Knowing the TCS on foreign remittances is very vital for Indian travelers and students planning to study abroad. The Government of India adopted it as part of the Liberalized Remittance Scheme, and it can significantly impact your expenses. Let’s break down what TCS really is, how it applies to foreign remittances, and most importantly, how you can get a refund or minimize its impact.
What is TCS on Foreign Remittance?
Tax Collected at Source (TCS) on foreign remittance refers to the tax collected by authorized dealers when individuals send money abroad under the Liberalized Remittance Scheme (LRS). This mechanism ensures tax compliance and monitors international fund transfers. The Income Tax Department receives the collected tax and reflects it in the individual’s Form 26AS.
Why Was TCS Introduced?
Principal objectives of TCS on foreign remittance include tracking high-value transactions and curbing the outflow of wealth from India. It brings transparency into foreign currency transactions and provides data regarding residents who are remitting large sums abroad.
LRS: The Liberalized Remittance Scheme
The Reserve Bank of India (RBI) established the Liberalized Remittance Scheme (LRS) to allow Indian residents to send money abroad for various purposes. Under this framework, individuals can remit funds overseas for education, travel, medical treatment, and investment. Under LRS, an individual can remit up to $250,000 (or equivalent in other currencies) per financial year for permissible transactions without the need for prior approval from the RBI.
Key features of the LRS include:
- Permissible Purposes: Remittances under LRS can be used for education, business travel, medical treatment, gifts, donations, and investment purposes, among others.
- Annual Limit: The current annual limit for remittances is $250,000 per person.
- No Prior Approval: Individuals can transfer funds freely under this scheme, subject to meeting the regulatory requirements.
- Tax Deducted at Source (TCS): Starting April 1, 2025, the government applies a 5% Tax Collected at Source (TCS) on the amount exceeding ₹10 lakh for remittances under the Liberalised Remittance Scheme (LRS).
TCS Rates on Foreign Remittances
The TCS rates applicable to foreign remittances vary based on the purpose and amount of the remittance. As per the revisions effective from April 1, 2025, the following TCS rates apply:
| Purpose of Remittance | Threshold Limit (INR) | TCS Rate |
| Education (financed by loan from financial institution) | Up to 10,00,000 | Nil |
| Above 10,00,000 | 0.5% on the amount exceeding 10,00,000 | |
| Education (other than loan) | Up to 10,00,000 | Nil |
| Above 10,00,000 | 5% on the amount exceeding 10,00,000 | |
| Medical Treatment | Up to 10,00,000 | Nil |
| Above 10,00,000 | 5% on the amount exceeding 10,00,000 | |
| Overseas Tour Packages | Up to 10,00,000 | 5% |
| Above 10,00,000 | 20% on the amount exceeding 10,00,000 | |
| Other Purposes (e.g., investments, gifts) | Up to 10,00,000 | Nil |
| Above 10,00,000 | 20% on the amount exceeding 10,00,000 |
How to Check for TCS Deducted
If you have made a foreign remittance under the Liberalized Remittance Scheme (LRS), you can verify the Tax Collected at Source (TCS) deducted using the following methods:
1. Check Your Form 26AS
- Visit the Income Tax e-Filing portal (www.incometax.gov.in)
- Log in using your PAN and password
- Navigate to ‘View Form 26AS’ under the ‘My Account’ section’
- Download and review Form 26AS to check your TCS deductions. You will find these deductions clearly reflected under Part C (Tax Collected at Source).
2. Review Your Bank/Forex Transaction Statement
- Check your bank statement or forex transaction receipt for any TCS deductions
- Authorized dealers (banks, forex companies) mention TCS deduction details in the transaction summary
3. Check the AIS (Annual Information Statement)
- Go to the Income Tax Portal and navigate to the AIS section
- The AIS will list all your LRS transactions and TCS deductions
How to avoid TCS on foreign remittance
To minimize or avoid TCS on foreign remittances:
- Plan Remittances: Distribute remittances across financial years or among family members to stay below thresholds.
