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.

Are there any exceptions to the 20% TCS rule?

Absolutely! For instance, if you're transferring money abroad for education or medical treatment, the TCS rate is reduced to 5% for amounts exceeding INR 7 lakh. And here's a bonus: if you keep your transfers below INR 7 lakh in a financial year, you won’t have to pay any TCS at all.

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.

How does TCS impact students studying abroad?

For students, there’s a 5% TCS on amounts over INR 7 lakh in a financial year for education expenses. It’s important to plan your remittances carefully and keep all necessary documents to benefit from this lower rate.

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.

Can I split remittances to avoid TCS?

Yes, you can split remittances among family members or over different financial years to stay within the INR 7 lakh exemption limit. Just make sure everything is done legally and with proper documentation.

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.

How can I avoid paying TCS on foreign education expenses?

Use an education loan from an RBI-approved financial institution. Only 0.5% TCS is charged on amounts above ₹7 lakh.

Is TCS applicable on credit card payments made abroad?

Not if the total foreign spending on the credit card is under ₹7 lakh in a financial year.

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.

Category – Finance

How to Avoid TCS on Foreign Remittances in 2025 (Legally + Smartly)

Updated On:

Apr 1, 2025

Karthik

Think you have no choice but to pay 20% extra on foreign transfers? Think again.

If you’re wondering how to avoid TCS on foreign remittances in 2025, you’re not alone. The recent tax hike has made sending money abroad—from tuition fees to investments—much more expensive. But not all remittances are taxed the same. In this guide, we’ll break down who’s impacted, what the exemptions are, and how to avoid paying more than you should, with the help of platforms like HOP Remit by moneyHOP that make every rupee count.

What is TCS on Foreign Remittances?

TCS, or Tax Collected at Source, is a tax the Indian government applies when residents send money abroad under the Liberalized Remittance Scheme (LRS). This includes payments for education, medical treatment, foreign travel, investments, and even sending gifts abroad.

Since October 2023 and reinforced in 2025, TCS rates have increased sharply — making it crucial to understand how to avoid TCS on foreign remittances legally.

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

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When Does 20% TCS Apply?

Purpose of Remittance	TCS Rate	Threshold
Education (via education loan)	0%	No TCS applicable
Education (self-funded)	5% on amount exceeding ₹10 lakh	₹10 lakh per financial year
Medical Treatment	5% on amount exceeding ₹10 lakh	₹10 lakh per financial year
Overseas Tour Packages	5% up to ₹10 lakh, 20% beyond	No threshold
Other Purposes (gifts, investments)	20% on amount exceeding ₹10 lakh	₹10 lakh per financial year

Understanding these new slabs is the first step in learning how to avoid TCS on foreign remittances without breaking any rules.

Who is Exempt from Paying 20% TCS?

Remittances below ₹10 lakh in a financial year

Payments for education funded via an education loan

Medical or education expenses within exemption threshold

Foreign credit card spends up to ₹10 lakh/year

Remittances from NRE or NRO accounts

Planning is essential. Knowing how to avoid TCS on foreign remittances means taking advantage of every legal exemption available.

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

Top 5 Legal Ways to Avoid TCS on Foreign Remittance

1. Keep Transfers Below ₹10 Lakh Per Year

One of the most effective ways to avoid TCS on foreign remittances is to stay within the annual threshold. If your education or family support needs exceed that, consider splitting payments across family members.

2. Use an Education Loan

TCS is not applicable if your foreign education remittance is funded through an education loan from a financial institution. This route completely avoids 20% TCS legally.

3. Use NRI/NRO Accounts

Remittances through NRI accounts for family maintenance are exempt. This can be a legitimate way to bypass TCS for recurring expenses.

4. Leverage the Credit Card Exemption

Foreign spends under ₹10 lakh per year on international credit cards are not subject to TCS. This is ideal for recurring services, tools, or smaller education payments.

5. Choose Forex Dealers with TCS Waivers

Some authorized dealers offer TCS waivers or tax-efficient remittance options. These can significantly reduce your overall cost.

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 savings:

₹8 lakh is paid via education loan: TCS = 0%

₹4 lakh sent from his account: Still below threshold

Total TCS paid? Zero.

Had he used just his savings, he’d have paid ₹40,000 in TCS.

Knowing how to avoid TCS on foreign remittances can mean the difference between smart planning and unnecessary costs.

Can I Claim a Refund on TCS?

Absolutely. TCS is not a final tax — it’s adjustable against your total tax liability. If you’ve overpaid, you can claim it back when filing your income tax return.

Steps to Claim a TCS Refund:

Get Form 27D from your bank or dealer

Check that it reflects in Form 26AS

Declare it in your ITR

Get a refund (or offset it against tax payable)

Understanding the TCS refund process is critical, especially for frequent remitters who exceed the exemption thresholds.

Note: In order to claim a refund of the TCS, you’ll need to file an income tax return and claim a refund in the assessment year. You’ll have to provide the TCS certificate to the income tax authorities while filing your tax return.

Is TCS on Foreign Remittance Refundable? Here’s How to Claim It

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

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Conclusion

Rising TCS rates don’t have to derail your international plans. Whether you’re sending money for education, family support, travel, or investments, it’s possible to stay compliant and still avoid 20% TCS legally.

By leveraging exemptions, using education loans, planning payments wisely, and choosing platforms like HOP Remit, you can save more with every transaction.

Now that you know how to avoid TCS on foreign remittances, it’s time to put your knowledge into action. Start sending smarter, safer, and more cost-effectively with HOP Remit by moneyHOP today.