What is TCS on foreign remittance and how does it affect my transfer?

Last updated 3 August 2026

Full Answer

A salaried professional in Chennai was sending her daughter to the UK for a postgraduate degree. She was funding it from her own savings, not a loan. Total remittances for the year across tuition and living expenses were Rs 45 lakhs. When she arrived at HDFC for her third transfer of Rs 12 lakhs, the bank collected Rs 1.9 lakhs in TCS before processing the wire. She had not budgeted for this. Her daughter's accommodation deposit payment was delayed.

TCS on foreign remittances catches a large number of people unprepared, particularly those funding overseas education from personal savings.

Tax Collected at Source on LRS remittances was revised significantly by the Finance Act, 2023. The revised rates became effective from October 1, 2023 under Section 206C(1G) of the Income Tax Act. The earlier rates were substantially lower; the current rates represent a meaningful increase, particularly the jump to 20 percent for non-education and non-medical purposes.

The threshold is Rs 7 lakhs per individual per financial year across all outward LRS remittances. The first Rs 7 lakhs in a year are TCS-free regardless of purpose. TCS applies only on the amount exceeding Rs 7 lakhs.

The rate structure based on purpose: remittances for education financed through a loan from a financial institution notified under Section 80E attract TCS at 0.5 percent on the excess above Rs 7 lakhs. Remittances for education from the remitter's own funds, or for medical treatment abroad, attract TCS at 5 percent on the excess. All other LRS remittances, covering travel, overseas investments, gifts, general maintenance beyond medical and education, and any other permitted purpose, attract TCS at 20 percent on the excess.

The 20 percent rate is significant. A person remitting Rs 20 lakhs for a foreign property investment pays TCS of Rs 2.6 lakhs on the Rs 13 lakhs above the threshold. This is a substantial cash outflow even though it is ultimately refundable.

TCS is not a final tax. It is an advance tax credit collected by the bank on behalf of the government. The amount collected appears in your Form 26AS and Annual Information Statement under your PAN. When you file your ITR for the year, you claim the TCS as a credit against your total tax liability. If the TCS collected exceeds your total tax payable, the excess is refunded after ITR processing.

The practical problem for people who do not normally file ITRs: resident individuals whose total income is below the basic exemption limit do not have a legal obligation to file an ITR in most circumstances. But if TCS has been collected on their LRS remittances, they need to file an ITR specifically to claim the refund. Many are unaware of this and forfeit the refund entirely.

Your bank tracks cumulative LRS utilisation using your PAN. When you initiate a transfer, the bank checks the running total for the year. If this transfer would push the cumulative amount above Rs 7 lakhs, the bank applies TCS on the incremental amount above the threshold. Spreading remittances across multiple banks does not reset or split the threshold because all banks report LRS data to RBI and the Income Tax department reconciles it by PAN.

One practical tax planning point: if you are remitting for education through a formal student loan from a scheduled bank or specified financial institution, structuring the remittance as a loan disbursement (0.5 percent TCS) rather than a personal transfer (5 percent TCS) saves meaningfully on the upfront cash outflow, even though both are ultimately recoverable.

TCS under Section 206C(1G) applies only to individual resident Indians making personal outward remittances under LRS. Corporate remittances for business purposes are governed by TDS under Section 195, not the LRS TCS framework — that is where Form 15CA (now Form 145) and Form 15CB (now Form 146) apply instead.

Note: Rates and thresholds mentioned are as of FY 2024-25. Always verify current figures before acting.

This article is for general information only. For your specific remittance, consult a practicing CA.