The tax tweaks that you need to be aware of if you're planning to study or travel abroad

Budget 2024 has proposed a significant change in tax regulations, allowing individuals to benefit from a reduced Tax Deducted at Source (TDS) on their salaries. This adjustment is particularly relevant for those who have paid Tax Collected at Source (TCS) on foreign remittances, foreign travel among other expenses.

Under the new provisions, employees can now inform their employers about any TCS payments they have made. This information will enable employers to factor in these payments when calculating the TDS on employees' salaries. The move is designed to lower the TDS deduction, thereby easing the financial burden on individuals and simplifying the process of reclaiming any overpaid taxes.

The TCS on international remittances under the Liberalised Remittance Scheme (LRS) was raised to 20% from 5% in budget 2023, with several exceptions.


Here is a breakdown of what you need to know to navigate these new regulations.

How much can you spend abroad every year?

Under the Liberalised Remittance Scheme, individuals can remit up to $250,000 annually without seeking prior approval from the Reserve Bank of India. This scheme facilitates a range of overseas expenses, including education, travel, and medical treatments.

However, the introduction of TCS on these remittances requires taxpayers to account for additional cash outflows, which can impact one's finances significantly.

What may change after Budget 2024?

The TCS requirement adds a financial burden at the time of remittance. Like the tax deducted at source (TDS), TCS can be adjusted against an individual's income tax liability.

According to the Budget 2024 proposals, credit for TCS will now be available against TDS deducted by the employer on salary income, which can help ease cash flow for employees. Should the TCS paid exceed the actual tax liability, the excess amount is refundable. However, claiming this refund can be a time-consuming process and involves additional paperwork, including providing PAN details.

The revised TCS rates vary based on the purpose of the remittance.

Taxes on studying abroad

For education, if it is financed by a loan from a financial institution, the TCS rate is nil up to ₹7 lakh and 0.5% above ₹7 lakh.

For self-financed education, the rate is nil up to ₹7 lakh and 5% above ₹7 lakh.

Expenses for self-financed education include airfare for overseas students, tuition, food, accommodation, local transport, health services, and other fees paid to educational institutions, as well as day-to-day expenses.

Travelling abroad

For overseas tour packages, the TCS rate is 5% up to ₹7 lakh and 20% thereafter. The cost of the tour package must include at least two of the following: international travel tickets, hotel stay with or without food, boarding, lodging, or other similar expenditures.

Other expenses

Other expenses, such as gifts or donations, employment abroad, emigration, maintenance of relatives, and business travel, have a TCS rate of nil up to ₹7 lakh and 20% above ₹7 lakh.

Medical treatment expenses have a TCS rate of nil up to ₹7 lakh and 5% above ₹7 lakh. Expenses for medical treatment include airfare for the patient and an attendant, medical expenses, day-to-day expenses required for treatment, and related food, accommodation, and local transport.

How can you save on tax?

To minimize TCS liabilities, consider booking travel and hotel accommodations separately, as this can sometimes reduce the overall tax rate. Furthermore, using an international credit card overseas does not currently incur TCS, offering another potential avenue for cost savings.