Why did the government introduce TCS on foreign remittances?

The primary reason for this is to monitor significant transactions and ensure compliance with tax regulations. This helps the government keep tabs on large amounts of money leaving the country for purposes such as education, travel, and investments.

What documents do I need for lower TCS rates for education or medical treatment?

To get the lower TCS rates: For education: You will require proof of admission, the fee structure from the school or university, and a statement of purpose for the remittance. For medical treatment: Be sure to have the doctor’s prescription, hospital bills, and a statement of purpose for the remittance.

Can I get a refund on TCS?

Yes, you can. When you file your income tax return, you can claim the TCS paid as a credit against your tax liability. If the TCS paid is more than your tax liability, you can get a refund.

Are there penalties for not following TCS regulations?

Yes, there are. If you don’t comply with TCS rules, you might face penalties, including interest on unpaid TCS and scrutiny by tax authorities. It’s important to stay compliant and keep accurate records of your remittances.

How can I make sure I’m following TCS regulations?

To stay compliant: Keep detailed records of all your remittances and their purposes. Consult a tax advisor to understand how TCS affects your specific situation. Regularly check for updates and new regulations from the Income Tax Department.

Is the 20% TCS on foreign remittances refundable?

Yes. You can claim a refund by filing your income tax return and submitting Form 27D issued by your bank or Forex dealer.

Can I use an NRI account to bypass TCS?

Yes. Remittances via NRI accounts are currently not subject to TCS.

What documents do I need to claim a TCS refund?

You’ll need Form 27D issued by the remitting entity and must file your income tax return to claim a refund.

How can I avoid TCS on foreign remittance in 2025?

Keep your total remittance in one financial year below ₹10,00,000 for non-tour uses. Use Section 80E-approved education loans for studies. Consider splitting remittances within the family.

Is TCS on foreign remittance refundable?

Yes! TCS is fully adjustable against your total tax owed. If your liability is lower, claim a refund when filing your ITR.

What is the new LRS threshold for TCS?

Raised to ₹10 lakh/year for most remittances (except overseas tour packages, which start at ₹1).

Who is exempt from TCS?

Remittances under ₹10 lakh, medical/education via approved loan, NRI repatriation via NRE/NRO, most international credit card expenses up to ₹10 lakh/year.

What is the LRS limit in India?

The Liberalised Remittance Scheme (LRS) allows Indian residents to remit up to $250,000 (around ₹2 crore) per individual per financial year for permissible purposes like education, travel, medical expenses, investments, and gifts abroad. Remittances within this limit are subject to TCS rates and exemptions as per the latest 2025 rules.

TCS vs TDS – what’s the difference?

TCS (Tax Collected at Source) is a tax the bank collects when you transfer money abroad (under LRS), while TDS (Tax Deducted at Source) is a tax deducted by a payer from certain types of income—like salaries, rent, or interest before paying you. TCS applies to outbound remittances, whereas TDS applies to incomes received in India.

How do I track if TCS was deducted on my remittance?

You can confirm TCS deduction by: Requesting a Form 27D certificate from your remitting bank or service provider, Checking your Form 26AS on the income tax portal, which will reflect all TCS entries linked to your PAN. Be sure these amounts align before filing your tax return or claiming any refund.

What about TCS on gifts/investments abroad?

If you send money overseas as a gift or for investment, TCS applies at 20% on any amount exceeding ₹10 lakh in a financial year (as of 2025). For amounts below ₹10 lakh/year, no TCS is deducted. Plan transfers accordingly and keep records of the remittance purpose for clarity.

TCS for NRI/NRO accounts?

Remittances made by NRIs from NRO (Non-Resident Ordinary) or NRE (Non-Resident External) accounts to their own overseas accounts are generally not covered under TCS provisions. However, resident-to-NRI transfers (using LRS) may attract TCS if above the threshold. Always check the account type and transaction details with your bank.

Can I avoid TCS on foreign tour packages?

TCS at 5% applies to all overseas tour packages up to ₹10 lakh and 20% on any excess; there's no exemption threshold. So, you cannot fully avoid TCS on foreign tour packages, but you can claim a refund if your final annual tax liability is less than the TCS paid. Always collect invoices and TCS certificates for ITR filings.

