A Guide on How Foreign Remittance Tax Impacts Overseas Transfers

When you send money abroad, a tax known as TCS on foreign remittance may apply. As per Section 206C(1G) of the Income Tax Act, banks and authorised dealers collect Tax Collected at Source (TCS) on such overseas fund transfers.

As per the budget 2025, the Finance Minister has increased the TCS limit on foreign remittance and made it ₹10 lakh.

Read this blog to learn more updates on tax on foreign remittance in India, how to check deductions, claim refunds and applicable exemptions!

Quick Synopsis 

• Latest rates: Nil to 5% for education/medical, 5 to 20% for foreign tours, 20% for other remittances above ₹10 lakh
• TCS can be checked via Form 27D, Form 26AS, AIS and TIS and excess TCS can be claimed as a refund while filing ITR.
• Certain exemptions exist for education and medical expenses up to ₹10 lakh and credit card transactions abroad (until further notice).

What is Foreign Remittance? 

The term ‘foreign remittance’ refers to sending funds from one person (in one country) to another (relative or non-relative) living abroad.

It can be of two types: inward and outward. Foreign inward remittance is the process of receiving funds from a foreign country into a local bank account. On the contrary, outward remittance refers to the process of sending funds from India to a foreign land. 

Latest TCS Rates on Foreign Remittances from India 

The Union Budget 2025-26, announced on February 1, 2025, has revised the TCS rules on foreign remittances, proposing to hike the limit to ₹10 lakh from ₹7 lakh. The new rates are effective from April 1, 2025. Let's check them out!

How to Check TCS on Foreign Remittance?

Regular monitoring of the TCS deduction helps you remain compliant and file ITR accurately. To check your TCS deduction, consider the following documents:

1. Form 27D: It is a certificate drafted by your authorised dealer. It contains details like your PAN, amount remitted, applied TCS rate and amount collected. 
2. Form 26AS: It refers to a consolidated tax statement, which you can find on the IT e-filing website. Visit the portal, log in using your credentials and download the document for the fiscal year. 
3. Annual Information Statement (AIS) and Tax Information Statement (TIS): Both statements are available on the IT e-filing portal. Check them out to get a complete record of your taxable transactions and TCS deducted. 

How to Claim TCS Refund on Foreign Remittance? 

If the total tax you owe for the financial year is lower than the TCS already deducted, you can apply for a refund. Once verified, the Income Tax Department will process your request and credit the eligible refund amount directly to your bank account.

Here are the steps to follow to claim a TCS refund:

Step 1: Get the Form 27D from your bank or service provider.

Step 2: Download the Form 26AS for the same year from the Income Tax portal. 

Step 3: Cross-check the details to ensure that the TCS collected matches what is recorded and reported to the authority.

Step 4: File your ITR and enter the TCS amount in the specified section.

Step 5: Ensure that the details are the same on the Form 26AS.

Step 6: Select the income category (ITR-1, ITR-4, etc.)

Step 7: Verify the details using OTP and submit your ITR.

Step 8: The IT department will review your submitted details and upon successful verification, will process your return.

Step 9: Once approved, the refund amount will be directly credited to your bank account.

Exemptions to Foreign Remittance in India

Here is a list below regarding some exceptions to the TCS rule:

• Loans for Education Purposes: Funded through banks or financial institutions under Section 80E.
• Remittances up to ₹10 lakh: Applicable for education and medical-related expenses.
• International Credit Card Payments: Made abroad; TCS collection is currently deferred until further notice.

How to Save on Foreign Remittance Taxes? 

The higher foreign remittance tax rate in India can increase the cost of sending money abroad. However, you can minimise this impact by adjusting the collected TCS amount against your total tax liability. When any remittance transaction attracts TCS, banks collect it on behalf of the government.

For example, if you transfer ₹15 lakh to a relative overseas, TCS will be charged at 20% on the excess ₹5 lakh (i.e., ₹1 lakh), since transfers up to ₹10 lakh are exempt. While filing your Income Tax Return, if your total tax liability is ₹2.5 lakh, you can offset the ₹1 lakh TCS against it, reducing your payable tax to ₹1.5 lakh.

Banks issue a TCS certificate after deduction, which can be used to claim refunds. If your income is non-taxable or your tax liability is lower than the deducted TCS, you are eligible to claim the entire amount as a refund.

Final Word

Foreign remittance tax in India promotes transparency and ensures compliance in overseas money transfers, aiming to curb tax evasion by high-net-worth individuals. Whether sending funds for education or investments, understanding current TCS rates, exemptions and refund claims can help you save money and avoid penalties. Thus, make sure to mention foreign remittances correctly in your ITR file to remain legally compliant.