New Delhi, Apr 1: The Indian government has ruled that domestic tour operators do not have to collect tax on the sale of overseas tour packages for NRIs.
The Central Board of Direct Taxes (CBDT) has relaxed the provision of tax collected at source of five per cent under the Income Tax act.
The CBDT said domestic tour operators claimed they faced difficulties in collecting tax from NRIs visiting India, who had bought overseas packages from them.
“Since such persons may not have a PAN (Permanent Account Number) card, tax is required to be collected at higher rates,” said a CBDT release. “Further, such non-residents may find it difficult to furnish their ITR and claim refunds.”
The move has been welcomed by many people involved with NRI-related taxation issues.
“The purpose was to collect information and monitor tax compliances of high spending individuals,” Neeraj Agarwala, partner, Nangia Andersen LLP, told a newspaper.
“However, the way the provisions were drafted, tour operators were even required to collect taxes from non-residents, who are otherwise not taxable in India, at the time of booking their return tickets from India.”
The five per cent tax was introduced in April 2020. However, the tour operators complained to the government about the difficulties they experienced and how they could not collect the tax from NRIs who did not have PAN/Aadhaar cards and could not claim tax refunds.