostels from another, day-tours from a third = no tour package classification = no 206C(1G) TCS. Bank-level LRS-TCS still applies on outward remittance above ₹7 lakh.
Planning around the TCS cliff
- If the trip is < ₹7 lakh: book as package or separate — 5% TCS on package, 0% on separate; separate saves the 5%.
- If the trip is > ₹7 lakh: separate-component booking can save 20% TCS (and the ITR-reclaim cash-flow drag).
- For multi-destination annual travel: spread across two financial years if the cumulative tour-package spend would otherwise exceed ₹7 lakh in one FY.
- For business travel: prefer employer-paid booking — employer's TCS reclaim is operationally simpler.
- For HNI travellers with large packages: budget for the 20% TCS as cash-flow timing, not as a permanent cost — reclaim is virtually certain at ITR.
Practical playbook for outbound Indian travellers in 2026
- Use credit cards for individual flight + hotel + activity bookings (no TCS on CC-FX in 2026 — see our separate explainer).
- Avoid tour-package classification by self-curating the trip across multiple sellers.
- If using a tour operator (Cox & Kings, Thomas Cook, MakeMyTrip Holidays, Yatra, Veena World), expect 5% TCS up to ₹7 lakh, 20% above.
- Provide PAN at booking to ensure the TCS is credited to your PAN for reclamation.
- Keep the Form 27D TCS certificate from the operator; verify it in Form 26AS / AIS post-FY-end.
- At ITR filing: report the TCS in Schedule TDS-TCS; offset against tax liability; refund the excess.
Frequently asked questions
Is flight-only ticket from MakeMyTrip a "tour package"?
No. Flight-only is a single component; the tour package definition requires bundling of at least two of the qualifying components (travel + lodging + boarding + similar) from a single operator. Flight-only is exempt from 206C(1G).
What if I book a tour package and the operator does not collect TCS?
The operator is the legal collector. If they fail to collect, the operator faces Section 271CA penalty (equal to the amount of TCS not collected). The buyer is not penalised but loses the certainty of TCS credit in PAN.
Can I get TCS waiver if my income is below the basic exemption?
No waiver mechanism at the time of collection. You reclaim the full TCS via ITR refund at year-end. The TCS is interest-free deposit until refund clears.
If I cancel the package, do I get the TCS back?
The operator typically does not refund the TCS already deposited. You reclaim it via ITR by reporting actual taxable spend post-cancellation against the TCS collected.
Does the ₹7 lakh threshold reset every year?
Yes — it is per individual per financial year, cumulative within the year. Resets every 1 April.
Is the TCS rate likely to change again in 2026?
The 5%/20% structure has been stable since 1 October 2023. Annual Budget cycles (1 February) are the most likely vehicle for any rate change. Monitor Finance Ministry notifications during budget periods.
Sources: Income Tax Act Section 206C(1G); CBDT Circular No. 10 of 2023 (clarification on tour-package definition); Finance Act 2023 amendments; CBDT Notification for post-1-October-2023 rate structure; accessed May 2026. Travel-tax rules are revised periodically — verify the current TCS rates on incometax.gov.in. Editorial research, not tax advice.