Tax on Outward Remittance from India (2026): TCS Rates, GST & Exemptions

Sending money from India now involves more than bank fees. With April 2025 updates to the Liberalised Remittance Scheme (LRS), understanding tax obligations is essential for individuals and businesses.

Two levies apply to foreign remittances: Tax Collected at Source (TCS) and Goods and Services Tax (GST). From April 1, 2025, the TCS exemption threshold increased from ₹7 lakh to ₹10 lakh for most categories. While these rules primarily affect individuals under LRS, businesses must comply with Form 15CA and 15CB requirements.

What is Tax on Outward Remittance?

Two distinct costs affect your foreign transfers: TCS (Income Tax) and GST (Service Tax). The term ‘Service Tax’ is outdated; it was replaced by GST in 2017, which now applies to bank service fees. Understanding this distinction helps avoid confusion when calculating total remittance costs.

TCS functions as an advance tax payment, not an additional cost. Banks collect it during remittance processing, and you can adjust it against your total income tax liability. Meanwhile, GST applies only to service components, such as currency conversion margins and processing fees.

Tax Collected at Source (TCS):

• TCS is collected by your authorised dealer (bank) at the time of remittance under LRS
• It applies to the principal amount remitted above specific thresholds set by the government
• This tax links directly to your PAN and appears automatically in Form 26AS
• The collected amount becomes a tax credit you can claim when filing returns

Goods and Services Tax (GST):

• GST applies only to currency conversion charges and processing fees, not the total remitted amount.
• The standard GST rate is 18% on all service fees charged by banks
• Banks calculate GST using slabs: up to ₹1,00,000 use 1% of the transaction value as the service value; ₹1,00,001 to ₹10,00,000 add ₹1,000 plus 0.5% of the amount above ₹1,00,000.
• For amounts above ₹10,00,000, banks charge ₹5,500 plus 0.1% above ₹10,00,000.

Updated TCS Rates on Foreign Remittance (Effective April 2025)

The distinction between TCS and GST becomes clearer when examining the revised tax structure. From April 1, 2025, the government implemented significant changes to TCS rates, raising the exemption threshold to ₹10 lakh. These rates vary based on your remittance purpose code.

Remittance for Education (Loan vs. Self-Funded):

• Education funded by loans from specified financial institutions attracts 0% TCS, regardless of the amount
• Banks require your education loan sanction letter referencing Section 80E for this exemption
• Self-funded education enjoys NIL TCS up to ₹10 lakh, then 5% on amounts exceeding this threshold
• Keep loan documentation ready when visiting your bank to ensure a correct TCS application

Remittance for Medical Treatment:

• Medical remittances remain tax-free up to ₹10 lakh per financial year
• Amounts exceeding ₹10 lakh attract a 5% TCS rate
• Banks may request medical invoices or doctor prescriptions for verification

Overseas Tour Packages:

• Tour packages face higher tax rates compared to other remittance categories
• The first ₹10 lakh attracts 5% TCS, significantly higher than the NIL rate for other purposes
• Amounts exceeding ₹10 lakh jump to a steep 20% TCS rate per financial year

Other Purposes (Investments, Gifts, Maintenance):

• This category covers foreign stock purchases, family maintenance, and gift remittances
• NIL TCS applies up to the ₹10 lakh threshold
• A flat 20% TCS rate applies on amounts exceeding the ₹10 lakh threshold
• Purpose codes matter: ensure correct selection to avoid higher tax rates

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How to Calculate TCS and GST on Your Remittance?

With multiple tax rates and thresholds established, calculating your actual remittance cost requires careful computation. Let’s walk through a practical example to clarify the process.

Scenario: Sending ₹15,00,000 for family maintenance

Step 1: Calculate GST on bank fees

• Bank service value (per slab): ₹5,500 + 0.01% of (₹15,00,000 – ₹10,00,000) = ₹6,000
• GST at 18% on service value = ₹1,080[3]
• Processing fee: ₹1,000 + GST ₹180 = ₹1,180

Step 2: Calculate TCS on the amount above the threshold

• Taxable amount = ₹15,00,000 – ₹10,00,000 = ₹5,00,000
• TCS at 20% = ₹1,00,000

Step 3: Calculate total payable

• Principal amount: ₹15,00,000
• Bank fees + GST: ₹7,180 + ₹1,180 = ₹8,360
• TCS: ₹1,00,000
• Total amount needed: ₹16,08,360

Exemptions and Ways to Save on Remittance Tax

Understanding TCS rules and thresholds allows legitimate planning to reduce liability. Smart structuring of remittances, while remaining legal, optimizes tax payments without evading them.

