Claiming of Foreign Travel Expenses for the purpose of Business


Foreign travel expenses are costs incurred while traveling specifically for the purposes of conducting business related activities. These are among the most common business expense deductions. However, there are some restrictions placed on these expenses by various regulations.

This Article evaluates the allowability and restrictions of foreign travel expenses incurred by any person of any Indian Company to be claimed as business expenses under the Income Tax Act, 1961 (‘the Act’), Foreign Exchange Management Act, 1999 (‘FEMA’) and the Companies Act, 2013 (‘the CA Act’).

Income Tax Act, 1961

  • As per Section 37 of the Act, expenses incurred wholly and exclusively for the purpose of business shall be allowed as expenses.
    • If the Director is able to justify that the foreign travel expenses were incurred wholly for business purposes by giving the complete details of the expenses, purpose of the visit, details of dollars purchased along with the supporting documents, then that expenses shall be allowed for income tax purposes.
  • As per Section 40A(3) of the Act, if the Director makes any payment or aggregate of payments made to a person in a day exceeding INR 10,000 in cash, then such payments shall be not be allowable under Income tax. It also applies to payments made in foreign currency equivalent to INR 10,000.
  • As per Section 206C of the Act, tax shall be collected at source at 20% for remitting the amount under the Liberalised Remittance Scheme (‘LRS’) for availing of foreign exchange facility.
    • However, TCS shall not apply to the usage of International Credit Card overseas as on date but according to Circular No. 10 of 2023 dated 30th June 2023 it will be implemented in the near future.
    • No tax shall be collected if the amount or aggregate of amount being remitted by a buyer is less than seven lakh rupees in a financial year.
  • Judicial Precedents on Allowability of Business Expenses under the Act
    • In Well Wisher Construction (P.) Ltd. Mumbai ITAT, 2023, it was held that where the directors of assessee company had undertaken foreign travels together with architect and advocate with relevant supporting evidence for understanding global trends in building construction, these expenses were to be allowed.
    • In Kohinoor Indian (P.) Ltd. Amritsar ITAT, 2021, it was held that where assessee claimed foreign travel expenses, however, some vouchers for expenditure incurred by assessee were missing, then the expenditure shall be restricted to 5 per cent, in absence of supporting document.
    • In Indian Metals and Ferro Alloys Ltd. Supreme Court, 2022, it was held that since assessee had not furnished any details as to fact that such travel expenses claimed by it were incurred wholly and exclusively for business purposes, Assessing Officer was justified in disallowing 20 per cent of such expenditure.
    • In Swan Silk (P.) Ltd. Karnataka High Court, 2021, it was held that since assessee was unable to adduce evidence that said foreign travel expenses were made for business purpose of assessee-company, same could not be allowed as deduction.
    • In Ramlord Apparels. Mumbai ITAT, 2020, it was held that merely because the expression rupee has been mentioned in Section 40A(3) of the Act, it would not debar applicability of the provision to the expenditure incurred in cash in foreign currency and therefore disallowed the expenses incurred in cash in foreign currency.

Foreign Exchange Management Act, 1999

  1. As per the LRS, a person can avail of foreign exchange facility for the purposes of business travel within a limit of USD 2,50,000 only in a financial year. Any additional remittance shall require prior approval of the Reserve Bank of India. The LRS limit shall not apply to the use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.
  2. A person is allowed to purchase foreign currency notes/ coins only up to USD 3,000 per visit and the balance amount can be in the form of store value cards, traveler’s cheque or banker’s draft.

Companies Act,2013

  1. Under the Companies Act, the company can claim the foreign travel expenses that are essential and incidental to the running of operations as business expenses.
  2. During the process of statutory audit, the auditor shall examine the expenses to verify the following –
  • Whether the expenditure has valid supporting documents like travel tickets, third party invoices, visa details, hotel reservation, stay documents, proof of payment, etc?
  • Whether the purpose of the visit was related to the Company’s business?
  • The details of the tour, the tour report and the details of the expenses.
  • The internal control policies relating to the incurring of expenses including approvals.
  • The Reserve Bank of India’s permission if necessary for withdrawal of foreign exchange.


  1. Based on the provisions and judicial precedents, we can interpret that in order to claim foreign travel expenses as business expenses proper supporting documents such as emails, vouchers, purposes of the visit, details of the entire visit, etc should be maintained.
  2. The purpose of the business travel should be justifiable to the nature of business.
  3. Internal control policies of the Company should be followed.
  4. To substantiate expenses that lack invoices, payments can be made through credit card, or any other online mode providing valid supporting records.

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