The Union Budget 2025 has proposed significant reforms in the Tax Collected at Source (TCS) regulations. The new TCS rules shall be in effect starting 1 April 2025. These tax proposals aim to reduce the financial burden on taxpayers and simplify the remittance process for students and frequent travellers.
Finance Minister Smt. Nirmala Sitaraman has proposed the following TCS reforms in the assembly:
- Removal of TCS on education-related foreign remittances financed by an education loan.
- Increase of TCS threshold under the Liberalised Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh.
Also Read: How Much Money Can You Send Abroad from India Without Tax?
Comparison of Present and Proposed TCS Regime on Forex Transactions
| Type of Forex Transaction | Present TCS Regime | Proposed TCS Regime | ||
| Below INR 7L | Above INR 7L | Below INR 10L | Above INR 10L | |
| Education Purposes (financed by education loan) | Not Applicable | 0.5% of the amount above Rs. 7 lakhs | Not Applicable | Not Applicable |
| Education Purposes (financed by other sources) | Not Applicable | 5% of the amount above Rs. 7 lakhs | Not Applicable | 5% of the amount above Rs. 10 lakhs |
| Medical Treatment Abroad | Not Applicable | 5% of the amount above Rs. 7 lakhs | Not Applicable | 5% of the amount above Rs. 10 lakhs |
| International Tour Packages and other related payments | 5% of the total amount | 20% of the total amount | 5% of the total amount | 20% of the total amount |
| All Other Purposes | Not Applicable | 20% of the amount above Rs. 7 lakhs | Not Applicable | 20% of the amount above Rs. 10 lakhs |
TCS Removal for Education-Related Foreign Remittances Out of Loan
Current Rule
Students and their parents sending money abroad for education face a 5% TCS on remittances over ₹7 lakh, but it is only 0.5% if funded by an educational loan. This tax applies to money transfers for tuition, living expenses, and other study-related costs.
Proposed Change
The government has proposed removing TCS from education-related foreign remittances that are funded by an education loan.
Impact
- Financial Relief: Parents and students will no longer need to pay upfront tax on tuition and living expenses abroad over the burden of a loan.
- Encouragement for Abroad Studies: More students may now consider pursuing education in international institutions due to the reduced financial strain.
- Simplification of Remittance Process: The removal of TCS eliminates additional paperwork and tax compliance for students and their families.
Increased TCS Threshold for LRS Transactions
Current Rule
Under the RBI’s Liberalised Remittance Scheme (LRS), any foreign remittance in a financial year, exceeding ₹7 lakhs is subject to TCS ranging from 0.5% to 20%, depending on the 10 purposes of the transaction.
Proposed Change
The Budget 2025 proposes raising the TCS threshold from ₹7 lakhs to ₹10 lakhs. This means that only transactions exceeding ₹10 lakhs in a financial year will attract TCS (except tourism and immigration).
Impact
- More Savings on Remittances: Individuals can now remit up to ₹10 lakhs without incurring TCS.
- Ease for Middle-Income Families: Families supporting students or patients abroad will face fewer tax-related hurdles.
- Encouragement for Overseas Transactions: With a higher threshold, individuals may find it easier to spend on travel or medical needs.
Also Read: How To Claim TCS Refund Online When Filing ITR?
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.