Under the Liberalised Remittance Scheme (LRS), Indians spent a record $31.7 billion overseas in FY24, marking a 17% increase from the previous year despite the introduction of tax collection. The data highlights a notable surge in international travel spending, which has now surpassed education expenses. Travel expenditures made up 53.6% of LRS spending, indicating a significant shift from pre-pandemic trends.
Indians have demonstrated a remarkable enthusiasm for overseas spending, reaching a record $31.7 billion under the Liberalised Remittance Scheme (LRS) in FY24. This represents a substantial increase of nearly 17% from the $27.1 billion recorded in FY23, despite the implementation of tax collection at source (TCS). However, data indicates that the average monthly spending saw a decline following the imposition of TCS in October 2023.
The annual remittance data reveals a significant surge in international travel, with Indians spending $17 billion on travel in FY24. This marks an impressive increase of over 24.5% compared to $13.6 billion in the previous year. The share of international travel in LRS spending has risen sharply to 53.6% in FY24, up from 37% in FY20 before the pandemic. In FY21, travel-related spending had plummeted to $3.2 billion due to mobility restrictions.
Conversely, the proportion of remittances allocated for education abroad has been on the decline. In FY21, education remittances constituted 30% of the total, primarily because travel was restricted during the pandemic. This share decreased to 26% in FY22 following the lifting of travel restrictions. In FY23, spending on education abroad fell in absolute terms to $3.4 billion from $5.2 billion the previous year, causing the overall share to drop to 12%. In FY24, spending on education abroad remained steady at nearly $3.5 billion, even as travel spending soared.
Interestingly, education abroad is no longer the second-largest category in forex spending. Indians spent more on maintaining relatives abroad ($4.6 billion) than on education fees. Bankers note that some funds sent by parents and guardians to students are being categorized under maintenance of relatives.
Two categories that experienced a decline in forex spending in FY24 were foreign currency deposits and donations. Deposits, which had surpassed $1 billion in FY23, fell to $916 million in FY24.
According to RBI data, total remittances on March 24 were $2.3 billion, slightly below the monthly average of $2.6 billion. Of this, $1 billion was allocated for travel, followed by $394 million for maintaining relatives. While annual spending under the LRS continued to grow, the imposition of TCS appears to have moderated growth post-October 2023. Average monthly remittances under LRS were $3 billion in the first half of FY24, but this average fell to $2.2 billion in the second half following the introduction of TCS. The most significant drop was observed in travel spending, which averaged $1.5 billion per month before TCS and $1.3 billion from October to March 2024.
Post-October 2023, overseas tour packages faced a TCS rate of 5% up to Rs. 7 lakh and 20% on amounts beyond this threshold. For remittances towards education from education loan proceeds, a 0.5% TCS was applied on amounts exceeding Rs. 7 lakh per year, with lesser amounts being exempt. The threshold remains at Rs. 7 lakh for education or medical treatment purposes, with a TCS rate of 5% on amounts surpassing this limit.
In summary, despite new tax measures, Indians have shown a robust appetite for overseas spending, setting new records and highlighting their increasing global engagement.
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