In a big move to boost travel in India, the Indian government has said domestic tour operators are now not required to collect tax on sale of overseas tour packages to non-resident individuals visiting India. The Central Board of Direct Taxes (CBDT) has relaxed the provision of Tax Collected at Source of 5% under section 206C(1G) of the Income Tax Act, 1961.

Section 206C (1G) of the Income Tax Act, 1961 provides for the collection of tax by a seller of an overseas tour program package from a buyer, being a person purchasing such a package, at the rate of 5% of the amount of the package.

The CBDT said representations were received from domestic tour operators who were facing difficulties in collection of tax from non-resident individuals visiting India who were booking overseas tour package from such domestic tour operators.

“Since such persons may not have a PAN, tax is required to be collected at higher rates. Further, such non-residents may find it difficult to furnish their ITR and claim refunds,” the finance ministry said in a statement. The relaxation will be extended to a buyer being an individual who is not a resident in India in terms of clause (1) and clause (1A) of section 6 of the Act and who is visiting India.
Experts call this a welcome step and said the move would encourage the travel bookings from India.