Indians took out $ 27.14 billion (around Rs 2.24 lakh crore) during the year ended March 2023 under the Liberalised Remittances Scheme of the Reserve bank of India, a rise of 38.39 per cent when compared to $ 19.61 billion in the previous year ended March 2022. The outflow works out to just 4.54 per cent of India’s forex reserves of $ 600 billion. Under LRS, all resident individuals, including minors, can remit up to US $250,000 (approximately Rs 2.06 crore) abroad per year without prior approval from the RBI. From July 1 this year, there will be a 20 per cent tax on remittances under LRS, except for credit card spends below Rs 7 lakh outside India, medical expenses and education purposes. Indians spent around $ 13.66 billion (over Rs 1.13 lakh crore) on overseas travel in the current financial year, a 98 per cent jump from the same period of last year, the latest data from the RBI showed. The total amount spent on travel outside India was $ 6.90 billion under the LRS In the same period of FY2022. The amount spent on foreign travels during the first 10 months of fiscal 2022-23 almost 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. Last week, the Centre amended rules under the Foreign Exchange Management Act (FEMA), bringing international credit card spends outside India under the LRS. As a consequence, spending on international credit cards would have then attracted a higher rate of TCS at 20 per cent from July 1. Now, with last Friday's decision, the 20 per cent tax rate is likely to be levied on card transactions beyond Rs 7 lakh. The initial proposal for 20 per cent tax on card spends outside India generated a lot of criticism as it was seen as posing a significant compliance burden on both card-issuing banks and consumers. Also, experts raised concerns that even though taxpayers can claim refunds on the TCS levy at the time of filing their returns, this could result in their funds being locked until the refund is initiated by the tax department. 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 20 per cent tax with effect from April 2022, it would have collected Rs 18,800 crore tax from overseas travel remittances of people. The data showed that travel constitutes around 50 per cent of the total outward remittances allowed under the LRS for resident individuals in FY2023. During 2021-22, the share of travel was 35 per cent of the overall international spending by Indians. 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.
