UAE: Implementation of Tax on overseas spending for Indian tourists postponed

For the remainder of this year, Indian tourists' spending on lodging, entertainment, consumer goods, and other items in their favourite foreign destinations like Dubai and Abu Dhabi will be steady. This comes after the Indian Finance Ministry decided to delay the implementation of a 20 percent tax on Indians' yearly outbound spending. The tax was supposed to be collected starting on July 1, which is the busiest day for Indian tourists travelling abroad.

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"Numerous suggestions were received from banks, the travel industry and the public about the new tax, which have been carefully considered," the Finance Ministry said on Wednesday. "It has been decided to give more time for the implementation of the revised tax collection at source (TCS)."

The sale of international vacation packages would have been subject to the new tax. By booking package trips, many Indians travel to well-known tourist locations like the UAE. If the new tax hadn't been postponed, these excursions would have cost 20% more starting the following week.

"Transactions by Indians through international credit cards while being overseas would not be counted as part of a Liberalised Remittance Scheme (LRS) and hence would not be subject to TCS," the Ministry said yesterday.

If remittances for the education of Indian children in the UAE are less than Rs. 700,000 ($8,500), they are not subject to tax. TCS of 0.5 percent already applies above that limit.

Over Rs 700,000, remittances sent for travel and medical expenses overseas are already subject to TCS at 5%. The proposed rise in TCS, according to Indian media today, "for all practical reasons, is currently in cold storage."

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