Category – Finance

How to Avoid TCS on Foreign Remittances in 2026 [Slabs, Exemptions, Refund Explained]

Updated On:

Sep 30, 2025

Karthik

Think foreign transfers automatically attract a steep 20% TCS? Not anymore.

With the latest updates to LRS rules in Budget 2026, several remittance categories, including overseas tour packages, now fall under a significantly lower 2% TCS rate, while concessional rates continue to apply for education and medical purposes.

Many Indians are now exploring how to legally optimise TCS on foreign remittances, understand refund eligibility, and use available thresholds and exemptions effectively. This guide breaks down the revised tax slabs, applicable exceptions, and the step-by-step process to claim TCS refunds online

Avoiding TCS on Foreign Remittances at a Glance

To legally reduce or optimise TCS on foreign remittances, plan your payments based on the revised rules under the RBI’s Liberalised Remittance Scheme, where TCS applicability now depends on the purpose of remittance and applicable thresholds rather than a uniform 20% rate. Overseas tour packages attract a lower flat 2% TCS, while education remittances funded through approved education loans continue to enjoy a concessional 0.5% rate regardless of amount; additionally, selecting the correct purpose code such as education or medical treatment, evaluating international credit card spending within prescribed limits, and routing transfers through NRE or NRO accounts where applicable are recognised ways to manage TCS exposure, and any excess TCS collected can be adjusted or claimed as a refund when filing the income tax return.

What is TCS on Foreign Remittances?

TCS, or Tax Collected at Source, is a tax collected by the Indian government when residents send money abroad under the Liberalised Remittance Scheme (LRS). It applies to a wide range of outward remittances, including payments for education, medical treatment, overseas travel, foreign investments, and even gifting funds internationally.

While TCS provisions were tightened in earlier years to improve monitoring of foreign spending, recent updates under Budget 2026 have rationalised several rates. For instance, overseas tour packages now attract a reduced 2% TCS, while concessional rates continue for eligible education and medical remittances.

These revisions, introduced through the latest Finance Act updates, aim to balance regulatory oversight with remitter affordability, making it important to understand the applicable slabs, thresholds, and refund eligibility when planning foreign remittances.

For a deeper understanding of how TCS applies under LRS, check out this guide.

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When Does TCS Apply?

Below is the updated TCS rate chart as per the latest revised slabs under RBI’s Liberalised Remittance Scheme (LRS).

Purpose of Remittance	TCS Rate (up to ₹10L)	TCS Rate (above ₹10L)	Exemption Notes
Education (via specified loan)	0.5%	0.5%	2% on the amount above ₹10 lakhs
Education (self-funded/other loan)	0%	Concessional TCS if funded by an approved education loan	2% on amount above ₹10 lakhs
Medical Treatment	0%	2% on the amount above ₹10 lakhs	2% on amount above ₹10 lakhs
Overseas Tour Package	2%	2%	Flat 2% on the total package amount
All Other Purposes (investment, gift, etc.)	0%	20%	20% only on amount above ₹10 lakhs

Under the RBI’s Liberalised Remittance Scheme (LRS), residents can remit up to USD 250,000 (around ₹2 crore) per financial year. TCS is applicable when total remittances exceed ₹10 lakh, except in specified cases such as overseas tour packages, where a flat rate applies.

Who is Exempt from Paying Higher TCS on Foreign Remittances?

Remittances below ₹10 lakh in a financial year (for applicable LRS categories)
Payments for education funded via an approved education loan (concessional 0.5% TCS)
Eligible education or medical expenses within the exemption threshold
Foreign credit card spending within prescribed regulatory limits
Remittances from NRE or NRO accounts, as per applicable rules

These exemptions and concessional provisions fall under the RBI’s LRS framework and can help reduce overall TCS liability when applied correctly.

Planning remains essential. Understanding how to optimise TCS on foreign remittances means making full use of every available exemption and concessional rate within the legal framework.

For a detailed breakdown of exemptions from TCS on international money transfers, check out this guide

5 Legal & Smart Ways to Reduce TCS on Foreign Remittances in 2026

1. Keep Remittances Within ₹10 Lakh Threshold (Where Applicable)

Spread payments across financial years or distribute remittances among eligible family members where the purpose permits. This helps you remain within the exemption threshold under LRS for applicable categories and reduces overall TCS outflow.

