20% TCS on foreign travel packages has altered tourism landscape: BookMyForex CEO Sudarshan Motwani

The Union government increased tax collected at source (TCS) of 20 per cent on foreign tour packages from October 1. This measure has predictably impacted international tourism. Sudarshan Motwani, Founder and CEO of BookMyForex.com, shares his perspective in a conversation with Navneet Dubey of BT Money Today. 

Motwani says the recent policy intervention has triggered a marked change in how Indian travellers are planning their foreign trips. The increase in TCS has contributed to higher financial burden, he says. This, he clarified, also applies to other remittance options connected to foreign travel, not just tour packages. 

BT: How has the forex industry fared after the change in TCS rules?  

SM: The introduction of a Rs 7 lakh limit on foreign remittance has surely alleviated concerns as transactions below Rs 7 lakh are exempt from TCS. Most importantly, since education and medical purposes remain unaffected by changing TCS rules, the majority of individuals will not be impacted by new TCS rules. 

At the company level, we actively engaged with customers and launched several campaigns to educate them that TCS is not a new tax and that there are multiple ways by which customers can avoid paying TCS or adjust it. These efforts have helped bring about a better understanding of the evolving regulatory landscape for customers. 

On the other hand, many customers, especially those who pay large amounts of taxes and are impacted by the new TCS rules, have not reacted negatively to TCS. This is a pleasant surprise for us. 

BT: How do you see the foreign travel business that was slowly coming out of the slump due to Covid-19 getting impacted? 

SM: As I said earlier, the overall impact on foreign travel due to TCS seems to be minimal, and in our view, the impact of TCS is unlikely to last very long. Overseas travel for leisure is no longer a luxury, and we don’t see this trend slowing down due to new TCS guidelines. 

BT: What are the new trends among younger travellers?  

SM: Young travellers, especially those in the income range of Rs 10 lakh plus, like to explore the world. Many youngsters are taking overseas vacations much more frequently. We see a pronounced change in preferences for destinations. Travel to East European countries has increased substantially, and travel to nearby countries like Vietnam, Azerbaijan, etc., is even more pronounced, while travel to countries like Dubai and Thailand is on the rise. In short, low-cost overseas vacations are on the rise, especially among youngsters. 

BT: Have you noticed a notable shift in customer preference towards prepaid Forex cards over traditional currency notes for international travel in recent years? 

SM: More and more Indians are now opting to pay by card rather than by cash. Among the various types of cards, Forex cards are preferred, as these cards are loaded with specific currencies and for a specific amount. Hence, carrying forex cards is very similar to carrying cash currencies. 

I would like to mention that the sale of prepaid Forex cards at BookMyForex has experienced a remarkable surge. In fact, comparing the current sales figures to the pre-COVID days, we have witnessed a staggering increase of approximately 10 times in forex card sales. 

However, it is important to note that cash cannot be completely replaced, especially in certain situations. Small merchants and remote areas often rely heavily on cash transactions, making it necessary for travellers to have some cash on hand. Despite the increasing preference for card payments, the need for cash in these specific contexts cannot be ignored. 

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BT: Fintechs have acquired a very large market share of cross-border money transfers globally. Has this trend caught up in India? 

SM: Fintechs have indeed acquired a significant market share of cross-border money transfers globally, accounting for 8% of the market. When it comes to cross-border money transfers in India, despite the progress made by fintechs in this sector, challenges remain. Regulatory frameworks and compliance requirements often restrict fintechs from expanding their cross-border services. 

For this reason, the fintech penetration rate in the Indian market is lower than in other regions of the world, and banks and other traditional means continue to dominate the industry. Fintech companies and traditional banks must collaborate and work in sync to address this situation. By leveraging their respective strengths and expertise, they can offer the best solutions to customers in the cross-border money transfer domain and enable fintech platforms to flourish in India. 

BT: Is your forex card linked to real-time interbank rates, and how does this benefit travellers? 

SM: Unlike the static rates used by other forex card providers, our forex cards are based on live interbank rates, the rates at which banks transact with each other for very large transactions and are considered the best and most transparent rates.  

This feature makes our forex cards a cost-effective option for travellers. By eliminating the need to pay extra mark-up fees or commissions, we let travellers convert their INR into foreign currency without losing money. This starkly contrasts our competitors, who typically provide cards that often don’t provide real-time statuses and impose a mark up of 2-3.5% premium over the base rates. 

BT: How does the rate lock facility on your platform help get favourable exchange rates for travellers or money transfers abroad? 

SM: While booking their forex order, people are often left with no choice but to accept the prevalent exchange rate, which can be either good, bad or even very bad. The rate lock facility available on our platform is designed to provide individuals with their desired exchange rates.  

Our customers have the option to set rate alerts and as soon as their desired rate becomes available, they get notified about it. They can then freeze that rate by paying a 2% refundable deposit. This feature ensures that people are not forced to settle for potentially unfavourable rates and rather have more control over their currency exchange transactions. 

BT: How does your online money transfer process through private reputed banks stand out within the industry? 

SM: Our money transfer services stand out due to their cost-saving aspect. Firstly, we provide the best rates for money transfers abroad, i.e. live and transparent rates that are very close to the live Interbank rates, ensuring more money reaches the recipient. Secondly, we offer zero transfer charges, allowing customers to maximise the value of their transfers. However, what truly sets us apart is our commitment to security. Trust is paramount when it comes to handling money matters, so we exclusively process transactions through reputed partner banks and strictly adhere to regulatory guidelines.