Leveraging the ₹10 Lakh Threshold:

• The ₹10 lakh limit applies per financial year (April to March) per individual, not per transaction
• Consider timing transfers across two financial years by splitting between March and April
• Each family member maintains their own LRS limit and TCS threshold
• Joint accounts allow flexibility: choose the remitter with available threshold space

International Credit Card Spends:

• International credit card spending while physically overseas is currently excluded from LRS limits
• That means no TCS when swiping your card during foreign travel
• However, purchasing tour packages from India using cards still attracts TCS
• Monitor regulatory changes as the RBI reviews these exemptions periodically

Claiming TCS as Income Tax Refund:

• TCS represents a tax credit, not a permanent cost to you
• Verify TCS entries in Form 26AS or Annual Information Statement (AIS)
• Adjust the collected TCS against your total tax payable when filing ITR
• Claim a full refund if your tax liability falls below the TCS already collected

Tax on Outward Remittance for Businesses vs. Individuals

The threshold benefits and TCS rates discussed apply primarily to personal remittances. Businesses sending money abroad face an entirely different compliance framework. Understanding this distinction prevents costly compliance errors and penalties.

LRS Rules for Individuals:

• Individuals remit under LRS with an annual limit of USD 250,000
• TCS serves as the primary tax mechanism for personal transfers
• Purpose codes (Education, Travel, Gift) determine applicable rates
• Banks handle TCS collection automatically based on the declared purpose

Form 15CA and 15CB Compliance for Businesses:

• Businesses don’t pay LRS TCS on their foreign payments
• Instead, they must deduct TDS (Tax Deducted at Source) if payments are taxable in India under Section 195
• Form 15CA (self-declaration) filing remains mandatory for all foreign payments
• Form 15CB (CA certificate) becomes necessary when payments have tax implications
• Trade payments for imports may skip 15CB but still require 15CA submission

Offset Global Business Costs with Razorpay MoneySaver Export Account

Managing taxes and costs for outward remittances is important, but businesses can also reduce forex expenses by optimising receipts. The Razorpay MoneySaver Export Account helps exporters and freelancers save up to 50% on international transfer fees compared to traditional SWIFT methods. It also simplifies compliance by providing automated electronic FIRCs for each transaction, ensuring adherence to RBI regulations without manual paperwork.

Conclusion

The April 2025 update brought relief by increasing the exemption threshold to ₹10 lakh, but high-value transfers still face 20% TCS. Remember that GST applies only to service fees while TCS targets the principal amount above thresholds.

Choose purpose codes carefully to access lower rates for education or medical needs. Check Form 26AS at year-end to claim your TCS as a refund or credit. For businesses managing tax on outward remittance from India, exploring digital solutions like Razorpay can automate compliance while reducing forex costs.

FAQs

1. What are the new TCS rates for foreign remittance effective April 2025?

Starting April 1, 2025, a 20% TCS rate applies to remittances exceeding ₹10 lakh for purposes like investments and tourism. Education and medical payments above this threshold generally attract a lower TCS rate of 5%.

2. Is GST charged on the total amount sent abroad?

No, GST is not applied to the principal amount remitted. It only applies at 18% to currency conversion charges and processing fees levied by banks or financial institutions.

3. How can I claim a refund for the TCS deducted from my remittance?

A refund can be claimed by filing your Income Tax Return. The TCS deducted appears as a tax credit in Form 26AS, which can be adjusted against your total tax liability or claimed as a refund.

4. Does using an international credit card abroad attract TCS?

No, international credit card spends made while physically outside India are excluded from LRS limits, so TCS does not apply. However, booking tour packages from India using credit cards attracts TCS.

5. Is the ₹10 lakh TCS exemption limit per transaction or per year?

The ₹10 lakh exemption threshold is cumulative for the entire financial year (April 1 to March 31) per individual, not per transaction.

6. Do businesses need to pay TCS on outward remittances?

No, TCS under LRS applies primarily to individuals. Businesses making foreign payments must comply with TDS rules under Section 195 and file Forms 15CA and 15CB.

7. Can I split my transfer across two years to avoid TCS?

Yes, since the LRS limit and TCS threshold reset every financial year (April 1), remittances can be planned across March and April to utilise exemption limits for both years.