Big overseas spends can cost you at tax time: What travellers and businesses should know

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Foreign expenditures under the lens

With changes in the Liberalised Remittance Scheme (LRS) and TCS (Tax Collected at Source) rules, the government has tightened regulation around large foreign spends. Whether it’s a family holiday, destination wedding, or business tour, your foreign exchange transactions are now tracked by banks and reported to the Income Tax Department—even if you’re paying through net banking or credit cards. No matter the purpose, high-value remittances no longer go unnoticed.

TCS is charged above ₹10 lakh.

As Budget 2025 declared, the threshold for TCS on LRS remittances has been raised from ₹7 lakh to ₹10 lakh per financial year. For spends above ₹10 lakh—except for certain exclusions—20% of TCS is charged. For medical and self-sponsored education remittances, it is less. Your bank charges the TCS and reflects it in your Form 26AS for adjustment or refund while filing ITR.

Credit card spending is also under the spotlight

While credit card spending overseas was originally not part of LRS, it is now brought under the reporting system. In case your overall foreign spending through credit and debit cards is more than ₹10 lakh during a year, TCS is effective. Frequent traveller and heavy users who spend heavily on foreign services need to keep track of their total usage, even though the transactions are distributed among several cards or platforms.

Documentation is essential for business travel

If you're traveling abroad for business either as a business owner or freelancer, you'll have to keep records of your spending. Save bills, tickets, and receipts. Even though TCS may still be paid in advance, it can be claimed as a business expense or set off while filing ITR. But if you cannot substantiate these claims with adequate documents, then these may result in disallowance of the deductions and your return under more scrutiny.

Excessive spends can initiate warning signs

Billion-dollar foreign outlays for discretionary or upscale use—like international shopping, luxury hotel vacations, or gifts—can prompt closer scrutiny. When your reported income doesn't equal the foreign spend, the tax agency may issue a mismatch notice or initiate a further audit. Be attuned to the perception and ensure your remittances and financial reports are reasonable and in line.

Budget ahead to surpass tax surprises

Avoid eleventh-hour anxiety or surprise TCS deductions by mapping your foreign spends in January and sticking to the ₹10 lakh threshold if possible. If your spends are going to exceed it, consult with your CA to estimate tax impact and file documents well ahead. In accordance with the 2025 rules in full operation, some advance planning can make your overseas trip trouble-free without shocks to the exchequer.