Tax Collected at Source (TCS) on Liberalized Remittances Scheme (LRS)
Key Points:
- As per the section 206C of the Income-tax Act, 1961 (the Act), Tax Collection at Source (TCS) is applicable on all Liberalized Remittance Scheme (LRS) transactions including international debit card transactions with effect from October 01, 2020.
- Foreign Exchange Management (current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated May 16, 2023 and subsequently, the Ministry of Finance vide its Circular No. 10 of 2023 dated June 30, 2023 has notified, to increase Tax Collection at Source (TCS) @20% from earlier @5% for outward remittance under Liberalized Remittance Scheme (LRS) with effect from October 01, 2023.
- The Budget 2025 has introduced two key changes to TCS on LRS transactions, effective April 01, 2025.
- Increased TCS Threshold: The TCS threshold on LRS transactions has been increased from INR 7 lakh to INR 10 lakh. This means that individuals making overseas remittances for permissible purposes will only be subject to TCS if the amount exceeds INR 10 lakh.
- Removal of TCS on Education Remittances: TCS has been completely removed for education-related remittances funded by loans from recognized financial institutions. This is a significant relief for students and individuals seeking education abroad.
Rate of TCS: TCS needs to be deducted at following rates
| Sr. No. | Purpose of Remittance | Revised TCS Rate w.e.f April 01, 2025 |
| 1 | Overseas tour package | 5% of the amount or the aggregate of the amounts up to INR 10 lakhs 20% of the amount or the aggregate of the amounts in excess of INR 10 lakhs |
| 2 | Any other purpose of remittance under LRS other than Education & Medical treatment | NIL up to INR 10 lakhs 20% of the amount or the aggregate of the amounts in excess of INR 10 lakhs. |
| 3 | For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E | NIL |
| 4 | For the purpose of education other than (Sr. No.3) or for the purpose of medical treatment |
NIL up to INR 10 lakhs 5% of the amount or the aggregate of the amounts in excess of INR 10 lakhs |
Frequently Asked Questions (FAQs):
Tax collection at source (TCS) on LRS transactions is a regulatory requirement, amended under section 206C of the Finance Act 2020.
TCS on foreign remittance under LRS is effective on any remittance transaction under LRS on or after October 01, 2020.
The tax will be applicable on all remittance(s) that fall under the LRS.
All remittances more than INR 10 lakhs in a financial year done under the LRS will be liable for a 20% TCS except if the remittance is for education paid through a loan obtained from any financial institution, where the TCS rate would be NIL.
No TCS shall be applicable on the amount if the amount remitted is obtained out of a loan from a Financial Institution for pursuing education.
TCS at 5% shall be applicable on remittances exceeding INR 10 lakhs in a financial year.
TCS at 5% will be applicable on the total amount remitted and Bank will collect TCS on the entire amount irrespective of its value.
All forex transactions under LRS will be included in threshold limit of INR 10 lakhs.
Yes, TCS will be applied on LRS transactions exceeding INR 10 lakhs if foreign exchange facility is availed through FCY Cash withdrawal at branches / loading Forex cards
No. GST will be applicable on the tax collected as TCS. However, GST will be applicable on the currency conversion, remittance service charge and other charges.
- If the remitter is liable to deduct tax at source under any other provision of the Income Tax Act.
- If the remitter is Government or any other person notified by the Government.
- Remittance made by Non-Residents, Diplomats and Non-Individuals.
- LRS remittance made from RFC (Resident Foreign Currency) account.
- If the aggregate amount of remittances made during the financial year including the current transaction is less than INR 10 lakhs irrespective of whether the customer is a Specified or Non-Specified individual.
- Seller of overseas tour program package has already collected TCS.
Yes, remitter / customer can claim credit for the tax collected by the Bank while filing for their tax returns as TCS is deemed to be a payment of tax on behalf of the person from whom the amount has been collected.
The Bank will not refund TCS collected which is paid to tax department. However, credit for the same shall be available to the remitter/customer and they can claim refund by filing income tax return.
