TCS on Foreign Remittance: Rates, Rules and Exemptions (2025–26)

When you send money out of India — to pay university fees abroad, book an overseas holiday, invest in US stocks, or support a family member living outside the country — your bank collects a percentage of that amount as tax before processing the transfer.

This tax is called TCS: Tax Collected at Source on foreign remittance.

It is not an additional burden you can ignore. But it is also not a permanent loss. TCS is advance tax. You get credit for it when you file your income tax return.

What confuses most people is the rate, the threshold, the exemptions, and how it all changed in Budget 2025 — and again in Budget 2026. This guide covers all of it.

What is TCS on Foreign Remittance?

TCS on foreign remittance is a tax collected by your bank or authorised forex dealer when you send money abroad under the Reserve Bank of India's Liberalised Remittance Scheme (LRS).

It falls under Section 206C(1G) of the Income Tax Act, 1961.

The bank does not keep this money. It deposits it with the government on your behalf. The amount shows up in your Form 26AS under your PAN, and you claim it back while filing your ITR.

Think of it as a government mechanism to track outward foreign transfers and ensure people declare their overseas spending at tax time.

TCS vs TDS — what is the difference?

Both TCS and TDS are advance tax mechanisms, but they work differently.

For foreign remittances, TCS is what applies. TDS does not apply to outward transfers.

Who collects TCS?

Your authorised dealer — typically your bank — collects TCS at the time of the transaction. If you use a forex platform or money transfer service (like Wise, NIYO, or BookMyForex), they act as the authorised dealer and do the same.

The Liberalised Remittance Scheme — Quick Explainer

TCS applies specifically to transfers made under LRS. So it helps to understand what LRS is.

The LRS allows any Indian resident to send up to USD 250,000 abroad in a financial year. This can be for a wide range of purposes: education, travel, medical treatment, investment in foreign securities, gifts, and maintenance of relatives abroad.

Which transactions fall under LRS?

LRS covers most reasons you would send money abroad as an individual. These include:

• Tuition and living expenses for education abroad
• Travel and tourism
• Medical treatment outside India
• Investment in foreign stocks, bonds, mutual funds, and property
• Gifts and maintenance for relatives living overseas
• Emigration

LRS does not apply to business payments, which go through a different RBI framework.

TCS Rates on Foreign Remittance — Current Table

The rates depend on what you are sending money for and how much you send in a financial year.

Current rates (effective April 1, 2025 — Budget 2025)

The ₹10 lakh threshold is calculated cumulatively across all remittances in a financial year — April 1 to March 31. It is per person, not per family.

What changed in Budget 2025 (effective April 1, 2025)?

Budget 2025 brought two significant changes:

1. The threshold for TCS increased from ₹7 lakh to ₹10 lakh for most remittance categories. This means smaller transfers — family maintenance, student living costs, medical — are no longer taxed unless the total crosses ₹10 lakh in the year.
2. TCS on education remittances funded through a loan from a specified financial institution (covered under Section 80E) was reduced to 0%. Earlier it was 0.5%.

What changes from April 1, 2026 — Budget 2026

Budget 2026 (Finance Act 2026) introduced further changes that kick in from April 1, 2026:

The direction is clearly toward lower rates for genuine personal expenses. The 20% rate on investments stays as a deterrent for capital outflows.

The ₹10 Lakh Threshold — How It Works

This is where most people get confused.

The threshold is not per transaction. It is the cumulative total of all LRS remittances you make in a financial year (April 1 to March 31), across all purposes except overseas tour packages.

Once your total crosses ₹10 lakh in a year, TCS applies to every rupee above that amount.

Is the ₹10 lakh limit per person or per family?

Per person. Each individual has their own ₹10 lakh limit. If a husband and wife both send ₹8 lakh each for investment, neither hits the threshold, and neither pays TCS.

Worked example: TCS on a ₹14 lakh investment remittance

You want to invest ₹14 lakh in US stocks through your broking account.

• The first ₹10 lakh: no TCS (below threshold)
• The next ₹4 lakh: 20% TCS = ₹80,000

Your bank collects ₹80,000 as TCS on top of the ₹14 lakh. Your account needs to have ₹14,80,000 available.

The ₹80,000 appears in your Form 26AS. When you file your ITR, you claim it as advance tax paid. If your total income tax liability is less than ₹80,000, you get a refund.

Worked example: ₹8 lakh education remittance (self-funded)

You are sending ₹8 lakh to pay tuition fees abroad from your savings (no education loan).

Total remitted this year: ₹8 lakh. Below the ₹10 lakh threshold. TCS = zero.

If you have already sent ₹4 lakh earlier in the year for another purpose, your cumulative total becomes ₹12 lakh. TCS of 5% applies to ₹2 lakh (the amount above ₹10L) = ₹10,000.