- Stay Within Thresholds: Keep remittances within the exempted limit of INR 10 lakh per financial year.
- Utilize Education Loans: For educational remittances, using loans from specified financial institutions can reduce TCS to 0.5% on amounts exceeding INR 10 lakh.
Is TCS on Foreign Remittance Refundable?
Yes, TCS on Foreign Remittance is refundable. Since TCS stands for Tax Collected at Source, the authorities credit it against your total income tax liability for the specific financial year.
How to Claim TCS Refund
If you have paid Tax Collected at Source (TCS) on foreign remittance and your total tax liability is lower than the amount collected, you can claim a refund while filing your Income Tax Return (ITR). Here’s how:
1. Verify TCS Deducted
- Download Form 26AS from the Income Tax e-Filing Portal
- Cross-check TCS deductions against your bank/forex transaction statements
- Check Annual Information Statement (AIS) for a detailed view of TCS transactions
2. File Your Income Tax Return (ITR)
- Choose the appropriate ITR form based on your income sources
- Under the ‘TCS’ section in the ITR form, enter the deducted amount (as shown in Form 26AS)
- Ensure that the total tax liability is recalculated, factoring in the TCS paid
3. Get Refund If Excess TCS Was Collected
- If your total tax liability is lower than the TCS deducted, the excess amount will be refunded
- The refund is credited directly to your bank account linked with PAN
4. Check Refund Status
- Refunds are typically processed within 3-6 months
- After filing, track the refund status on the Income Tax Portal under ‘Refund/Demand Status’
Things to Keep in Mind
- TCS Applicability: TCS is applicable only when your total remittances exceed ₹10 lakh (w.e.f 1st April 2025) in a financial year. The authorities collect tax on the amount that exceeds this threshold.
- Documentation: Keep proper records of all remittances and TCS payments done. You will need this documentation when you file your ITR and claim a refund.
- Avoiding Penalties: One has to furnish the correct information at the time of remitting funds. Furnishing incorrect information to avoid TCS attracts penalties and other legal implications.
Supreme Forex: Facilitating Seamless Education Remittances
Supreme Forex specializes in providing efficient and compliant foreign exchange services, particularly for students pursuing education abroad. Under the RBI’s Liberalized Remittance Scheme, Indian residents can remit up to $250,000 per financial year for educational purposes.
Why Choose Supreme Forex for Education Remittances?
- Expert Guidance: Our remittance experts assist you through the entire process, ensuring adherence to RBI guidelines and optimal tax planning.
- Competitive Exchange Rates: We offer favorable exchange rates, maximizing the value of your remittance.
- Swift Processing: Supreme Forex typically completes transfers within 24–48 hours, ensuring students pay tuition fees and other educational expenses on time.
- Convenient Services: With both online and branch services, we provide flexibility and convenience tailored to your needs.
To initiate a remittance or for personalized assistance, contact Supreme Forex at +91 7303524400.
Final Thoughts
The TCS on foreign remittances becomes paramount in international money transactions by resident Indians. Once the rates are known, how to save yourself from undue TCS and what its refund processes are, that could, in itself, save you loads of money. The foreign exchange providers like Supreme Forex stand by your side through these complexities, arming you with expertise and support to help you make informed decisions.
Planning is the most crucial component in ensuring that students and travelers are attended to effectively. With informed choices and a little help from some reliable foreign exchange providers, you can ensure that your international remittances are cost-effective while adhering to all regulatory requirements.
Your trusted associate in foreign remittances—get expert guidance, competitive rates, and seamless compliance with TCS regulations. Do visit our nearest branch today!
Sources:
- Indian Finance Ministry
Remarks:
- 1 United States Dollar equaled 85.88 Indian Rupee as of 8 Apr 2025, 4:48 am UTC
