How to plan a dream foreign vacation without breaking the bank

To ensure that you do not break the bank or your savings to enjoy your dream foreign vacation as this new financial year commences, planning for the same becomes crucial.

how to plan a foreign vacation
Know how to plan your foreign trip without breaking the bank in new financial year 2023-24. Representational image

Finally, the impact of the pandemic has subsided, and individuals have again started to make their upended vacation plans. As the world opens, it is the perfect time to plan a vacation with your family. However, the task is easier said than done, especially if you are planning a foreign trip.

In Budget 2023, the tax collection at source (TCS) rate for foreign remittances under the Liberalised Remittance Scheme (LRS) has increased from 5% to 20%, which would be applicable from 1st July this year. Thus, any foreign tour package that you will purchase from an agent, will be subjected to TCS, which includes accommodation, food, and other travel costs, except airfare.

Earlier, it was not applied for foreign trips planned by individuals if the foreign spends were under Rs 7 lakh per annum. However, from July this year, there is no such limit and 20% TCS will be applicable on all foreign spends.

TCS is not an additional tax and works like TDS. However, it increases the cash outflow at the time of the expenditure. TCS is adjusted against any tax payable or advance tax requirements. In case, there is excess tax payment due to TCS then that becomes refundable after the return is filed.

Also Read: Travel insurance for students studying abroad: Is it better to buy in India?

Given this, to ensure that you do not break the bank or your savings to enjoy your dream foreign vacation as this new financial year commences (April 1), planning for the same becomes crucial.

Plan your foreign trip in advance and create a budget

If you plan your trip in advance, you get better availability of tickets and occupancy at hotels as per your preferences. In addition, last-minute bookings are typically expensive compared to advance bookings. Thus, saving money on these expenses by planning your vacations 5 to 6 months in advance would be an advantage.

  • Additionally, your vacation planning should include budget-making. Consider questions such as
  • What amount are you planning to spend on your vacation?
  • From that amount, how much money are you planning to save via investment?
  • How much money do you need to save each month for your holiday, so you don’t have to disrupt your savings for other goals?

Planning an advance holiday will help you be financially efficient and enjoy your time off without worrying. Another critical element of vacation planning is travel insurance. Travel insurance protects:

  • You and your family, in case of any medical emergency
  • Your belongings from theft or damage while travelling
  • Your vacation experience in case of cancellations, delays, interruptions, etc.

It is always better to search for and buy travel insurance that addresses all your requirements. You can also plan your vacation during the off-season as this will likely cost you lower due to lower demand.

Create a separate travel fund and use the investment income to cover expenses

Once you decide on a travel budget and the amount you need to save, invest it accordingly to achieve your goal. This will help you stay on top of your game and ensure you don’t compromise your savings for the vacation.

Booking tickets or packages for your vacation is perhaps the first and most considerable expense you may encounter. With the increase in TCS from July, if you are planning a foreign tour package, you will have to pay 15% more of the overall package cost as TCS is increased from 5% to 20%. Also, bookings may need to happen more quickly than other expenses to get the best rates and sometimes for getting a visa.

You will need a corpus for bookings in the short term. Thus, you should invest in safe and liquid fixed-income instruments. For example, if you start planning for a Europe trip with your family in March 2024, you have around one year to save for it.

You can plan, keeping in mind this time, to invest and accumulate sufficient funds for your dream vacation.

Consider investing money in fixed-income instruments such as debt funds or fixed deposits for attaining your goal and create the desired corpus. Equity investments are not recommended because of the short-term nature of the goal.

The idea is to ensure you have dedicated funds to sponsor your trip. This will avoid a situation where you end up dipping into funds saved for long-term goals or an emergency.

Plan for currency conversion and payment

Alongside financial planning, you should also ponder how you would make payments in terms of the transaction medium. The currency conversion rate can have a significant impact on your budget. Thus, planning for this at least one to two months before your trip is better.

Typically, airport currency exchange and foreign exchange bureaus charge higher/additional fees; thus, their rates would not be favourable for your pockets. The solution here is to conduct your research beforehand about where you can get a reasonable conversion rate in the countries you are planning to visit. You can also use alternative methods.

An easy solution is to get a prepaid forex card. These cards usually offer much better rates and protection against currency fluctuations by letting you lock in the exchange rate ahead of your travel.

A smart move can also be to opt for digital/cashless payments. The pandemic has encouraged people to opt for these payment methods. Going digital will let you enjoy your trip without hard cash and the stress of keeping it safe. In addition, you may access advantages such as discounts, cashback, rewards, etc., for using specific debit/credit cards. However, do understand that some countries are still not as digital-friendly as India.


Muhammad Al said, “Don’t count the days. Make the days count.” Taking vacations with your family is a bonus in this post-pandemic world. Breaks not only help you lower stress levels but also foster creativity. However, this is only possible if you plan the financial nitty-gritty of your vacation beforehand.

(By Anup Bansal, Chief Business Officer, Scripbox. Views expressed above are personal)

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First published on: 01-04-2023 at 12:19 IST