Spent over ₹2 lakh on foreign travel? You may have to file ITR even with no taxable income

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 ITR filing even when you have no taxable income, and why filing a return becomes important in such cases.

One of the most commonly overlooked provisions relates to foreign travel expenditure.

“Mandatory filing now sits in Section 263 of the Income Tax 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.

Apart from mandatory filing provisions, tax collected at source (TCS) 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.

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.