Indian tax on overseas tourism spending postponed

NEW DELHi, 29th June, 2023 (WAM) – Spending on hotel rooms, entertainment, purchase of consumer goods and other items by Indian tourists in their favourite overseas destinations like Dubai and Abu Dhabi will remain steady for the rest of this year.

This follows the Indian Finance Ministry’s decision to postpone the imposition of a 20 percent tax on annual overseas spending by Indians. The tax was to have been collected from 1st July, which is the peak of India’s outbound tourism season.

“Numerous suggestions were received from banks, the travel industry and the public about the new tax, which have been carefully considered,” the Finance Ministry said yesterday. “It has been decided to give more time for the implementation of the revised tax collection at source (TCS).”

The new tax would have also covered the sale of overseas tour packages. A large number of Indians visit popular tourist destinations like the UAE by purchasing package tours. These tours would have become 20 percent costlier from next week if the new tax had not been deferred.

“Transactions by Indians through international credit cards while being overseas would not be counted as part of a Liberalised Remittance Scheme (LRS) and hence would not be subject to TCS,” the Ministry said yesterday.

Remittances for the education of Indian children in campuses such as in the UAE will not attract any tax if they are below 700,000 Indian rupees ($ 8,500). Above that limit, TCS of 0.5 percent is already levied.

Remittances abroad for medical treatment and tour packages above the limit of 700,000 Indian rupees are already subject to TCS at five percent. India media today commented that the proposed increase in TCS “for all practical purposes, is now in cold storage.”

WAM/Krishnan Nayar