2. Finance Overseas Education Through an Education Loan

Remittances funded via approved education loans attract a concessional 0.5% TCS rate, making it one of the most tax-efficient ways to pay overseas tuition or living expenses.

3. Select the Correct Purpose Code

Choose purpose codes such as education or medical treatment where genuinely applicable instead of higher-tax categories like investment or gift. Using the correct classification ensures the lowest applicable TCS rate while maintaining LRS compliance.

4. Evaluate International Credit Card Spends

Eligible international credit card expenses within prescribed regulatory limits may carry different TCS treatment compared to direct remittances.

5. NRI Account-Based Remittances

Transfers routed through NRE or NRO accounts follow separate regulatory treatment and may not attract TCS in the same manner as resident outward remittances.

By combining these strategies, remitters can legally optimise TCS exposure, improve cash flow, and manage upfront tax deductions more efficiently.

Myth-buster: You cannot opt out of TCS where it is applicable. However, any excess TCS collected can be claimed as a refund or adjusted against your final tax liability while filing your income tax return.

Learn how TCS is reshaping the cost dynamics of foreign tour packages in this in-depth analysis

Real-World Example

Case: Akash wants to send ₹12 lakh to his daughter studying in Canada. Instead of transferring the entire amount from personal savings:

₹8 lakh is funded via an approved education loan: TCS = 0.5%
₹4 lakh is sent from his own account: Falls within the exemption threshold

Total TCS paid: Minimal compared to standard remittance rates.

Had he routed the entire ₹12 lakh from savings alone, the amount exceeding the threshold would have attracted higher applicable TCS, increasing the upfront tax outflow.

This example highlights how structured payment planning using education loans and threshold benefits can significantly reduce TCS impact while remaining fully compliant under RBI’s LRS framework.

How to Claim a TCS Refund for Foreign Remittance?

You can apply for a TCS refund online through the Income Tax e-Filing portal by following these steps:

Collect Form 27D: Your bank/service provider sends this as proof for TCS paid.

Cross-check Form 26AS: Shows all TDS/TCS against your PAN via the income tax portal.

Enter TCS Amount in Your ITR: Add TCS in the “Tax Paid” section.

Submit & Track: After successful processing, any extra TCS is credited to your bank account by the tax department.

Useful Tip: Even if TCS is deducted (for example, you overrun the threshold by ₹50,000), any difference can be claimed when you file your tax return .

You can also track your refund status anytime on the Income Tax portal under the ‘Refund Status’ section.

Want to know more about the refund of the TCS on foreign remittance? Check out this guide.

Difference Between TDS & TCS

Let us try to understand the key differences between Tax Deducted at Source and Tax Collected at Source.

Aspect	TDS (Tax Deducted at Source)	TCS (Tax Collected at Source)
Definition	Tax deducted by the payer	Tax collected by the receiver/seller
Scope of Application	Salaries, rent, interest, etc.	Sale of goods or foreign remittances
Rates	Vary based on income type	Prescribed under Finance Act
Responsibility	Deducted by the payer	Collected by bank or seller
Governing Act	Income Tax Act, 1961	Finance Act or Customs Act

In simple terms, TDS is deducted by the payer, while TCS is collected by the bank or payment service provider during a foreign remittance. Both can be adjusted when filing your ITR.

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Conclusion

The revised LRS framework and rationalised TCS rates have made foreign remittances far less burdensome than before, but thoughtful planning still plays a crucial role.

While higher TCS continues to apply to select discretionary remittances, categories like overseas tour packages now attract a lower 2% rate, and concessional rates remain in place for eligible education and medical transfers. Whether you’re sending money for studies, family needs, travel, or investments, it is possible to stay compliant while optimising your overall TCS outflow.

By leveraging applicable thresholds, using education loans, structuring payments efficiently, and choosing platforms like HOP Remit by moneyHOP, you can make every international transaction more cost-effective.

Now that you understand how to optimise TCS on foreign remittances under the latest rules, it’s time to act. Start sending smarter, safer, and more efficiently with HOP Remit by moneyHOP.

Always review current RBI and income tax guidelines before initiating a transfer to confirm applicable TCS rates, exemptions, or refund eligibility.