IN WHAT MARKS the first decline since the Covid pandemic disrupted overseas travel and study plans of Indians, remittances by resident Indians under the Liberalised Remittances Scheme (LRS) of the Reserve Bank of India have declined by 6.84 per cent to $29.56 billion in FY2025, down from $31.74 billion in the previous year.
The decline is largely attributed to a 16 per cent drop in funds remitted by students for studies abroad, which fell to $2.92 billion in FY2025 from $3.48 billion a year ago, according to RBI data. This trend is likely linked to many countries tightening student visa norms. Student remittances had peaked at $4.98 billion in FY2019-20, just before the pandemic, when Indian students were flocking to foreign universities in large numbers.
Travel remittances also declined marginally to $16.96 billion in FY2025 from $17 billion last year. Despite the marginal decline, travel remittances have risen significantly over the past four years, growing by 144 per cent from $6.95 billion in FY2020-21. This suggests that Indians are still keen on exploring international travel options, albeit at a slower pace.
Interestingly, investment in equity and debt abroad by resident Indians rose 12.51 per cent to $ 1.699 billion in FY25 as against $ 1.51 billion in the previous year, RBI data shows.
Why student remittances declined?
Remittances for travel and studies abroad declined in the wake of a sharp fall in students going abroad. For the first time in four years, the number of Indian students heading to foreign universities has simultaneously declined across the top three destination countries — Canada, the US and the UK. The data shows a sharp decline of at least 25 per cent in Indian students receiving study permits across these key destinations in 2024.
According to data from Immigration, Refugees and Citizenship Canada (IRCC), only 30,640 permits were issued to Indian students from January to March of this year, registering a 31 per cent drop from the same period in 2024.
Moreover, according to travel industry sources, a good number of people dropped or postponed their travel plans as the global economy and markets faced volatile movements during the period.
The in February 2025 increased the threshold for collecting Tax Collected at Source () on LRS transactions from Rs 7 lakh to Rs 10 lakh. This change was expected to benefit the travel and foreign exchange sectors, providing a boost to outbound tourism, education and the airline sectors.
Under LRS, resident individuals, including minors, can freely remit up to US$ 2,50,000 per financial year for permissible current or capital account transactions. These transactions include education, studies abroad, travel, medical treatment abroad, purchase of property, and investments in foreign stocks.
Travel has emerged as the primary source of remittance outflow from India, accounting for over 57 per cent of total outflows at $16.964 billion from just 1.5 per cent share in FY14.
TCS is not an additional tax liability as people can claim a refund while filing income tax returns. As per the TCS rates under LRS proposed in the 2023-24 Budget, overseas tour package attracted TCS of 20 per cent from October 1, compared to 5 per cent. However, TCS will not be levied on credit card spending abroad.
LRS remittance processed by the bank as an Authorised Dealer towards air travel ticket booking or hotel booking by a resident individual customer would be subject to TCS of 20 per cent above Rs 10 lakh, said a leading private bank.
