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Indians spent around $10 billion on overseas travel between April and December, a report by the Times of India (TOI) said, citing data from the Reserve Bank of India (RBI). It is the highest ever such figure, even more than the spending in any financial year. Before this, the highest spend on overseas travel in an entire financial year was $7 billion in 2019-20.
The RBI data showed that Indians spent $1.137 billion on travel in December 2022 alone. This takes the total till December in FY23 to $9.947 billion. When the foreign exchange spent on education, gifts and investments is taken into account, the total money sent abroad stands at $19.354 billion. The highest ever in this category was $19.61 billion in FY22.
However, as the expenditure on travelling is rising, Indians are now spending less on their relatives staying abroad. The share of remittances in the total foreign spending has fallen from 26 per cent in FY18 to 15 per cent in FY23. The money sent abroad for investment in equity shares has stayed around $10 billion annually since FY18.
Experts believe that the Budget 2023 announcement to raise the Tax Collection at Source (TCS) on foreign remittances under the Liberalised Remittance Scheme (LRS) from 5 per cent to 20 per cent, may impact outflows.
According to the LRS scheme, introduced in 2004, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both.
A TCS of 5 per cent was imposed on the LRS scheme in 2020 to monitor the remittances and correlate these with the income tax returns. This has been hiked to 20 per cent and may lead to a fall in outward remittances. However, according to experts, the impact is likely only short-term.
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