Key Points
Resident Indians have front loaded their overseas spends under LRS including travel abroad to save taxes on such outflows that would be effective later..
But Spends on overseas travel which accounts for over half of LRS or liberalised remittances scheme rose 50 percent in May to $1.5 billion.. Finance minister Nirmala Sitharaman, had announced that higher TCS-Tax credit at source- would be applicable under LRS with effect from 1 July 2023 in her budget speech in February..
" This may have resulted in Indian residents either advancing their travel plans before 1 July 2023 or pre-booking overseas travel to avoid the higher TCS rates " said Moin Ladha, partner in the Corporate and Commercial..
The Reserve Bank allows resident Indians individuals to freely remit abroad $250000 a year for current account and some capital account transactions like investment in bonds and equities besides property investment under its LRS...
" Therefore, instead of repatriating the ideal funds back to India, resident individuals are preferring to invest or utilize their overseas funds towards their overseas expenses predominantly towards overseas travel " said Ladha. " To this extent to fund an additional requirement remittance additional remittances could have been made"..
