What is TCS on Foreign Remittance?
Tax Collected at Source (TCS) on foreign remittance applies primarily to Indian residents who transfer money overseas under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). LRS allows a resident individual to remit up to USD 2,50,000 per financial year for various purposes, including education, medical treatment, gifts, and investments.
When a resident individual initiates a remittance transfer under LRS, the bank collects the prescribed TCS amount, which is then deposited with the government.
Key Takeaways:
- Mechanism: Tax Collected at Source (TCS) is collected by authorised dealers/banks when processing overseas remittance transfers under LRS.
- Credit/Refund: The deducted TCS is reflected in your Form 26AS/Form 27D and can be claimed as a credit against your tax liability or as a refund when filing your ITR.
Latest TCS Rates on Foreign Remittance (Effective April 1, 2025)
The Tax Collected at Source rates are applied on the aggregate amount of foreign remittances made by a resident individual in a financial year. The threshold of ₹10 Lakhs is per individual per financial year.
| Purpose of Remittance |
Applicable TCS Rate |
Threshold for TCS |
| Education (Financed by a loan u/s 80E) |
Nil |
No limit |
| Education / Medical Treatment (Other than loan-financed) |
5% |
On amount exceeding ₹10 Lakh |
| Overseas Tour Package |
5% |
Up to ₹10 Lakh |
| Overseas Tour Package |
20% |
On amount exceeding ₹10 Lakh |
| Any Other Purpose (Investment, Gift, Maintenance, etc.) |
Nil |
Up to ₹10 Lakh |
| Any Other Purpose (Investment, Gift, Maintenance, etc.) |
20% |
On amount exceeding ₹10 Lakh |
Exemptions and Relief from Foreign Remittance Tax
Certain transfers are either exempt from TCS or enjoy a nil/lower rate:
- Education Loans: Remittance transfers for education that are financed by a loan from a specified financial institution (u/s 80E) are subject to Nil Tax Collected at Source.
- Threshold Exemption: For education and medical purposes, a Nil TCS rate applies to the aggregate amount up to ₹10 Lakh in a financial year.
- International Credit Cards: The application of TCS on foreign expenditures made through international credit cards while overseas has been deferred until further notice.
Tax Collected at Source for Non-Resident Indians (NRIs)
A critical point for Non-Resident Indians is that the LRS framework, and consequently the TCS provision under Section 206C(1G), is primarily applicable to resident individuals.
- No TCS on Repatriation: An NRI is generally not liable to pay TCS on the repatriation of funds. Specifically, when an NRI transfers money from their Non-Resident Ordinary (NRO) account to their fully repatriable Non-Resident External (NRE) account, the TCS provision under Section 206C(1G) is generally not applicable on the transfer itself.
- Repatriation Limit: NRIs can repatriate up to USD 1 million per financial year from their NRO account (which holds income earned in India, such as rent, dividends, etc.). This repatriation is subject to necessary tax clearances (like TDS on the underlying income) and documentation (Form 15CA/15CB).
How to Check and Claim TCS
The TCS collected by the authorised dealer/bank on your remittance transfers is an advance tax that can be utilised to reduce your final tax liability.
- Verification: You can verify the amount of remittance tax collected against your PAN using Form 26AS (Tax Credit Statement) and Form 27D (TCS Certificate issued by the authorised dealer).
- Adjustment/Refund: When filing your ITR, the total TCS amount is automatically credited against your total tax payable.
- If your tax liability is more than the TCS collected, you pay the balance.
- If your tax liability is less than the TCS collected, the surplus amount is eligible for a refund.
Conclusion
Understanding the remittance tax (TCS) is key for planning overseas remittance transfers. While mandatory for residents under the Liberalised Remittance Scheme, Tax Collected at Source acts as an advance tax, which can be claimed as a credit or refund via ITR filing. NRIs are generally exempt from this TCS on repatriating funds from NRO to NRE accounts. Staying informed about the latest rates and exemptions ensures compliance and optimises your international transfers.
Invest 18k/month & get 2 Crore# Tax-Free*
Manage your funds online60k + happy customers across 25+ countries
Compare & Choose30+ Plans and 150+ Fund options
