Complete Guide to TCS when sending money abroad from India

Under the Liberalised Remittance Scheme (LRS), residents of India are eligible to send up to USD 250,000 abroad annually¹. It's important for Indian residents to understand the costs involved when sending money overseas. These include:

• Transfer fees charged by the bank or service provider (plus GST on the fees)
• Markups on the mid-market exchange rate– a hidden cost involved in currency conversion.
• Tax Collected at Source (TCS)– an additional amount withheld from foreign transfers above a specified threshold (which varies based on the purpose of the transfer)

Don't worry, TCS isn't an extra fee! It is an advance tax payment that you can adjust against your income tax liability when filing your returns. Read on to understand how it works. In this article, we'll also introduce you to Wise — a convenient option for remitting funds from India, and a great companion for international students starting their journey abroad.

What is TCS on Foreign Remittance

Tax Collected at Source (TCS) on foreign remittances is a percentage collected on outward remittances made under the Liberalised Remittance Scheme. The TCS collected on a transfer is deposited with the Income Tax Department and is reflected on your Form 26AS.

TCS on foreign remittances is deducted only on the amount above a certain threshold, not on the entire transfer amount.⁵

TCS Rates on Foreign Remittances from India

This table details the TCS rate for foreign remittances under LRS for different purposes, effective from April 2025 onwards:⁶

How to Pay TCS for Foreign Remittances

Your service provider records all foreign remittances made during the financial year. Once your total remittance exceeds INR 10,00,000, TCS is collected at the applicable rate by debiting your account at the time of transfer.

How to check for TCS deducted

It is essential to keep track of the TCS deducted on your overseas transfers. You can verify the TCS deducted through the following documents:⁷

You can check the TCS deducted during the year through the following documents.⁷

1. Form 27D: Your authorised dealer issues this TCS certificate as proof that TCS has been collected and deposited with the tax authority.
2. Form 26AS: This tax credit statement, available on the Income Tax e-filing portal, details all TDS and TCS amounts deducted against your PAN.
3. Other Statements: The Annual Information Statement (AIS) and Tax Information Statement (TIS) available on the Income Tax e-filing portal also help confirm the TCS deducted from your transfers.

How to claim TCS Refund on Foreign Remittance

The TCS collected by your bank or service provider is deposited with the Income Tax Department and is available as a tax credit on your Income Tax Return (ITR). If your overall tax liability in a financial year is less than the TCS deducted, you can claim a refund when filing your ITR.

Step-by-step guide for claiming TCS

When filing your annual ITR, follow these steps to claim your TCS refund:⁸

1. Ensure you receive Form 27D from your service provider, detailing the TCS debited and deposited.
2. Download Form 26AS from the Income Tax e-filing portal and verify that the amounts in Form 27D are correctly reflected.
3. File your income tax return and include the TCS amount in the designated section.
4. The Income Tax Department processes your return and calculates your refund, if applicable.

How to Avoid TCS on Foreign Remittances

The most effective way to avoid TCS on foreign remittances is to ensure your total transfers do not exceed INR 10,00,000 in a financial year. Here are some strategies:

1. Schedule your remittances: Keep your annual overseas transfers below INR 10,00,000. If your transfer amount is close to the threshold, consider postponing part of it to the next financial year.
2. Evaluate the transfer purpose code: Remittances for purposes like medical treatment or education may have lower TCS rates compared to other transfer purposes.
3. Consider an education loan: If you are a student, using an education loan can lower the TCS rate to 0%.
4. File your returns accurately: Even if TCS is deducted, you can claim a refund if your tax liability is lower. Always ensure that your Tax Credit Statement (Form 27D) aligns with your Form 26AS when filing your ITR.

TCS Applicability for NRIs

TCS applies only to Indian residents. Non-Resident Indians (NRIs) with an NRE account who are repatriating funds or sending money to their permanent residence abroad are not required to pay TCS..

Sending Money Abroad with Wise: A Convenient and Cost-Effective Solution

Wise offers a seamless, affordable solution for sending money abroad from India—for education, travel, medical expenses, and more. Wise is a reputable global money transfer platform and is approved in India by RBI. Wise offers:

• Convenience: Send money quickly and securely using the Wise app, anytime and anywhere—no need to visit a bank!
• Transparent Pricing: Wise displays transfer fees upfront and uses the mid-market exchange rate with no hidden markups, ensuring you get the best value for your money.

Send money abroad with Wise 🚀

Frequently Asked Questions

1. Can you refuse to pay TCS on money sent abroad?

No. You cannot refuse to pay the TCS on international money transfers. The transfer provider automatically deducts the TCS if your total foreign remittance for the year exceeds INR 10,00,000.

2. Will the TCS amount be reversed in the case of a transaction reversal?

Generally, the bank refunds the TCS if the transaction is reversed on the same day as the original transfer. Otherwise, you will need to claim the TCS refund when filing your ITR.