With international travel among Indians on the rise, the Income Tax Department (ITD) has tightened its oversight of high-value foreign trips. Tax experts warn that failing to disclose travel expenses properly can result in unexpected notices, even for those with no taxable income.
A recent case highlights this risk. Mr. A travelled abroad with his wife and children. His wife booked a ₹5 lakh tour package from her personal bank account. Although she had no taxable income, she still received a notice from the ITD. The reason: ITR filing becomes mandatory if foreign travel expenses exceed ₹2 lakh, regardless of income level. This is because tour operators must report the PAN of buyers to the tax department, and high-value bookings trigger compliance alerts.
Under current disclosure rules, spending up to ₹2 lakh on foreign travel requires no reporting. However, if a person’s income is below the taxable limit but their foreign travel costs exceed ₹2 lakh, they must file an ITR under the Seventh Proviso of the Income Tax Act. Those with income above the taxable limit do not have additional disclosure obligations beyond their regular ITR, even if they spend more than ₹2 lakh on travel.
From April 1, 2025, new Tax Collected at Source (TCS) rates will apply. For overseas tour packages, spending up to ₹10 lakh will attract 5% TCS, while amounts above ₹10 lakh will incur 20% TCS. For card transactions related to foreign travel—excluding education and medical expenses—no TCS will apply up to ₹10 lakh, but 20% will be levied on amounts above that threshold.
If TCS is not collected on credit card spending, banks will not require travellers to pay it directly to the government. However, penalties for non-collection may be imposed on the banks themselves.
For business travel, foreign income is generally taxable in India unless the traveller qualifies as a Non-Resident Indian (NRI). Whether daily allowances from employers are taxable is still under judicial consideration. Travellers are advised to claim foreign tax credits in India to avoid double taxation, refrain from conducting business on a tourist visa, and be mindful that residency status will determine the tax treatment of their overseas earnings.
Experts recommend that travellers maintain proper records of expenses and be cautious of the ₹2 lakh foreign travel trigger to ensure smooth compliance with tax regulations.
