Summer holidays are in full swing, and many Indians are heading abroad for vacations, family trips, and luxury getaways. But while you may be busy planning flights, hotels, and shopping, tax experts say there is one thing many travellers often overlook — your foreign travel spending could create an unexpected income tax return (ITR) filing obligation, even if you have little or no taxable income.
According to Mrinal Mehta, Joint Secretary at the Bombay Chartered Accountants’ Society (BCAS), taxpayers should not assume they can skip filing an income tax return simply because their earnings fall below the basic exemption limit.
“Indian law now links your filing obligation to how you spend, not merely what you earn — and summer travel is exactly the kind of spending it watches,” he said.
So, let’s understand how foreign travel and luxury spending can trigger filing even when you have no taxable income, and why filing a return becomes important in such cases.
Foreign travel spending above ₹2 lakh can make return filing mandatory
One of the most commonly overlooked provisions relates to foreign travel expenditure.
“Mandatory filing now sits in Section 263 of the Act, 2025, which replaces Section 139 of the 1961 Act and is effective from 1 April 2026. It carries forward the high-value-transaction triggers — so anyone who spends more than ₹2 lakh on foreign travel in a year must file a return, even if income is below the basic exemption limit,” says Mehta.
He explains that the ₹2 lakh threshold is calculated on an annual aggregate basis and includes expenses such as airfare, visas, and hotel bookings.
“The threshold is an annual aggregate covering airfare, visas and hotels, and it applies whether you pay for yourself or for any other person. Funding a trip for parents or children counts — and for a couple’s two-week European holiday, ₹2 lakh is easily crossed,” he adds.
This means that even individuals with little or no taxable income may be required to file an income tax return if they incur significant foreign travel expenses during the financial year.
Overseas travel packages and luxury purchases leave a tax trail
Apart from mandatory filing provisions, tax collected at source () on foreign travel and luxury purchases also creates compliance obligations.
“From 1 April 2026, under Section 506 of the new Act (corresponding to Section 206C(1G) of the 1961 Act), an overseas tour package attracts a flat 2% TCS from the first rupee, while other LRS travel remittances attract 2% above ₹10 lakh a year — down from the earlier 5%/20% slabs,” says Mehta.
He notes that luxury purchases are also tracked under the tax system.
“Luxury buys feed in too: a single item above ₹10 lakh — a watch, handbag, sunglasses — still carries 1% TCS against your PAN,” he says.
As a result, taxpayers making such purchases may find these transactions reflected in their tax records even if they have not otherwise filed returns.
Why filing an ITR becomes important
Mehta points out that many taxpayers mistakenly treat TCS as an additional tax burden. In reality, it is a tax credit that can be adjusted against the final tax liability or claimed as a refund.
“TCS isn’t an extra tax; it’s an advance tax parked on your PAN, recoverable only by filing a return. Every such transaction also surfaces in your Annual Information Statement — so silence invites a notice,” he explains.
Since these transactions are reported against the taxpayer’s PAN, the tax department can view them through information statements such as the Annual Information Statement (AIS) and Form 26AS.
Check AIS and Form 26AS before skipping tax filing
Given the tax department’s increasing use of data analytics and transaction reporting, he recommends that taxpayers review their AIS and Form 26AS before deciding not to file an income tax return.
“Before assuming you needn’t file, check your AIS and Form 26AS, and file to recover any TCS. This summer, the safest souvenir is a filed return,” says Mehta.
For taxpayers returning from overseas vacations or making luxury purchases this summer season, filing an ITR is not just about reporting income. It may also be necessary to meet statutory filing requirements and claim refunds of taxes already collected through TCS.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations. The views and opinions expressed above are solely those of the expert and do not reflect the views of Mint.