Experts cheer new TCS rule on foreign remittance, but seek clarification on living expenses for students

The government has recently decided to postpone the implementation of the new tax collected at source (TCS) under the liberalised remittance scheme (LRS) to October 1, 2023. Additionally, the use of international credit cards while abroad has been excluded from LRS and will not be subject to TCS. Hailing the moves, Mahesh Iyer, the Executive Director and CEO at Thomas Cook said that this measure comes as a huge relief for both his company and the industry as a whole.

He called it a safe bet and added that none of the travel that happens specifically on the segment is above Rs 7 lakhs per individuals.

"So clearly, I don't think there's going to be any impact per se at all," he told CNBC-TV18.

Iyer further clarified that medical travel constitutes only a small portion of their business segment, accounting for approximately 8-10 percent of the education market. However, as far as education is concerned, he added that they are about eight to 10 percent of the market at this point.

He expressed the need for further clarification on living expenses for students, highlighting the importance of understanding the specific details related to this aspect.

Lastly, Iyer expects ramp-up in Q2 and Q3 post the LRS clarification. “We expect Q2 and Q3 to actually start ramping up because people were holding back on the decisions. A lot of people make their travel plan on holidays, so we believe that a lot of that demand will start coming back very soon.”

Prashant Pitti, Co-founder at Easy Trip Planners also stated that the impact of the new TCS rule on their business was not significant, indicating that their first-quarter trends aligned with the overall industry growth.

Pitti said, “We did not see a huge number drop or enhancement after this revision which has been made."

He further projected a doubling of the gross merchandise value (GMV) and profit after tax (PAT) for the fiscal year 2024.

“Our quarter one is usually the stronger quarter compared to the quarter four so we are expecting quarter one to be in line with whatever the industry movement is. However, for the entire year, we have already shared possible numbers for FY24. For this particular FY24, we anticipate our GMV to double and so should our bottom line.”

Under the LRS scheme, the RBI allows residents to spend funds abroad up to the specified ceiling for investment and expenditure, including travel, education, medical treatment and buying securities and physical assets.

However, all other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/overseas counterparty are not allowed under the scheme.