Between FY18 and FY21, overseas travel spending ranged from $4 billion to $6 billion annually. It sharply increased in FY22 to $7 billion and $13.6 billion in FY23
In the last couple of years, affluent Indians have significantly increased their spending on international travel compared to previous periods. Data from India's Liberalised Remittance Scheme (LRS) analyzed by Moneycontrol reveals that Indian travelers splurged around $30 billion on overseas trips, fueled by the rise of "revenge tourism" in the post-pandemic era.
India introduced the LRS in the 2004-05 fiscal year, and by 2021-22, the total spending by Indians on foreign travel had reached $29.2 billion. This substantial surge in spending occurred despite the Indian government's implementation of a tax collection at source (TCS) scheme for overseas remittances.
The LRS data encompasses all forms of international travel, including personal vacations and professional trips, but excludes travel related to overseas education, which is categorized separately. In the 2023-24 fiscal year, Indians spent approximately $17 billion on foreign travel, accounting for more than half of the $31 billion in overall LRS remittances for that year, according to Reserve Bank of India (RBI) data. In the previous fiscal year (2022-23), overseas travel spending was $13 billion out of the total $27 billion in LRS remittances.
The introduction of the TCS, which levies a 20% tax on overseas tour packages exceeding Rs 7 lakh per financial year (with a 5% tax on packages up to Rs 7 lakh), has not deterred Indian travelers from embarking on international trips. Instead, it has led to more organized foreign spending, as experts explain that TCS allows taxpayers to claim refunds within 15-18 months if the travel occurred in the first quarter of the fiscal year, or even sooner if the travel was later in the year. Consultants and entrepreneurs can also adjust the TCS in their advance tax payments, minimizing the impact of the cash blockage.
The demographics of Indian overseas travelers have also shifted, with a growing number of affluent individuals from smaller towns and cities participating in international travel. Previously, the typical travelers were from metropolitan or tier-1 cities with higher income levels, but now there is an increased representation from tier-2 and tier-3 cities, as their aspirations and income levels have risen.
The most popular overseas destinations for Indian travelers are largely in Europe, with Amsterdam, Switzerland, Paris, and London being the top choices. Central Asian destinations like Baku, Tbilisi, and Georgia are also gaining popularity as they become more accessible from India. The ease of access is a crucial factor, which is why destinations in South America, despite their attractions, are less popular due to the longer flight times.
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