According to Mint reports, taxpayers spending more than ₹2 lakh on foreign travel in a year must file an income tax return, even if their income falls below the basic exemption limit. As reported by Mrinal Mehta, Joint Secretary at the Bombay Chartered Accountants' Society (BCAS), this provision is now included in Section 263 of the Income Tax Act, 2025, which replaced Section 139 of the 1961 Act and became effective from 1 April 2026. The threshold covers annual aggregate expenses including airfare, visas, and hotel bookings, whether paid for oneself or others, and applies to both individual and couple's travel.
Under the new regulations, overseas tour packages attract a flat 2% TCS from the first rupee from 1 April 2026, while other LRS travel remittances above ₹10 lakh annually attract 2% TCS. As reported by Mehta, luxury purchases above ₹10 lakh still carry 1% TCS against the taxpayer's PAN. These transactions are reported against the taxpayer's PAN and surface in their Annual Information Statement (AIS) and Form 26AS, making them visible to the tax department through data analytics and transaction reporting. Tax collected at source (TCS) is not an additional tax burden but an advance tax parked on the PAN that can only be recovered by filing a return.
According to the report, tax collected at source (TCS) is not an additional tax burden but an advance tax parked on the PAN that can only be recovered by filing a return. Mehta explains that every transaction surfaces in the taxpayer's Annual Information Statement, and silence invites a notice from the tax department. He recommends that taxpayers review their AIS and Form 26AS before deciding not to file an income tax return, noting that filing becomes important for recovering TCS and meeting statutory requirements. The expert emphasizes that filing becomes crucial for freelancers who may have multiple income sources and need to manage advance tax payments throughout the year.
As reported by Mehta, many taxpayers mistakenly treat TCS as an additional tax burden when it is actually a tax credit that can be adjusted against final tax liability or claimed as a refund. The expert recommends that taxpayers returning from overseas vacations or making luxury purchases this summer season should file an ITR not just for reporting income, but also to meet statutory filing requirements and claim refunds of taxes already collected through TCS. This approach ensures compliance with the tax department's increasing use of data analytics and transaction reporting, particularly important for freelancers managing multiple clients and international payments.
