Summary :- There is a 20% TCS on foreign remittances (other than for education and medical purposes) over a threshold of INR 10 lakhs. Foreign remittances of less than Rs 10 lakh in a financial year are not subject to any Tax Collected at Source (TCS). Let’s understand TCS for foreign remittances in more detail.
The Union Budget proposed by Finance Minister Nirmala Sitharaman in 2025 had some significant updates regarding TCS for foreign remittances. Even though TCS is still applicable on foreign remittances, the Tax Collected at Source (TCS) threshold under LRS has been increased from ₹7 lakh to ₹10 lakh, easing the tax burden on individuals remitting money abroad. Let’s analyze all aspects of TCS on foreign remittance in detail, but first let’s understand what LRS and TCS are!
What is Liberalised Remittance Scheme (LRS)?
A Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI) allows Indians to remit money for investment, expenditure, and other permissible reasons to another country during a Financial Year. A resident Indian individual can remit up to $250,000 or equivalent in a financial year, according to the prevailing regulations.
What is Tax Collected at Source (TCS)?
Tax Collected at Source, or TCS, is a type of advance tax collected by sellers from buyers. In the case of foreign remittance transactions, you may be required to pay this type of tax when sending money abroad. It is important to emphasize that remitting money does not necessarily mean sending it to friends or family abroad. It could even mean remittances made for shopping, investing abroad, or buying assets.
Analyzing the Change in TCS on Foreign Remittance
All foreign remittance transactions under the Liberalized Remittance Scheme (LRS) are subject to Tax Collected at Source (TCS). Starting October 1st, 2023, the TCS rate was raised from 5% to 20% for foreign remittances exceeding ₹7 lakh in a financial year, with exceptions for education and medical treatment-related remittances.
With the Union Budget 2025, the TCS rate remains unchanged for most purposes except for education when funded through a loan, but the good news is that the threshold has been increased for all remittances from 7 lakhs to 10 lakhs. The key update is for outward remittances for education (when funded through an education loan), where the TCS has been waived off, providing relief to students.
The following table shows the previous TCS rate and the proposed TCS rate:
| Type of Transaction | Previous Rate | New Rate as per Union Budget 2025 |
|---|---|---|
| Outward Remittances (except for education, medical and business purposes) | 20% (only for forex spends over Rs. 7 lakhs in the financial year) | 20% (only for forex spends over Rs. 10 lakhs in the financial year) |
| Outward remittances for education/medical purposes | 5% (only for forex spends over Rs. 7 lakhs in the financial year) | 5% (only for forex spends over Rs. 10 lakhs in the financial year) |
| Outward remittances for education (with education loan) | 0.5% (only for forex spends over Rs. 7 lakhs in the financial year) | 0% |
| Outward remittances for business/commercial purposes | 0% | 0% |
1. Foreign remittance for the purpose of education & medical treatment
Despite being subject to Tax Collected at Source (TCS), remittances for education and medical treatment were excluded from the TCS hikes implemented from October 1, 2023. As of now, a 5% TCS continues to apply to these specific remittances. However, with the budget 2025 announcement, the threshold under the Liberalized Remittance Scheme (LRS) has been raised from ₹7 lakh to ₹10 lakh. This adjustment significantly eases the tax burden, as no TCS will be levied on foreign remittances below ₹10 lakh in a financial year.
2. Foreign remittance when funds are obtained from a loan for overseas education
For overseas education funded through an education loan from a financial institution, the TCS rate is now 0%. Let’s break this down with an example. Suppose someone has taken an education loan of ₹10,00,000 from a financial institution to pay for education fees. Previously, if they were remitting this amount for education fees, they would have been charged a 0.5% TCS on the amount exceeding ₹7 lakh. The TCS would have been ₹1500. However, under the new rules, no TCS will be levied on such remittances, providing a significant benefit for students.
3. Foreign remittance for any other purpose
Outward remittances for purposes such as investing overseas, or buying assets have been subject to a 20% TCS rate since October 1, 2023. For example, if you wish to remit ₹9,00,000 to the US for investing in US stocks, you would have previously been liable to pay 20% TCS on the amount exceeding ₹7 lakh. However, with the recent increase in the threshold to ₹10 lakh as per union budget 2025, no TCS will be charged if you’re remitting ₹9,00,000, effectively eliminating the tax deduction.
Should You Worry About TCS on Foreign Remittances?
Even if you are remitting more than 10 lakh in a financial year and paying TCS, it shouldn’t be a cause for concern. The reason for this is quite simple. TCS isn’t an additional tax. TCS can either be adjusted against your total income tax liability or claimed back when filing income tax returns. You can receive your TCS amount without any hassle, so there is no need to worry.
How to Get Your TCS Money Back?
If you have sent more than 10 lakhs abroad in a financial year and are subject to TCS, you should understand the financial implications and know how to claim your TCS. The amount of TCS you have paid over your actual tax liability can be claimed as a refund in your income tax return. Follow these steps to claim your TCS back:
1. Make sure that you have all the necessary documents with you, including the TCS certificate, the acknowledgment receipt, and Form 26AS, if applicable.
2. The refund claim form needs to be filled out. All necessary documents must be attached to the refund claim form.
3. Submit both the refund claim form and the supporting documents to the Income Tax Department.
4. The Income Tax Department will process the refund claim and credit the money to the individual’s bank account.
About the Author
Bhawna Nijhawan is the Content Manager at BookMyForex and the go-to person for creating engaging, informative content that resonates with the platform’s diverse audience. With over 8 years of experience in content writing and more than 4 years in the forex industry, she knows exactly how to simplify complex forex topics into something everyone can relate to.
