If you have landed on this blog expecting to know the amount you can transfer abroad tax-free, it’s time to learn the bitter truth. You cannot send money from India without paying tax! But we suggest you continue reading to learn how to claim your tax amount back.
Indian residents do foreign remittance under the LRS (Liberalised Remittance Scheme). Payments included in this scheme are hence liable to GST and TCS charges.
Even though GST is unavoidable in money transfers, it is charged in small amounts. But TCS changes as per transfer purposes and threshold.
But don’t worry! There are several ways you can plan money transfers and cut down on taxes charged. Let’s find it out in this blog.
Taxes Charged for Foreign Remittances from India
1. TCS (Tax Collected at Source)
TCS is charged based on your purpose for the money transfer. 20% TCS is levied for payments above the limit of Rs. 7 lakhs. However, crucial purposes such as education and medical treatments are offered a concession. In all cases, payments below the set limit attract no TCS (except foreign tour packages).
| Type of Outward Remittance | Rate of TCS for up to Rs. 7 Lakhs | Rate of TCS for Above Rs. 7 Lakhs |
| Education Purposes (financed by education loan) | Not Applicable | 0.5% of the amount above Rs. 7 lakhs |
| Education Purposes (financed by other sources) | Not Applicable | 5% of the amount above Rs. 7 lakhs |
| Medical Treatment Abroad | Not Applicable | 5% of the amount above Rs. 7 lakhs |
| Overseas Tour Package | 5% of the total amount | 20% of the total amount |
| All Other Purposes | Not Applicable | 20% of the amount above Rs. 7 lakhs |
2. GST (Goods and Services Tax)
GST is charged based on the volume transacted and these volumes are divided into 3 slabs. The calculation of GST value for each slab is different.
| Slabs | GST Payable | Minimum Tax to be Paid | Maximum Tax to be Paid |
| Slab 1 (Upto Rs. 1 lakh) | 0.18% of the total amount sent abroad | Rs. 45 | Rs. 180 |
| Slab 2 (Rs.1 lakh – Rs.10 lakhs) | Rs.180 + 0.09% of the total amount sent abroad | Rs. 180 | Rs. 990 |
| Slab 3(Above Rs. 10 lakhs) | Rs.990 + 0.018% of the total amount sent abroad | Rs. 990 | Rs. 10,800 |
Do NRIs Need to Pay Tax for Overseas Money Transfer?
NRIs do not do overseas fund transfers through the LRS Scheme. Therefore, as per the Income Tax Act, their payments to NRE or foreign bank accounts are not subjected to TCS. However, they must pay GST charges on currency conversion and service charges.
Best Way to Send Large Sum Abroad with Minimum TCS Liability
Now, you have understood that TCS is not charged for money transfers below Rs. 7 lakhs (except overseas tour packages). Therefore, splitting the fund into small instalments and sending abroad shall work best.
For instance, consider you are an international student who has to pay tuition fees of Rs. 10,00,000 to your university in the UK. If your university permits you to remit the fee from multiple bank accounts, you can split the payment between your parents’ bank accounts and send it.
That is, you can divide Rs. 10,00,000 into two separate transactions from different bank accounts such that each transaction is below the Rs. 7,00,000 threshold.
Can You Claim Your TCS Back?
You can adjust TCS payment in your ITR (Income Tax Return) filing at the end of a financial year. TCS paid is deducted from your overall tax liability, so you only need to pay the remaining ITR payable amount.
If your ITR is less than the TCS amount paid, the balance amount after ITR will be refunded to you.
Why is TCS charged if it is to be adjusted/refunded?
The government has observed that many Indian residents have sent money overseas for investments and purchases. However, these incomes are not reported accurately for income tax purposes. To address the issue, this method is implemented to ensure that these individuals file their ITR so they don’t miss the opportunity to claim their refunds.
How Can You Claim TCS Paid During ITR Filing?
Mr Robint Jac Roy, Product Head of ExTravelMoney, brings his 7 years of expertise in international remittances to share his insights on the TCS refund process:
“Usually, banks and exchange houses issue a TCS certificate when the TCS collection occurs in a transaction. You can use this certificate to claim TCS while filing an ITR. However, an online feature of the Income Tax Department, Form 26AS is available to claim all the taxes you have paid in a financial year, including TCS.
Form 26AS also known as the Annual Tax Statement is a digital form that is linked with one’s PAN Card which is automatically updated while a tax deduction/collection happens. This form can be downloaded and verified on the TRACES website anytime. While an ITR filing occurs, Form 26AS is cross-checked by the authorities and accurate calculations are ensured.”
Therefore, do not consider TCS a liability but an opportunity to align ITR efficiently with enhanced compliance with the tax regime of the country.
Also Read: What Is The Tax On NRI Repatriation From India?
Ann Mariya Job is the Associate Content Writer at ExTravelMoney.com. Holding a Bachelor’s in Journalism, she excels in creating deeply researched, engaging, and crisp content. Her work helps readers understand the complexities of foreign exchange, overseas money transfers, and international travel.