Indians spent $30 billion on overseas travel in 2 years
Wealthy Indians have spent a staggering $30 billion on overseas travel in the past two years, according to data from the Liberalised Remittance Scheme (LRS) analyzed by Moneycontrol. This figure surpasses the total amount spent on foreign trips over the previous 14 years. The spending surge is attributed to the trend of revenge tourism in post-pandemic India. The LRS data includes all forms of travel like professional trips and personal vacations, but excludes international education-related travel which is categorized separately.
Overseas travel spending hit $17 billion in FY24
According to the Reserve Bank of India (RBI), Indians spent approximately $17 billion on overseas travel in FY24, accounting for over half of the $31 billion in total LRS remittances for the year. In FY23, expenditure was $13 billion, against total remittances of $27 billion.
Indian government's tax scheme fails to deter spending
Despite the Indian government's introduction of the tax collection at source (TCS) scheme for overseas remittances, spending on overseas travel surged. To curb outward remittances, the government imposed a 20% TCS on all overseas tour packages over ₹7 lakh in a financial year, and a 5% TCS on packages up to ₹7 lakh. However, industry experts believe that TCS hasn't deterred overseas travel. Instead, it has made foreign expenditure more organized.
TCS had no impact on overseas travel expenditure
Debasis Nandy, President at Thomas Cook India, stated that the TCS scheme hasn't impacted overseas travel spending. "There has been no impact of TCS on LRS on overseas travel. Initially, it seemed like a deterrent; however, the government wants taxpayers traveling abroad to file their returns and pay taxes," Nandy said. He further clarified that taxpayers can get a refund of TCS within 15-18 months, if spent in the first quarter and even shorter if spent later in the year.
Demographic shift in Indian overseas travelers
Market participants have observed a shift in the demographics of Indian overseas travelers, with an increase in affluent travellers from smaller towns. "Earlier, typical travelers were from metro or tier-1 cities with higher income levels. Today, travelers from tier-2 and tier-3 cities have increased, their aspirations have grown, and income levels have risen," Nandy said. This demographic shift is contributing to the surge in overseas travel spending by Indians.
Preferred destinations for Indians
The most preferred destinations for Indians are largely in Europe with Amsterdam, Switzerland, Paris, and London being their top choices. Central Asian destinations like Baku, Tbilisi, and Georgia are also becoming popular as they are more accessible from India. "Ease of access is crucial which is why South America despite its attractions is less popular due to the long flight times," Nandy concluded.
