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Indians spent around $11.44 billion (over Rs 94,000 crore) on overseas travel between April-January in the current financial year, a 122 per cent jump from the same period of last year, the latest data from the Reserve Bank of India (RBI) showed.
The total amount spent on travel outside India was $5.15 billion under the RBI’s Liberalised Remittances Scheme (LRS) In the same period of FY2022. The amount spent on foreign travels during the first 10 months of the current fiscal more than doubled when compared to the same period of previous fiscal as flights resumed and travel restrictions were eased by countries in the wake of subsiding Covid pandemic.
Under the LRS, Indian residents can remit up to $ 250,000 every financial year.
However, the scenario is likely to change from July 1, 2023 when the higher tax on LRS on foreign travel comes into force. In a bid to trace high-value spending and tax avoidance by high net-worth individuals, the Union Budget this year announced a sharp hike in the tax collected at source (TCS) rate — to 20 per cent from 5 per cent — on overseas tour packages and on certain remittances out of India under the LRS. This has been proposed with the exception of LRS remittances for education and medical treatment purposes.
Currently, there is a 5 per cent tax on funds in excess of Rs 7 lakh sent out of India under the LRS of the RBI. The government apparently hiked the tax on remittances as people were making high-value remittances but their tax returns were not reflecting proportionate income tax payments. Had the government imposed the tax with effect from April 2022, it would have collected Rs 18,800 crore tax from overseas travel remittances of people.
Moreover, foreign exchange reserves of the country have not made much increase in the last a few months in the wake of the rising interest rates abroad and capital outflows from the stock market. Reserves fell by $ 2.39 billion to a three-month low of $ 560.003 billion for the week ended March 10, the RBI said in its latest weekly data release.
During January, the amount spent by Indians for traveling to foreign destinations stood at $1.49 billion – the highest in the current financial year. In fiscal 2021-22, the total spending by Indians on overseas travel stood at $6.9 billion.
The data showed that travel constitutes more than 50 per cent of the total outward remittances allowed under the Liberalised Remittance Scheme (LRS) for resident individuals in April-January of FY2023. During 2021-22, the share of travel was 35 per cent of the overall international spending by Indians.
The outward remittances under the LRS scheme stood at $22.08 billion in the first 10 months of this fiscal.
Besides travel, Indians spend money overseas on gifts, donations, maintenance of close relatives, education, medical treatment, purchase of immovable property, investment in equity or debt and deposits. In April-January, $2.3 billion was spent on gifts, same as in FY22.
Indians spent around $3 billion on education in the first ten months compared to $5.16 billion in FY22. Money spent on maintenance of close relatives was $3.22 billion. In FY22, the money spent under the same category stood at $3.3 billion, the RBI data showed.
