If you sell overseas tour packages, the tax you collect from clients changed on 1 April 2026, and a lot of the guidance still circulating online describes the old rules.
This is a plain-language summary for tour operators. It is not tax advice, and the transition is recent enough that you should confirm the treatment of your own bookings with your chartered accountant before changing what you quote.
What changed
The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961. Alongside the new Act, the entire section numbering changed.
For tour operators, two things matter:
What the old rules looked like
Under the previous regime, TCS on overseas tour packages ran on slabs. A lower rate applied up to an annual limit, and a substantially higher rate applied above it. Operators had to track a client cumulative spend across the financial year to know which rate applied to the next booking.
That tracking requirement is what the flat rate removes.
Why this matters commercially, not just administratively
The old high slab rate was a genuine friction point in selling higher-value overseas packages. A client comparing a quote from you against booking components themselves saw a large amount collected upfront, and explaining that it was recoverable against their income tax rather than a cost did not always land.
A flat 2% with no threshold changes that conversation in three ways:
Quoting gets simpler. The same percentage applies to a small package and a large one. You no longer need to know what a client has already spent this financial year before you can quote accurately.
High-value packages get easier to sell. The upfront collected amount on a large package is dramatically smaller than it was under the top slab. The objection that used to arrive late in the conversation is much smaller.
Repeat clients stop being a special case. Under the slab system, a client second or third overseas trip in a year could attract a different rate than their first. That is gone.
What has not changed
TCS is still not a tax on your client. It is tax collected in advance and credited against their income tax liability, recoverable when they file their return, in the same way TDS is. If your team explains it as a cost, they are creating an objection that does not need to exist.
You are still responsible for collecting it, depositing it, and reporting it correctly. The rate got simpler; the compliance obligation did not go away.
What to check with your accountant
The genuinely uncertain areas are at the edges, and they are where you should ask rather than assume:
The practical takeaway
If your quoting process still calculates TCS on slabs, or still asks how much a client has spent this year before producing a number, it is running on rules that expired in April. That is worth fixing before your next overseas season, both because the calculation is wrong and because the new position is easier to sell.
---
Last verified: July 2026. Tax rules change, and this piece describes a change that is only a few months old. Confirm the current position with a qualified chartered accountant before relying on it for pricing or compliance.