Union Budget 2023: Foreign travel, overseas investing to get expensive; here's why

If you plan to travel abroad then be ready to shell out more from July 1, 2023 onwards. This is because Finance Minister Nirmala Sitharaman in the Union Budget 2023 has proposed to increase the Tax Collected at Source or TCS to 20 per cent. Currently, the TCS of 5 per cent is applicable on foreign outward remittances above Rs 7 lakh. 

For example: If you want to travel abroad and convert Rs 10 Lakh to USD then your bank would deduct a TCS of 20 per cent on Rs 10 lakh amounting to Rs 2 lakh which can be claimed and adjusted later while filing Income Tax Return (ITR).

Similarly, if you are converting the rupee for the purpose of investment abroad, then also you need to shell out more as 20 per cent will be set aside as TCS. This has come at a time when direct investing in foreign markets has become popular due to the high returns it gave in the past along with the diversification it offers to one’s portfolio. 

Investments and expenditures abroad are made by using the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI), which is available to all resident Indians. Through this scheme, an individual can remit up to $250,000 per financial year for such transactions. 

“It is proposed to amend the said sub-section (1G) so as to increase the rate of collection of tax at source from “five per cent.” to “20 per cent if it is for a purpose other than for education or medical treatment”. It is further proposed to amend the first proviso to the said section to provide that collection of tax at source is not applicable where amount or aggregate of amount is less than Rs 7 lakh is remitted for the purpose of education or medical treatment. These amendments will take effect from 1st July, 2023,” said Finance Minister in the Budget 2023 speech.

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