Budget 2025: Impact on Foreign Travel & Remittances
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Liberalized Remittance Scheme (LRS) & TCS Changes in Budget 2025
The Union Budget 2025 has introduced key adjustments that affect how Indian residents remit money abroad, particularly benefiting travelers, students, and medical tourists. Here’s what you need to know:
What is the Liberalized Remittance Scheme?
Liberalized Remittance Scheme: A framework that allows resident individuals to remit money abroad for various purposes such as travel, education, and medical treatment, among others.
Key Change: TCS Threshold Increase in Budget 2025
TCS on Foreign Remittance u/s 206C(1G)
It compares the current limit and proposed limit for Tax Collected at Source (TCS) on various foreign remittances under the Liberalised Remittance Scheme (LRS).
| Code | Nature of Payment | Current Limit | Proposed Limit |
|---|---|---|---|
| 6CO | Sale of Overseas Tour Program Package | 5% up to INR 7 lakh, 20% thereafter | 5% up to INR 10 lakh, 20% thereafter |
| 6CP | Remittance under LRS for educational loan taken from financial institution covered under Section 80E | Nil up to INR 7 lakh; 0.5% above INR 7 lakh | NIL |
| 6CQ(a) | Education and Medical Remittance under LRS | Nil up to INR 7 lakh; 5% above INR 7 lakh | Nil up to INR 10 lakh; 5% above INR 10 lakh |
| 6CQ(b) | Other LRS Foreign Remittances | Nil up to INR 7 lakh; 20% above INR 7 lakh | Nil up to INR 10 lakh; 20% above INR 10 lakh |
Key Takeaways
- Threshold for most foreign remittances proposed to increase from INR 7 lakh to INR 10 lakh.
- Educational loan remittances from specified financial institutions proposed to be fully exempt from TCS.
- TCS rates remain unchanged in most cases; only the exemption threshold is proposed to be increased.
- Overseas tour packages continue to attract 5% TCS up to the threshold limit and 20% thereafter.
- Previous Threshold: Tax collected at source of 5% was applicable on international remittances exceeding ₹7 lakh.
- New TCS Threshold: The Tax Collected at Source threshold under the Liberalised Remittance Scheme has been increased from INR 700,000/- to INR 1,000,000/-. The threshold has been raised to INR 1,000,000/-. This means that travellers, students, and medical patients can now remit amounts up to INR 1,000,000/- without triggering the TCS, reducing their immediate tax burden on outbound remittances.
- If your international travel expenses exceed ₹10 lakh in a financial year, Tax Collected at Source will be applicable. Tax Collected at Source Rate for Foreign Travel: 5% on the amount exceeding ₹10 lakh.
- Other Remittances: For remittances (excluding education and medical expenses), Tax Collected at Source applies at 20% on amounts exceeding INR 700,000/-
Impact on Various Sectors: Broader Economic & Tourism Benefits
- Boost to Tourism & Forex Reserves: The budget also emphasizes enhancing tourism infrastructure and simplifying visa processes, which, in tandem with the higher TCS threshold, could lead to increased inbound tourism and improved forex inflows.
- Medical Tourism Growth: The government’s initiatives, such as the ‘Heal in India’ campaign, aim to further boost India’s reputation as a top destination for affordable, high-quality medical care. This strategy involves public-private partnerships, enhanced infrastructure, and streamlined medical visa processes.
- For Indian Travelers—Foreign Travel: International travel expenses are now more tax-efficient. TCS will only apply if travel expenses exceed INR 700,000/- in a financial year, making outbound tourism more affordable for heavy spenders.
- For Students & Medical Tourists: Education & Medical Expenses: They benefit from a higher TCS exemption threshold, reducing upfront tax deductions on remittances for tuition fees or medical treatments abroad.
- For Indian Businesses: Overseas Payments: Businesses making payments for services or investments abroad can remit higher amounts before TCS is applied, aiding smoother international transactions.
- Economic Advantages – Increased Forex Inflows: More foreign tourists & medical travellers will contribute to strengthening India’s foreign exchange reserves. Growth in sectors like healthcare, tourism, and hospitality will create more job opportunities. Indian companies are expected to attract more global investments and partnerships due to these positive reforms.
Conclusion
Those planning to spend heavily on overseas trips will face higher upfront costs due to the collection of tax collected at source on larger amounts. The increase in the TCS threshold under LRS—from INR 700,000/- to INR 1,000,000/-—offers immediate tax relief for outbound remittances related to travel, education, and medical expenses. This measure, alongside other tourism and healthcare initiatives in Budget 2025, is set to make international engagements more accessible for Indian citizens while bolstering the country’s overall economic and forex position.