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 2025 [Slabs, Exemptions, Refund Explained]

Updated On:

Sep 30, 2025

Karthik

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

Many Indians today are looking for ways to legally avoid 20% TCS on foreign remittances, understand refund eligibility, and make the most of LRS exemptions under the new 2025 rules. This guide simplifies everything from tax slabs and exemptions to the online refund process.

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.

These changes were reinforced through the Finance Act 2025, which tightened LRS compliance for all outward remittances, making it important to understand how and when TCS applies.

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

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When Does 20% TCS Apply?

Below is the updated TCS rate chart for 2025 under RBI’s Liberalized Remittance Scheme (LRS).

Purpose of Remittance	TCS Rate (up to ₹10L)	TCS Rate (above ₹10L)	Exemption Notes
Education (via specified loan)	0%	0%	No TCS, unlimited amount if funded by approved education loan
Education (self-funded/other loan)	0%	5%	Only 5% on amount above ₹10 lakhs
Medical Treatment	0%	5%	Only 5% on amount above ₹10 lakhs
Overseas Tour Package	5%	20%	5% up to ₹10L, 20% above ₹10L; no basic exemption
All Other Purposes (investment, gift, etc.)	0%	20%	20% only on amount above ₹10 lakhs

Under the RBI’s Liberalized Remittance Scheme (LRS), residents can remit up to USD 250,000 (around ₹2 crore) per financial year. TCS is applicable only when total remittances exceed ₹10 lakh, except in cases like overseas tour packages.

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

These exemptions fall under the RBI’s LRS rules and can help you avoid paying unnecessary TCS if used strategically.

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

5 Legal & Smart Ways to Avoid Paying 20% TCS on Foreign Remittances in 2025

1. Keep Remittances Under ₹10 Lakh Limit

Spread payment between financial years or use multiple PANs (family members) where purpose allows.

This approach helps you stay within the LRS exemption limit and avoid unnecessary TCS deductions.

2. Finance Abroad Education with Education Loan

No TCS applies if the loan is from a Section 80E-specified bank.

3. Accurate Purpose Code Selection

Choose “education” or “medical” for lower TCS instead of “investment” or “gift.”

Using the right purpose code ensures you are charged the lowest applicable TCS rate and stay compliant under the LRS framework.

4. Leverage Credit Card Exemptions

International credit card spending (personal) under ₹10 lakh/year generally isn’t subject to TCS.

5. NRI Remittances

Transfers from NRE/NRO accounts to overseas are not covered by TCS.

By combining these strategies, you can legally minimize or completely avoid TCS on foreign remittances and even qualify for a refund during your income tax filing.

Myth-buster: You cannot “opt out” of TCS if due. But you can claim a full refund if your final tax is lower!

You can claim a TCS refund while filing your income tax return if the total tax paid exceeds your final liability.

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.

This clearly shows how smart payment planning can help families save thousands in TCS and still remain compliant under the RBI’s LRS guidelines.

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 new LRS limits and increased TCS rates can make foreign remittances seem daunting, but careful planning and the right financial tools make a big difference.

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-effective with HOP Remit by moneyHOP today.

Always check current RBI and income tax guidelines before making a transfer to ensure your transaction qualifies for TCS exemption or refund.