Will overseas travel soon cost more? Govt weighs temporary tax amid Iran oil tensions

Rashmi Pandey — Fri, 15 May 2026 12:59:26 +0000

The Indian government is considering a temporary tax, cess or surcharge on foreign travel as rising crude oil prices and escalating tensions involving Iran and the Strait of Hormuz add pressure on the country’s import bill and foreign exchange outflows, CNBC-TV18 reported. The proposal is still under discussion, and no formal decision has been announced yet.

The move comes at a time when India’s outbound travel market is expanding sharply. Industry estimates suggest the outbound segment could rise to $55.39 billion by 2034 from $18.82 billion a decade earlier, reflecting strong long-term demand for international travel. India’s outbound departures also rose nearly 6% to 32.7 million in 2025, supported by higher incomes, easier visa access and the growing influence of social media on travel choices.

The broader concern in government circles is that higher crude prices could quickly hit inflation, transport costs, airline operations and the rupee. India imports more than 80 percent of its crude requirement, leaving the economy highly exposed to any disruption in global energy markets. The Strait of Hormuz remains central to those concerns because it is a key route for global oil and gas shipments, and recent instability in West Asia has intensified fears of supply disruption.

Industry bodies, however, have urged the government to strengthen inbound tourism to balance foreign exchange outflows. Executives say India should use the current moment to revive the Incredible India campaign and attract more overseas visitors, which could help offset the money Indians spend abroad. Travel industry leaders argue that boosting inbound arrivals would be a more durable way to support the current account than discouraging international travel.

EaseMyTrip said Prime Minister Narendra Modi’s message could help push domestic tourism, while analysts described the appeal as a signal rather than a formal policy shift. They also warned that the near-term impact on the travel industry could still be painful if oil prices remain elevated and outbound demand weakens.

In a separate interview with PTI, ixigo Group CEO Aloke Bajpai said the West Asia crisis was already affecting international flights and broader travel business, and said the government’s austerity call created an opportunity to bring more foreign tourists into India. He argued that while Indians are spending heavily abroad, the country is not receiving enough foreign exchange in return from inbound tourism. Bajpai said a fresh marketing push for Incredible India could help shift that balance.

The reported levy, if approved, would likely be temporary and aimed at cushioning the immediate impact of higher crude and import costs. For now, officials have not confirmed any final measure, and the discussion remains part of a wider effort to protect economic stability during a period of global uncertainty.

EconomicPolicy | Business Upturn

Will overseas travel soon cost more? Govt weighs temporary tax amid Iran oil tensions