Forex remittances had averaged over $3 billion a month between April-Sept 2023 before the increased tax collection at source (TCS) came into effect in October. The introduction of the TCS saw remittances drop sharply from nearly $3.5 billion in Sept to about $2.2 billion in a month’s time.
Figures released by RBI in its monthly bulletin show that the decline continued during Nov, with the total amount remitted abroad dropping by $298 million with a month to nearly $1.9 billion. The Liberalised Remittance Scheme (LRS) allows every Indian to send up to $250,000 abroad annually.
The decline was seen across all categories, with the maximum drop seen in spending on foreign travel, followed by studies abroad. In Nov, the total spend on travel was $1.2 billion — about $189 million lower than previous months. Before the tax was imposed in Oct, the average monthly spend on travel in FY24 was $1.5 billion. The remittance for studies dropped by $61 million to $208 million in Nov compared to $269 million in Oct. The average remittance for studies before the TCS was $306 million.
In percentage terms, the biggest fall was in money sent for equity investment abroad, which halved to $41 million in Nov from $84 million in the previous month. Oct itself had seen remittances for investment drop more than half from $208 million in Sept.
Government had increased the tax collection at source on remittances under the LRS from 5% to 20%.