TCS on Foreign Remittance & Tax: A Complete Guide for Indians (2025)

If you’re an Indian resident or a business owner sending money abroad, you’ve likely encountered confusion around TCS on foreign remittance. Is it an extra tax? How much is it? Does it apply to education fees? The rules, especially with recent changes, can be complex.

This guide is designed to give you complete clarity. We will demystify foreign remittance tax, break down the exact TCS rates for 2025, and explain the step-by-step process of how this tax is collected and, most importantly, how you can claim it back.

What is Foreign Remittance Tax? Differentiating TCS from Income Tax

First, it’s crucial to understand that there isn’t a separate, standalone “foreign remittance tax.” Instead, tax implications arise in two different ways: through Tax Collected at Source (TCS) and your regular income tax liability.

Is Foreign Remittance Taxable in India?

The act of sending money abroad itself is not taxed. However, the purpose of the remittance can have tax implications under the Income Tax Act. For example:

• Gifts: Gifts sent to specified relatives are generally not taxable.
• Income: If the remittance is a payment for services that constitutes your income, that income is taxable as per your slab rate. 

So, what is TCS on Foreign Remittance?

TCS on foreign remittance is not an additional tax but an upfront tax collection mechanism. It is a tax collected by your authorized dealer (like a bank or a fintech platform) at the time you send the money. Its purpose is to help the government track high-value foreign transactions and ensure tax compliance. 

Understanding TCS on Foreign Remittance: The Rules for 2025

The rules for TCS for foreign remittance are defined under Section 206C(1G) of the Income Tax Act. 

Who Collects TCS?

TCS is collected by the Authorized Dealers (ADs) who facilitate your foreign remittance. This includes all major banks and other authorized service providers like Razorpay. 

Who is Covered by TCS?

TCS is applicable to resident individuals who make foreign outward remittance transactions under the Liberalized Remittance Scheme (LRS).

Detailed TCS Rates and Thresholds for Foreign Remittance (Updated for 2025)

This is the most critical part for anyone sending money abroad. The TCS rate depends entirely on the purpose of the remittance. Here is a breakdown of the rates applicable for the 2024-2025 financial year. 

What About TCS for Business Payments?

It’s important to note that the TCS rules detailed above apply specifically to remittances made by resident individuals under the Liberalised Remittance Scheme (LRS).

Most “business payments”—such as paying for imports, software licenses, overseas marketing, or other foreign services—are classified as current account transactions for a company. These transactions do not fall under the individual LRS framework and are therefore not subject to these specific TCS provisions.

While businesses have their own set of compliance requirements under FEMA for making such payments (like submitting invoices and Form A2), they are not impacted by the TCS rates discussed in this guide for LRS.

How to Claim TCS Credit on Foreign Remittance

This section directly answers the query: how to avoid TCS on foreign remittance. You don’t “avoid” it, but you can claim it back.

TCS is Not an Extra Tax – It’s a Credit!

The most important thing to remember is that TCS is not a new tax burden. It is an advance tax paid on your behalf.  The amount collected by your bank will be reflected in your Form 26AS and Annual Information Statement (AIS), which are linked to your PAN. 

Step-by-Step Guide to Claiming TCS in Your ITR

When you file your annual Income Tax Return (ITR), you can easily claim the TCS amount. 

1. Verify the Amount: Check your Form 26AS to confirm the TCS amount deducted during the year.
2. Declare in ITR: While filing your return, there will be a specific section to declare the TCS paid.
3. Offset Against Liability: The declared TCS amount will be deducted from your total income tax liability for the year.

Getting a TCS Refund

If the total advance tax paid (including TCS) is more than your final tax liability for the year, you will receive the excess amount back as an income tax refund from the IT Department.

LRS and TCS: The Connection

TCS on foreign remittance is directly linked to the Liberalized Remittance Scheme (LRS). 

What is the Liberalized Remittance Scheme (LRS)?

The LRS is an RBI framework that allows resident individuals to freely send up to $250,000 (or its equivalent) abroad per financial year for permissible purposes like education, travel, medical treatment, and investments.

Simplify Your Business Compliance with Razorpay

While your business payments for imports and services aren’t subject to the LRS-based TCS rules, they come with their own set of compliance challenges. Managing FEMA regulations, submitting invoices, and handling documentation like Form A2 for every international transaction can be complex and time-consuming.

Razorpay streamlines this entire process. Our platform is built for businesses to handle international payments with ease, ensuring every transaction is fully compliant without the administrative headache.

• Automated Documentation: We help simplify the necessary paperwork for your business remittances.
• Seamless Vendor Payments: Pay your international suppliers and service providers quickly and efficiently.
• Clear Tracking & History: Maintain a clear audit trail of all your cross-border transactions in one dashboard.

Don’t let compliance slow your business down.

Explore Razorpay’s Solutions for Business Payments

Frequently Asked Questions

1. Is foreign remittance taxable in India?

The act of remitting is not taxed, but TCS is collected. The purpose of the remittance determines if it’s part of your taxable income (e.g., business income is taxable, while gifts from specified relatives are generally exempt).

2. What are the current TCS rates on foreign remittance for education? 

For education funded by a loan, TCS is 0.5% on the amount exceeding ₹7 lakh. For self-funded education, the rate is 5% on the amount exceeding ₹7 lakh.

3. Can I avoid TCS on foreign remittance? 

While TCS collection cannot be avoided if the transaction falls within the rules, it is not an extra cost. It is an advance tax that you can claim as a credit against your total income tax liability when you file your ITR.

4. What is the LRS limit, and how does it relate to TCS? 

The LRS limit allows resident individuals to send up to $250,000 abroad per financial year. TCS provisions under Section 206C(1G) are specifically applicable to remittances made under this scheme.

5. How do I claim my TCS refund? 

The TCS amount collected is reflected in your Form 26AS/AIS. You can claim this amount as a credit while filing your annual Income Tax Return (ITR), which can result in a refund if your collected tax exceeds your final tax liability.