TCS on Foreign Remittances Under LRS: What's Changed and What It Costs You

Send money abroad for a child's tuition, book an overseas holiday package, or wire funds into a US brokerage account, and you'll likely notice that the amount actually leaving your account is higher than the amount you asked to remit. That difference is Tax Collected at Source (TCS), added on top by your bank or authorised dealer at the time of remittance under the Liberalised Remittance Scheme (LRS). It catches plenty of people off guard precisely because it shows up at the bank counter or on the remittance app, not on any tax form they've seen before. It isn't an extra cost in the way GST is, since it comes back to you, but the rate depends heavily on why you're sending the money, and getting the purpose wrong at the time of remittance is a common, entirely avoidable expense.

What LRS Is, and When TCS Applies

LRS is the RBI framework that lets a resident individual remit up to USD 250,000 in a financial year for a broad list of permitted purposes: education, travel, medical treatment, maintaining a relative abroad, gifts, and investing in shares, property, or deposits overseas. The scheme is available only to resident individuals, including minors through a guardian - not to corporates, trusts, or partnership firms - and the USD 250,000 limit is personal to each individual, so a family remitting for a shared purpose still has one separate limit per person rather than a single pooled amount. The TCS that rides on top of this framework used to be collected under Section 206C(1G) of the old Act; that provision now sits within Section 394 of the Income Tax Act, 2025, though the mechanics are unchanged - your bank or authorised dealer collects it at the time it processes the remittance, against your PAN, and deposits it with the government in your name. For most purposes, the first Rs 10 lakh remitted in a financial year is free of TCS altogether, a threshold raised from Rs 7 lakh in 2025, with tax collected only on the amount above it. The one purpose that doesn't get this threshold is an overseas tour package, where TCS is collected from the first rupee.

TCS Rates by Purpose

The rate you'll actually see applied depends entirely on what the remittance is for, and the gap between purposes is wide enough that it's worth confirming the correct purpose code with your bank before you remit:

Why the Rate Swings So Much by Purpose

The gap between 2% and 20% isn't arbitrary. Education, medical treatment, and packaged travel are treated as spending the government has little reason to tax at source, so those rates were brought down sharply; loan-funded education gets full exemption on the reasoning that the loan itself is already documented and traceable through the lending institution. Money going out as investment, gifts, or general maintenance of a relative abroad sits at the steep 20% rate because that category is most associated with pure capital outflow, and the higher rate is meant to discourage casual use of LRS for that purpose rather than to actually raise revenue, since most of it comes back as credit anyway. One thing worth knowing: as things currently stand, spending on an international credit card while travelling abroad isn't treated as an LRS remittance and doesn't attract this TCS at all - it's specifically remittances and forex drawn through an authorised dealer that count. Because the rate difference between categories is so large, it's worth stating the purpose accurately and consistently on your remittance form - the authorised dealer applies TCS based on what you declare, and correcting a wrongly coded purpose after the money has already left is far more friction than getting it right at the counter.

Getting the TCS Back: How It Shows Up in Your ITR

TCS collected on your remittance isn't a cost you simply absorb - it's tax paid in advance on your behalf, and it shows up against your PAN in both Form 26AS and AIS, just like TDS does. The bank or dealer that collects it is required to issue you a certificate for it, commonly referred to as Form 27D, which is worth holding onto alongside your remittance receipt even though the credit itself flows through to your PAN automatically. When you file your return, it's claimed as credit through the TCS schedule, reducing your final tax liability rupee for rupee, with any excess refunded to you. Salaried taxpayers don't have to wait until the return to get the benefit, either: you can declare TCS collected during the year to your employer, who is required to factor it into the TDS deducted from your salary for the remaining months, which is considerably faster than waiting for a refund after filing. Either way, check that the amount collected actually appears in your 26AS and AIS before you file - if your bank's certificate shows TCS that isn't reflected there, that's worth chasing before you claim it.

None of this changes whether you should send the money; it changes how much shows up in your account when you do, and how quickly you get the rest back. Confirm the purpose code, know which threshold applies, and treat the TCS certificate the way you'd treat a TDS certificate - something to check against your 26AS, not filed away and forgotten the moment the transfer goes through.