Exemptions from TCS on Foreign Remittance

Not all outward transfers attract TCS. Some are exempt entirely.

Education loans from specified institutions

If you are sending money abroad for education and the funds come from a loan taken from a bank or financial institution covered under Section 80E of the Income Tax Act, TCS is 0% regardless of amount.

Specified institutions include scheduled commercial banks, most NBFCs that provide education loans (HDFC Credila, Avanse, Auxilo, InCred), and some government-notified bodies.

Foreign lenders like Prodigy Finance or MPower do not qualify. If your loan is from a foreign lender, you are treated as self-funded.

International credit cards — current deferred status

This is still a grey area.

In June 2023, the government announced that using an international credit card while abroad would count as LRS and attract TCS. Then in July 2023, the Ministry of Finance put that provision on hold — indefinitely. As of the time of writing, TCS does not apply to credit card spends made abroad.

Debit cards and forex cards used abroad do attract TCS (they are treated as LRS remittances).

The credit card deferral could be reversed with a government notification at any time, so track updates if you are a frequent traveller.

Documents You Need When Sending Money Abroad

When you visit the bank or initiate a remittance through a platform, you will need to complete a Form A2 (or its online equivalent).

Form A2 asks you to declare:

• The purpose of remittance (education, travel, investment, etc.)
• The amount
• Beneficiary details

You will also need your PAN card (mandatory for all LRS remittances), your passport, and in some cases, supporting documents depending on the purpose — an offer letter for education, a medical certificate for treatment, etc.

What the bank does after collecting TCS

The bank deposits the collected TCS with the Income Tax Department within 7 days of the end of the month in which it was collected. They then issue a TCS certificate (Form 27D) to you quarterly. This certificate confirms that the tax was deposited.

The TCS amount also shows up in your Form 26AS and Annual Information Statement (AIS) on the income tax portal — both of which you can access at incometax.gov.in.

How to Claim TCS Refund in Your ITR

TCS on foreign remittance is not a permanent tax. You claim credit for it while filing your Income Tax Return.

Step 1: Check Form 26AS and AIS

Log into the income tax portal. Download your Form 26AS (under the e-file section). Look for Part F, which shows TCS details. Cross-check the TCS amount shown with the certificate your bank issued.

Step 2: Claim TCS credit in your ITR

In your ITR form, go to the tax payments section. Enter the TCS amount as advance tax paid. This reduces your final tax liability for the year.

Step 3: Get a refund if eligible

If the TCS collected is more than your final tax liability, the excess is refunded by the Income Tax Department — usually within a few weeks of filing if the return is e-verified promptly.

The refund is issued to the bank account registered in your ITR, so make sure your pre-validated bank account details are current on the portal.

TCS for NRIs — Does It Apply?

Generally, TCS under LRS applies to Indian residents, not NRIs.

NRIs operating NRE or NRO accounts are treated differently. Transfers from NRO accounts (which hold India-earned income) to foreign accounts may attract some FEMA compliance, but LRS-based TCS rules typically do not apply to NRIs remitting from these accounts.

However, if an NRI is physically in India for a long enough period to be classified as a resident for tax purposes in a given year, the LRS rules — and TCS — can apply.

If you have recently returned to India or are in the process of changing your residential status, consult a CA before making large remittances.

Strategies to Minimise TCS (Legally)

TCS is claimable, so technically it is not a loss. But it does affect cash flow. Here is how to plan around it.

Stay under ₹10 lakh per financial year. For education, medical, and other regular expenses, keeping total annual remittances below ₹10 lakh means zero TCS.

Use an education loan from a qualified lender. If your child is studying abroad and you can get a loan from a scheduled bank or qualified NBFC, TCS drops to 0% regardless of the amount.

Split large remittances across financial years. If you are sending ₹15 lakh for an investment and it is not time-sensitive, sending ₹9.9 lakh before March 31 and the rest after April 1 keeps both tranches below the threshold.

Declare the correct purpose. If you are sending money for medical treatment, declare it as such — the rate is 5% above ₹10L, not 20%. Wrong purpose declarations can trigger penalties.

Use international credit cards where possible. While the deferral lasts, credit card spends abroad are not treated as LRS and do not attract TCS.

Penalties for Non-Compliance

If you remit money abroad without declaring it correctly, or if your platform fails to collect TCS, there can be consequences under the Income Tax Act.

For the collector (bank or platform) that fails to collect TCS: interest at 1% per month on uncollected TCS, plus penalty.

For the remitter who provides incorrect information to avoid TCS: possible scrutiny by the income tax department and penalty under Section 271C.

The practical risk for most individuals is low if they are sending money for genuine purposes through regulated banks. The bigger concern is for those making large remittances without proper declaration — which can flag up in the Annual Information Statement.

Frequently Asked Questions