The New Rules of Travel Money
The two acronyms every Indian traveller needs to know in 2026 are LRS and TCS. The Liberalised Remittance Scheme (LRS) is the RBI's framework that allows resident Indians to send up to USD 250,000 abroad per financial year for various purposes, including
travel. This isn't a new scheme, but how it's taxed has changed. Tax Collected at Source (TCS) is an advance tax the government collects on certain transactions. For travellers, this now applies to foreign exchange purchases, tour package bookings, and other remittances under LRS. Think of it as a temporary holding tax that you can claim back when you file your income tax return (ITR), but it significantly impacts your upfront travel budget and cash flow.
How TCS Affects Your Spending
The key change impacting travellers involves a 20% TCS on LRS transactions above a certain threshold. For general travel expenses, like loading a forex card or making a wire transfer for a hotel booking, there is no TCS on the first ₹7 lakh spent in a financial year. However, once you cross this ₹7 lakh limit, a hefty 20% TCS applies to every rupee thereafter. For example, if you load a forex card with ₹10 lakh, you pay no TCS on the first ₹7 lakh, but a 20% tax (₹60,000) is collected on the remaining ₹3 lakh. This ₹60,000 is then held until you can claim it in your ITR. For overseas tour packages, the rule is slightly different: 5% TCS is levied on spends up to ₹7 lakh, and 20% above that. Importantly, as of mid-2026, international credit card spending while abroad is exempt from this TCS rule, making it an attractive option for many.
Cash vs Cards: The Best Way to Pay
While credit cards currently avoid TCS, they come with their own costs, such as foreign transaction mark-up fees, which can range from 1% to 3.5%. It's crucial to check your specific card's fees. Forex cards, while subject to TCS above the ₹7 lakh LRS limit, often have lower mark-up fees and offer the ability to lock in an exchange rate. Carrying cash is also an option, but it's highly regulated. Under RBI rules, you can carry a maximum of USD 3,000 in foreign currency notes and coins per trip. You are also permitted to carry up to ₹25,000 in Indian currency. Exceeding these limits can lead to seizure and penalties. Given the restrictions on cash and the TCS implications for forex cards, a combination strategy often works best: use a credit card for most transactions, a forex card for smaller spends or where cards aren't accepted, and keep a limited amount of cash for emergencies.
Managing Large Upfront Purchases
This is where the headline's warning becomes critical. Booking an expensive tour package, a luxury cruise, or paying for a long-term rental abroad can easily push you over the ₹7 lakh LRS threshold, triggering the 20% TCS. For a family booking a ₹12 lakh European tour, TCS could block a significant amount of cash upfront. To manage this, consider booking flights and hotels separately instead of as a bundled "tour package." Booking components individually may not fall under the strict definition of a tour package, thereby avoiding the specific TCS rule for packages. Additionally, if you are travelling with family, remember that the LRS limit of USD 250,000 and the TCS threshold of ₹7 lakh apply to each individual. Splitting costs among family members, with each person handling their own forex, can be a legitimate way to stay under the individual thresholds and manage cash flow effectively.
Your Pre-Travel Financial Checklist
Before you zip your suitcase, run through this financial checklist: 1. Review Your Itinerary: Estimate your total trip cost, including flights, hotels, and spending money. 2. Understand TCS: Determine if your spending will exceed the ₹7 lakh LRS threshold for the financial year. Remember, this includes any other foreign remittances you've made. 3. Choose Your Payment Mix: Decide on a strategy combining credit cards, forex cards, and cash. 4. Inform Your Bank: Let your bank know about your travel dates to avoid your cards being blocked for suspicious activity. 5. Check Card Limits: Verify the daily transaction and withdrawal limits on your debit and credit cards. 6. Know Your Fees: Check the foreign transaction mark-up fees on all your cards. A 'zero-markup' credit card can save you a lot. 7. Keep Records: Always provide your PAN for LRS transactions. Collect TCS certificates (Form 27D) from your bank or tour operator to claim the tax back easily when filing your ITR.
