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Indians spent a record USD 31.7 billion overseas under the liberalised remittance scheme in FY24, an increase of nearly 17 per cent over the USD 27.1 billion recorded in FY23. The rise has been despite the imposition of tax collection at source. However, data analysis shows that the monthly average spending fell after the imposition of TCS in Oct 2023.
The annual data for remittances shows that Indians have taken to overseas travel with a vengeance, spending USD 17 billion on it in FY24 — an increase of more than 24.5 per cent over the USD 13.6 billion in the previous year. The share of international travel in spending under the LRS has risen to 53.6 per cent in FY24 from 37 per cent in FY20 before the onset of the pandemic. In FY21, international travel spending had dipped to USD 3.2 billion due to restrictions on mobility.
On the other hand, the share of remittance going towards education abroad has steadily declined. In FY21, remittance for education was 30 per cent largely because travel was subdued during the pandemic. The share fell to 26 per cent after travel restrictions were lifted in FY22. Spending on education dipped in FY23 in absolute terms to USD 3.4 billion from USD 5.2 billion in the year before, resulting in the share of overall spend falling to 12 per cent . In FY24, spending on studies abroad was flat at nearly USD 3.5 billion even as travel spending soared.
As a result of lesser spending on fees, studies abroad is no longer the second-biggest category in forex spends. Indians have spent more on maintaining relatives abroad ( USD 4.6 billion) than on fees. Bankers, however, say that some of the money sent by parents and guardians to students is being captured under the head of maintenance of relatives.
The two categories that saw a dip in forex spending in FY24 were money sent into foreign currency deposits and donations. Deposits, which had crossed USD 1 billion in FY23, fell to USD 916 million in FY24.
RBI data shows that on March 24, total remittances were USD 2.3 billion — lower than the monthly average of USD 2.6 billion. Of this, USD 1 billion was for travel, followed by USD 394 million for maintenance of relatives.
While the annual spending under the LRS continued to grow, there are indications that the imposition of TCS has tempered growth after Oct 2023. Average monthly remittances under LRS were USD 3 billion in the first half of FY24 while post-TCS the average fell to USD 2.2 bn in the second half. The biggest drop was in travel where the average monthly spend was USD 1.5bn before TCS and USD 1.3bn between October to March 2024.
Post-October 2023, Overseas tour packages incur a TCS rate of 5 per cent up to INR 7 lakh and 20 per cent on amounts beyond this threshold.
Also, for any remittance towards education made from proceeds of an education loan, there was a 0.5 per cent TCS on amounts exceeding INR 7 lakh per year, while lesser amounts were exempt
The resurgence in air travel demand, particularly with the reopening of North Asian markets such as China, Hong Kong, Japan, and Taiwan, propelled SIA and Scoot to carry a combined 36.4 million passengers, a 37.6 per cent increase year-on-year. Passenger traffic rose by 26.6 per cent, outpacing the 22.9 per cent increase in capacity, leading to a group passenger load factor improvement of 2.6 percentage points to a record 88 per cent.
The threshold remains at INR 7 lakh for education or medical treatment purposes, with a TCS rate of 5 per cent on amounts surpassing this limit.
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