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 20% TCS on Foreign Remittances Legally in 2025

Updated On:

Oct 10, 2023

Karthik

How to avoid 20% TCS on foreign remittances is one of the biggest concerns for Indian residents sending money abroad. With the government increasing the Tax Collected at Source (TCS) from 5% to 20% on most outward remittances starting October 1, 2023, international transfers have become significantly more expensive.

Combine that with a 4.5% depreciation of the Indian Rupee against the US Dollar, and it’s clear that you now get fewer dollars for every rupee sent. Fortunately, there are legal and smart ways to avoid or reduce the impact of 20% TCS, especially for students, families, and professionals managing cross-border payments.

In this guide, we break down everything you need to know: when TCS applies, how to legally avoid it, and how platforms like HOP Remit by moneyHOP can help you save more on every transfer.

What is TCS on Foreign Remittances?

TCS is a tax that the Indian government collects when an individual sends money abroad under the Liberalised Remittance Scheme (LRS). Starting from October 2023, the TCS rate for most categories surged to 20 percent, affecting everyone from students to travelers and investors.

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

When Does 20% TCS Apply?

Type of Remittance	TCS Rate (Post Oct 1, 2023)
Education (with loan)	0.5% above ₹7 lakh
Education/Medical (no loan)	5% above ₹7 lakh
Overseas Tour Packages	20% (no threshold)
Other Purposes (Investments, Gifts, etc.)	20% above ₹7 lakh

Who is Exempt From Paying 20% TCS?

Remittances below ₹7 lakh per year

Payments for education via an education loan

Expenses related to medical treatment abroad

Credit card spends under ₹7 lakh per year for overseas payments

Remittances using NRI accounts or select Forex platforms offering TCS waivers

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

Top 5 Ways to Avoid 20% TCS on Foreign Remittance

1. Keep Transfers Below ₹7 Lakh per Year

If your total remittances stay under ₹7 lakh in a financial year, you don’t pay TCS at all. Plan your transactions or split them across time or family members.

2. Education or Medical Treatment Payments

Funds sent for your spouse’s, child’s, or parent’s education or medical care are charged at only 5 percent, and in some cases (via loan), just 0.5 percent.

3. Use Credit Cards Smartly

TCS doesn’t apply to foreign credit card spending below ₹7 lakh per year. This exemption can be used smartly for recurring payments or subscriptions.

4. Use an NRI Account

If you or a family member have an NRI account, TCS isn’t applicable on outward remittances made through them. This is a legally valid method.

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

Can I Claim a Refund on TCS?

Yes, you can.

TCS paid can be claimed as a refund while filing your Income Tax Return (ITR)

Your bank or Forex dealer will issue a TCS certificate (Form 27D)

Submit this when you file your ITR to claim a refund or adjust it against tax liability

Note: In order to claim a refund of the TCS, you’ll need to file an income tax return and claim 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

The 20% TCS rule has added a considerable cost to global transactions from India. But there are smart, legal ways to manage it. Whether it’s planning your remittances, using credit cards under the exemption threshold, leveraging NRI accounts, or choosing the right platform, you can save significantly.

With HOP Remit by moneyHOP, international transfers don’t have to be complicated or expensive. We provide transparency, compliance, and cost-efficiency, so you can focus on your global aspirations.

Start your remittance journey with HOP Remit today and experience smarter, stress-free money transfers.