Complete Guide to TCS on Foreign Education Loans when Remitting from India

When pursuing higher education abroad, Indian students often need to send money overseas for tuition fees and living expenses. Sending money for education involves understanding India's Tax Collected at Source (TCS)—an amount deducted on certain foreign remittances to effectively track and tax these transactions.

Read on to understand how TCS works for education loan remittances, learn about its rates, and find out how to claim a refund. In this review, we'll also introduce you to Wise — a convenient option for remitting educational expenses from India and a great companion for international students beginning their journey abroad.

Understanding TCS

Don't worry, TCS isn't an extra fee. It is an advance tax collection that can be adjusted against your income tax liability when filing your tax returns. In other words, the TCS amount is not an additional tax burden but rather a pre-payment of taxes you might owe. TCS on foreign remittances is deducted only when sending money abroad above a certain threshold; remittances below that limit do not attract TCS.

What is TCS on Education Loans?

TCS applies to remittances exceeding INR 7 lakhs in a financial year made under the Liberalised Remittance Scheme (LRS).

TCS Rates for Education Loan Remittances

It's important to understand that the TCS applies only to the amount exceeding INR 7 lakhs, not the entire sum. For instance, if you remit INR 8 lakhs for education through an education loan, the TCS will be calculated on INR 1 lakh (₹8 lakhs - ₹7 lakhs) at 0.5%.

Proposed Changes presented in Budget 2025 Speech:- No TCS on education loan remittances from authorized institutions- Change in threshold from INR 7 lakhs to 10 lakhs. Expected to take effect from April 2025, pending RBI notification

If you're not using a loan, note that TCS rates differ when paying education fees directly. For more information, check out our guide to TCS when remitting fees directly 👉

Smart Ways to Minimize or Avoid TCS

Although TCS is mandatory for foreign remittances exceeding the threshold, there are legitimate ways to minimize or avoid it:

• Opt for an education loan to fund your overseas studies. This approach offers a significant advantage, as it allows you to benefit from a lower TCS rate of 0.5% on the amount exceeding INR 7 lakhs—compared to a 5% rate when using personal funds.
• Each individual has an exemption limit of INR 7 lakhs under LRS. If both parents contribute to their child's education, each can remit up to INR 7 lakhs without attracting TCS. This strategy can help families avoid TCS altogether. 
• If you receive scholarships or grants from recognized institutions, these amounts might be exempt from TCS or subject to a lower rate. Exploring scholarship options may reduce your overall TCS liability.  

Guide to Foreign Education Funding for Indian Students

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

While your bank handles the transfer of your education loan, you might need to send money for other expenses. Wise offers a convenient and cost-effective way to do this.

Why Choose Wise for Remitting University Fees?

Wise is a renowned global money transfer platform that is approved in India by RBI. Wise offers:

• Convenience: Send money quickly and securely through the Wise app—no need to visit a bank!
• Transparent Pricing: Wise displays transfer fees upfront and uses the mid-market exchange rate without hidden markups, ensuring you receive the best value for your money.
• Easy Account Management: Track your transfers and manage your finances effortlessly with the user-friendly Wise app.

Send money abroad with Wise 🚀

The Wise Account: Your Perfect Companion Abroad

For international students studying in supported countries, the Wise account is a great option for a local account in your new country.

• Multi-currency Benefits: Hold multiple currencies—including INR—in one account.
• Everyday Spending: In supported countries, you can apply for a linked card to cover daily expenses, shopping, and ATM withdrawals.
• Seamless International Payments: Send money home for loan repayments or other needs at the mid-market exchange rate and enjoy low, transparent fees.
• Travel with Ease: Use your Wise card for hassle-free spending and ATM withdrawals while traveling, including during trips back to India.

Open your Wise Account 🚀

Claiming Your TCS Refund

Since TCS is adjusted against your income tax liability, you can claim a refund if the TCS deducted exceeds your total tax payable for the financial year. Here’s how to claim your TCS refund:

• Obtain Form 27D: This TCS certificate, provided by the bank or authorized dealer that collected the TCS, contains details of the deducted amount.
• Download Form 26AS: This form reflects your tax credit statement and shows the TCS deducted against your PAN. You can download it from the Income Tax Department's e-filing portal.
• File Your ITR: When filing your Income Tax Return, declare the foreign remittance made for education along with the TCS deducted. You can claim the TCS as a credit against your tax liability.
• Verification and Processing: After filing your ITR, verify it through the available methods (e-verification, digital signature, etc.). The Income Tax Department will process your return and determine the refund amount.

Be sure to maintain all necessary documentation, including your PAN card, TCS certificates (Form 27D), tuition fee receipts, and bank statements. Following these steps will help ensure that any excess TCS can be adjusted or fully refunded if you owe no additional tax.

Conclusion

TCS on foreign remittances for education loans is a crucial aspect of financial planning for students pursuing higher studies abroad. By understanding the TCS rates, thresholds, and refund process, you can optimize your remittances and minimize your tax burden. Remember, TCS is not an additional tax but an advance tax payment that adjusts against your final income tax liability. Utilizing exemption limits, opting for education loans, and exploring scholarships are effective strategies to avoid or reduce TCS.

While this article provides a comprehensive overview, it is important to stay updated on the latest regulations and consult a tax advisor for personalized guidance. They can help you navigate the complexities of TCS while ensuring compliance with all applicable rules. Also, consider other aspects of foreign remittances for education, such as documentation requirements and potential tax implications, to ensure a smooth and hassle-free experience.

Sources:

• Budget 2025 Speech - Minister of Finance