TCS of 20% is applicable on all foreign remittances made under the Liberalised Remittance Scheme after 1st Oct 2023. Earlier the rate of TCS was 5% but it has now been increased to 20% with effect from 1st Oct 2023. It is important to note here that this TCS is only applicable to foreign remittances made by Resident Indians and not on Foreign Remittances made by NRI’s.

The Liberalised Remittance Scheme (LRS) is basically a scheme for making personal payments (i.e. non-business payments) and thus, it can be said that 20% TCS is applicable on foreign remittances made for personal purposes and not for business purposes.

If any payment is made outside India, for business purposes – then this rate of 20% will not apply. In this case where the payments are made outside India for business purposes, the provisions of Section 195 will apply.

Section 195 says that if any business payment is being made outside India for the purpose of purchase of goods which are used for the purpose of furtherance of business – then the rate of TDS would be 0%.

However, if any payments are made outside India for the purpose of availing services which are consumed for the purpose of furtherance of business – then the rate of TDS depends on the country from which the services are consumed. The rate of TDS on payments made to most of the countries for availing services is 10% (subject to fulfillment of certain conditions). However, there are some countries like the UAE wherein No TDS would be deducted for payments made from India to a UAE Company for availing the services.

The exact rate of TDS is determined by the Double Taxation Avoidance Agreement which India has with other countries.

This has been explained below:-

Rate of TCS on Payments made under LRS

Type of RemittanceRate
For Educational purposes (Loan taken from financial institution)Nil upto INR 7,00,00
0.5% above INR 7,00,000
For Educational purposes/ Medical treatment (Other than finance by loan)Nil upto INR 7,00,000
5% above INR 7,00,000
Purchase of overseas tour package5% till INR 7,00,000,
20% thereafter
Any other caseNil upto INR 7,00,000
20% above INR 7,00,000

The above rates can be explained with the help of an example:-

Example 1: TCS for Education Purpose
Mr. Shah is paying for the fees of his son who has got admission in Oxford College and he has to pay fees of Rs. 20 Lakhs which he intends to pay through a loan. In such a case, No TCS would be applicable on the first Rs. 7 Lakhs and 0.5% TCS would be levied on the balance Rs. 13 Lakhs. This, the total TCS would be Rs. 6,500

Example 2: TCS for Medical Treatment
Mr. Kapoor’s father is undergoing a medical treatment abroad for which he has to make a payment of Rs. 10 Lakhs. In such a case, No TDS would be deducted on the first Rs. 7 Lakhs and 5% TCS will get applicable on the balance 3 Lakhs. Thus, Rs. 15000 (i.e. 5% of Rs. 3 Lakhs) will get deducted as TCS.

Example 3: TCS on Overseas Tour Package
Mr. Gupta has taken a Tour Package to travel to the US and has paid Rs. 10 Lakhs. In such a case he will pay 5% TCS on the first Rs. 7 Lakhs (i.e. Rs. 35,000) and 20% TCS on the balance Rs. 3 Lakhs (i.e. Rs. 60,000). Thus, the total TCS paid would be Rs. 95,000 (i.e. Rs. 35,000 + Rs. 60,000).

Example 4: TCS on Other Payments

Mr. Jindal is buying a property in Dubai and is making a payment of Rs. 20 Lakhs. In such a case, No TDS would be deducted on the first Rs. 7 Lakhs and 20% TCS will get deducted on the balance Rs. 13 Lakhs. This, a total of Rs. 2,60,000 (i.e. 20% of 13 Lakhs) will get deducted as TCS in this case.

How to claim refund of 20% TCS

This 20% TCS for payments made under the LRS Scheme is deducted of the person who is making the payment and not of the person who is receiving the payment.

The person sending the money can also claim a refund of the 20% TCS by filing an Income Tax Return after the end of the year. The money deducted as TCS cannot be claimed as a refund during the year and can only be claimed as a refund after the end of the year as Income Tax Return can only be filed after the year has ended.

Other Relevant Points

  1. 20% TCS would also be applicable on Cash Withdrawls through ATM’s located outside India.
  2. For the purpose of computing the limit of Rs. 7 Lakhs, the aggregate of all forex withdrawals availed by the customer under LRS across different mediums of payment (i.e. Outward Remittance, Forex Cards, Debit Card etc) is taken into consideration.
  3. It is the responsibility of the Bank through whom the payment is being made the collect the TCS and deposit with the Govt.
  4. The TCS collected by the Bank will get reflected in the Form 26AS of the person who had sent the money.
  5. This Rs. 7 Lakhs limit is per person. Thus, if there are 4 members in the family and everybody has a PAN Card, then you can do foreign remittance of Rs. 7 Lakhs per person which makes it a total of Rs. 28 Lakhs without attracting any TCS.
  6. At the time of making the international payment, supporting documents are required to be submitted to substantiate the purpose of making the payment to be eligible to take the benefit of the lower TCS Rates.
  7. The maximum amount which is allowed to be remitted for Resident Indians under the Liberalised Remittance Scheme for personal payments is $2,50,000 per person for each financial year
  8. TCS on foreign remittance is not applicable if the money is being sent by NRI. NRI’s can easily repatriate upto $ 1 Million outside India without attracting any TCS implications.
  9. TCS is not applicable on the purchase of Air Tickets for travel abroad. It is only applicable on payments for the purchase of tour package for travel abroad.