TCS Rates and Thresholds on Foreign Remittance
Section 405 of the Income-tax Act, 2025 requires an authorized dealer (typically a bank) to collect tax at source on remittances made by a resident individual under the RBI's Liberalised Remittance Scheme (LRS), which permits residents to remit up to USD 2,50,000 per financial year for permitted current and capital account transactions.
The applicable TCS rate depends on the purpose of remittance and the amount: remittances for education financed by an education loan attract no TCS up to ₹7 lakh and 0.5% beyond that threshold; remittances for education (self-funded) or medical treatment attract no TCS up to ₹7 lakh and 5% beyond that threshold; and remittances for all other purposes (investment in foreign securities, gifts, foreign property purchase, etc.) attract no TCS up to ₹7 lakh and 20% beyond that threshold.
Overseas tour packages are treated separately: TCS at 5% applies on the first ₹7 lakh of package cost per individual per financial year, and 20% applies on the amount exceeding ₹7 lakh, regardless of the purpose exemption that applies to other LRS remittance categories — the tour package category does not benefit from the same nil-TCS band logic in the same way once the aggregate threshold across the financial year is crossed.
TCS collected is not an additional cost in the final analysis — it is available as credit against the remitter's total income tax liability for the year and can be claimed while filing the return, or adjusted against advance tax/TDS obligations through Form 15G/15H style pre-emption is not applicable here, but salaried employees can request their employer to factor in TCS credit while computing salary TDS.
Worked Example: Foreign Education Remittance (Self-Funded)
A resident individual remits ₹12,00,000 abroad in a financial year to fund their child's foreign education, self-funded (no education loan).
Frequently Asked Questions (FAQs)
Is there a difference in TCS rate for education funded by a loan vs self-funded?
Yes. Education remitted through a specified financial institution's education loan attracts a concessional 0.5% TCS beyond the ₹7 lakh threshold, while self-funded education (and medical treatment) remittances attract 5% beyond the same threshold.
What is the TCS rate for remittances not covered by education, medical, or loan-funded categories?
20% on the amount exceeding ₹7 lakh per financial year — this covers general LRS purposes like investment in foreign shares/property, gifts to relatives abroad, and maintenance of close relatives, which do not qualify for the concessional education/medical rates.
Is TCS collected on foreign remittance a final tax or is it refundable?
It is not a final tax — TCS collected is available as credit against the remitter's total income tax liability for the year when filing the return. If the credit exceeds actual tax liability, the excess is refundable.
Does the ₹7 lakh threshold apply per remittance or per financial year?
Per financial year, aggregated across all LRS remittances made by that individual for a given purpose category during the year — not per individual transaction. Multiple smaller remittances in the same category are added together to test against the threshold.
How is TCS on overseas tour packages different from other LRS remittances?
Overseas tour package purchases attract 5% TCS on the first ₹7 lakh and 20% beyond that per individual per year, applying uniformly regardless of the specific components of the package (travel, hotel, etc.), whereas other LRS remittance categories have purpose-specific rate structures.