The Government of India has notified significant changes to the Tax Collected at Source (TCS) provisions on foreign remittances under the Liberalised Remittance Scheme (LRS). Effective April 1, 2025, the threshold for TCS applicability has been revised from ₹7 lakh to ₹10 lakh per financial year. These changes impact individuals remitting money for foreign travel, education, medical treatment, and international investments.
Understanding these changes is crucial for both taxpayers and businesses facilitating overseas payments. Here's a detailed guide.
Under Section 206C(1G) of the Income Tax Act, banks and authorised dealers are required to collect TCS on foreign remittances made under the LRS. These include remittances for:
🧳 Overseas travel
🎓 Education
🏥 Medical treatment
💼 Foreign investments (stocks, real estate, etc.)
🎁 Gifts or maintenance of relatives abroad
The revised structure introduces a ₹10 lakh annual threshold for most foreign remittances and adjusts the TCS rates accordingly.
| Purpose | Threshold | TCS Rate |
|---|---|---|
| Education (Funded by Loan) | Any Amount | Nil |
| Education (Self-funded) | ₹10 Lakh | 5% on amount exceeding ₹10 lakh |
| Medical Treatment | ₹10 Lakh | 5% on amount exceeding ₹10 lakh |
| Tour Packages | ₹10 Lakh | 5% up to ₹10 lakh, 20% above threshold |
| Investments / Other Purposes | ₹10 Lakh | 20% on amount exceeding ₹10 lakh |
Higher Threshold for All Purposes (except tour packages):
The ₹10 lakh limit applies cumulatively across all remittances, except for overseas tour packages.
Tour Package TCS Split Introduced:
Earlier, 20% applied on the entire tour amount.
Now, 5% TCS applies up to ₹10 lakh, and 20% only on the excess.
Education Loans Continue to Enjoy Exemption:
Remittances made through education loans from approved financial institutions will continue to attract zero TCS, irrespective of the amount.
TCS collected will be visible in your Form 26AS and Annual Information Statement (AIS). You can:
Adjust it against your final income tax liability, or
Claim a refund if no tax is otherwise payable.
🧾 Track total LRS remittances to avoid surprise deductions.
📄 Submit correct PAN to the bank or dealer for reporting.
🧑🏫 Provide education loan documents if applicable.
📅 Plan high-value travel or investment transactions in advance.
The revised TCS regime under LRS from April 1, 2025, brings welcome clarity and relief for those making moderate foreign remittances. The raised threshold of ₹10 lakh ensures that small to mid-level transactions are not burdened with additional tax outflows.
However, individuals planning to spend more—especially on foreign tours and investments—must prepare for the higher 20% TCS on the excess. Proper planning and tax consultation will ensure smooth remittance and tax credit claiming processes.