Since July 1, 2023, a higher rate of Tax Collected at Source (TCS) applies on foreign remittances exceeding ₹7 lakh under the Liberalized Remittance Scheme (LRS). Budget 2024 retained this, and for FY 2025–26, NRIs and residents making international transfers must plan their remittances carefully to avoid cash-flow issues.
This blog breaks down the ₹10 lakh TCS limit, the current rates, exemptions, and smart strategies NRIs and Indian residents can follow.
Legal Reference
- Section 206C(1G), Income Tax Act, 1961
- Finance Act 2023 increased TCS from 5% to 20% on certain LRS payments
- Applies to foreign tour packages, international investments, and foreign remittances for other purposes
TCS Threshold: What Changed?
Earlier:
- TCS @ 5% on foreign remittances above ₹7 lakh
Now (w.e.f. July 1, 2023):
- ₹10 lakh limit for education and medical purposes (with loan)
- For all other LRS transactions, 20% TCS applies without threshold
Exceptions:
- Education or medical: 5% TCS beyond ₹7 lakh
- Education loan (under Section 80E): 0.5% TCS beyond ₹7 lakh
- Remittances for investment, property purchase, or gifts: 20% TCS with no threshold
Common Scenarios for NRIs
| Purpose | TCS Rate | Threshold |
|---|---|---|
| Sending money to kids for education | 5% | After ₹7 lakh |
| Paying for medical treatment abroad | 5% | After ₹7 lakh |
| Funding overseas property purchase | 20% | No threshold |
| Investing in US stocks (via Indian broker) | 20% | No threshold |
| Transferring savings to NRO/NRE account | Not under LRS | Not applicable |
Practical Planning Tips for NRIs & Indian Residents
- Split Remittances Across Financial Years
If you need to send ₹15 lakh, split it into ₹7 lakh this year and ₹8 lakh after April 1 to reduce TCS exposure. - Use Family Member Quotas
Each resident has a ₹2.5 lakh exemption limit before TCS applies. Utilize parents’ or spouse’s quota if applicable. - Avoid Using Credit Cards for Overseas Expenses
As per RBI clarification, foreign credit card spends abroad may also attract LRS rules if used extensively. - Maintain Proof of Purpose
Especially for education and medical remittances. Without it, 20% TCS will apply by default. - Claim Refund While Filing ITR
TCS is not a tax liability, it is adjustable against your tax dues or refundable. File ITR to claim it back.
Example: TCS Impact on a Foreign Investment
Mr. Rajiv wants to invest ₹20 lakh in US stocks via an Indian broker.
- Since it’s under LRS (not for education/medical), TCS of ₹4 lakh (20%) is collected at source.
- While filing ITR, he shows the ₹4 lakh as tax paid and adjusts it against final tax due or claims a refund.
Conclusion
The TCS on foreign remittances isn’t a tax on income, but it does affect cash flow, especially for large payments. NRIs and high-net-worth families must plan LRS usage, document every purpose, and file ITRs to ensure they recover excess TCS.
Call to Action and Disclaimer
Planning a large foreign remittance or international investment?
Schedule a meeting with our Chartered Accountant, Anshul Goyal, by visiting:
Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. This blog is for educational purposes only and should not be treated as financial or legal advice.
Frequently Asked Questions
1. Is TCS a tax or can I get it back?
TCS is adjustable or refundable. It’s not a final tax. File ITR to claim it.
2. Can I avoid 20% TCS by showing education or medical documents?
Yes, but proof must be submitted at the time of remittance.
3. Does TCS apply to NRE/NRO transfers?
Transfers from India to your own NRO/NRE accounts are not under LRS and are exempt.
4. If I use a credit card abroad, will TCS apply?
Potentially yes, depending on amount and usage. Government is yet to finalize the enforcement mechanism.
5. Can I split remittances across accounts to avoid TCS?
Not if all accounts are held by the same PAN holder. You can split across family members.