The Union Budget 2025 has brought significant changes that directly impact Indian travelers, students, and medical tourists. With the increase in the Tax Collected at Source (TCS) threshold under the Liberalized Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh, this guide will help you understand how these changes affect your travel plans, the economy, and the overall forex reserves of India.
Understanding the Liberalized Remittance Scheme (LRS)
The Liberalized Remittance Scheme (LRS) allows resident individuals to remit a specified amount of money during a financial year for permissible current or capital account transactions. These transactions include:
- Education: Tuition fees for studying abroad.
- Participation in Conferences& Events: Participation fees and expenses for participating in global events and exhibitions.
- Travel: Costs associated with international travel.
- Investments: Purchasing property or investing in foreign stocks.
Key Features of LRS
- Annual Limit: Under LRS the limit is 2,50,000 USA dollars or its equivalent.
- Permissible Transactions: The scheme covers various transactions, including education, leisure, global participation of international events, business travel, medical treatment, and investments.
TCS Increase in Budget 2025
In the recent Budget 2025, the finance ministerhas proposed an increase the threshold limitto collect the TCS on remittances done under LRS scheme from ₹7 lakh to ₹10 lakh. This change is aimed at reducing the tax burden on outbound remittances, making it easier for individuals to send money abroad for various purposes.FM has also proposed that TCS will not be applicable foroverseas education of students seeking an education loan from specified banks or financialinstitutionsthat qualify for the Section 80E income tax benefit.
TCS Rates Before and After Budget 2025
| Transaction Type | TCS Rate Before Budget 2025 | TCS Rate After Budget 2025 |
| Education (Loan from Banks and specified financial institutions whichqualify under Section 80E tax benefit) | 0.5% above ₹7 lakh | 0% TCS |
| Education (Other) | 5% above ₹7 lakh | 5% above ₹10 lakh |
| Medical Treatment | 5% above ₹7 lakh | 5% above ₹10 lakh |
| Other Remittances | 20% above ₹7 lakh | 20% above ₹10 lakh |
This increase in the threshold allows travelers, students, and medical patients to send higher amounts abroad without facing immediate tax deductions, thus easing financial pressure.
How This Affects Forex Reserves?
The changes in the LRS and TCS thresholds are expected to have an impact on India’s forex reserves. Here’s how:
- Increased Outbound Remittances: With a higher limit, more individuals can send money abroad without incurring TCS, leading to increased remittances.
- Boost in Foreign Exchange Inflows: As more Indians travel abroad for education, medical treatment, and tourism, the inflow of foreign currency is expected to rise.
- Strengthening of Forex Reserves: Higher remittances contribute to the overall forex reserves, which are crucial for maintaining economic stability.
Current Forex Statistics
| Year | Forex Reserves (in USD Billion) | Growth Rate (%) |
| 2021 | 640 | 10 |
| 2022 | 600 | -6 |
| 2023 | 580 | -3 |
| 2024 | 620 | 7 |
| 2025 | 650 (Projected) | 5 |
Source: Reserve Bank of India (RBI)
Forex Impact on Tourism
The increase in the TCS threshold is expected to make outbound tourism more affordable for Indian travelers. Here are some key impacts:
- Higher Spending Power: Travelers can now spend more without incurring additional taxes, making international trips more financially viable.
- Increased Travel Opportunities: With reduced tax burdens, more individuals may consider traveling abroad for leisure, education, or medical purposes.
- Boost to Travel Industry: The tourism sector is likely to see a surge in demand, benefiting airlines, hotels, and travel agencies.
Key Initiatives for Tourism
The Budget 2025 has also proposed several measures to enhance tourism in India, including:
- Development of World-Class Tourist Sites: New policies to improve infrastructure and visitor experiences.
- Improved Hospitality Infrastructure: Support for hotels and resorts to enhance amenities.
- Simplified Visa Processes: Faster e-visas and dedicated tourism visas to encourage more foreign tourists to visit India.
Medical Tourism: A Growing Sector
India has emerged as a global hub for medical tourism, offering high-quality healthcare at a fraction of the cost compared to Western countries. The Budget 2025 focuses on expanding India’s medical tourism capabilities through policy incentives and infrastructure investments.
Economic Benefits of Medical Tourism
- Increased Forex Inflows: Medical tourists bring foreign currency, boosting India’s forex reserves.
- Employment Generation: The sector supports jobs in healthcare, travel, hospitality, and related industries.
- Expansion of Healthcare Infrastructure: Higher demand for medical tourism leads to better hospitals, technology upgrades, and new medical facilities.
Impact on the Indian Economy
The focus on tourism and medical travel in Budget 2025 is expected to have a positive impact on the Indian economy:
- Higher Foreign Exchange Earnings: A growing number of foreign tourists and medical travelers will contribute to forex reserves.
- Boost in Employment: More jobs will be created in healthcare, travel, hospitality, and related sectors.
- Stronger Business Opportunities: Indian companies catering to medical tourism will attract global partnerships and investments.
Conclusion
The changes introduced in Budget 2025 regarding the Liberalized Remittance Scheme (LRS) and Tax Collected at Source (TCS) are set to have a significant impact on Indian travelers, students, and medical tourists. With the increase in the TCS threshold, individuals can now send more money abroad without facing immediate tax deductions, reducing financial burdens and promoting international travel.
These changes are expected to strengthen India’s forex reserves, boost the tourism sector, and enhance the country’s position as a top destination for medical tourism. Travelers, businesses, and investors should seize these opportunities for smarter financial planning while exploring international ventures.
By understanding these changes, you can make well-informed decisions about your travel plans and financial strategies in the years ahead. For all your foreign exchange needs, contact RemitX for seamless and reliable services.