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TCS cut: More cash to splash on foreign travels

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 The Budget has proposed to reduce the tax collected at source (TCS) for self-funded education and medical purposes abroad under the liberalised remittance scheme from 5% to 2%. However, the TCS rate for other purposes will continue at 20%. Govt had last year exempted remittances for education from TCS where such remittance is from a loan taken from a specified financial institution.

The finance minister has also proposed to reduce TCS on overseas tour packages to 2%. Currently, TCS for such expenditure is levied at a rate of 5% (for remittances up to Rs 10 lakh) and 20% (for remittances beyond Rs 10 lakh). The move will boost foreign travel.

Under the liberalised remittance scheme, all resident individuals, including minors, are allowed to freely remit up to $250,000 in a financial year without seeking prior approval from RBI. This enables an individual to send money to a child studying overseas for education, make an investment or take a vacation.

Govt’s decision to slash TCS on tour packages to a flat 2% will ease the upfront cash burden for travellers and boost outbound tourism. While TCS is adjustable against a traveller’s final tax liability, it is paid upfront and remains locked with govt for several months,impacting liquidity.Samco Securities research analyst Jahol Prajapati said the change would lower the entry barrier for highvalue travel. “A family had to block an additional amount

with govt for months. Now that capital stays in their pocket, effectively reducing the entry barrier for luxury travel,” he said.

Travel companies echoed the sentiment. EaseMyTrip co-founder Rikant Pittie said the TCS cut was among the most significant Budget measures for the sector. MakeMyTrip co-founder Rajesh Magow said the rationalisation directly addresses the liquidity impact faced by Indian outbound travellers. StampMyVisa co-founder Rahul Borude said this could unlock pent-up demand.

SNVA Traveltech chairman Alok K Singh said the TCS cut would “enable better financial planning for travellers and tour operators while supporting responsible and transparent spending.”

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