If you’re sending money abroad from India — for kids’ education, medical treatment, a vacation, or investing — there are three layers of friction that the marketing brochures don’t mention: the RBI $250K/year ceiling, the 1-3% bank forex margin, and TCS under Section 206C(1G) which can be 0.5%, 5%, or 20% depending on the purpose. This post decodes all three with worked examples for each remittance purpose.
The RBI ceiling: LRS $250,000/year
The Liberalised Remittance Scheme (LRS), introduced in 2004, lets any resident Indian individual remit up to $2,50,000 per financial year for permissible current and capital account transactions — education fees, medical treatment, gifts, foreign stock purchases, overseas property, emigration. The ceiling applies per PAN per year, not per transaction.
Concrete example at USD/INR = ₹92.85 (April 2026): $2,50,000 = ~₹2,32,12,500. That’s ~₹2.32 crore per individual per year. A couple can pool LRS allowances to ~₹4.64 crore/year combined. Children aged 18+ have their own LRS allowance.
Purposes outside LRS: current account business transactions (imports, legitimate trade), sovereign remittances, and specific regulatory exemptions. If you’re running a business and paying foreign vendors, you use a different route (ODI or regular current account).
Section 206C(1G) TCS — the post-Oct-2023 rates
Tax Collected at Source (TCS) on foreign remittance is a 2020 innovation. Rates changed significantly on 1-Oct-2023 (Budget 2023 amendment) and now stand as follows for FY 2026-27:
| Purpose | Rate | Threshold |
|---|---|---|
| Education via education loan (Section 80E qualifying) | 0.5% | On amount above ₹7L |
| Education via own funds / family sponsorship | 5% | On amount above ₹7L |
| Medical treatment (for self or close relative) | 5% | On amount above ₹7L |
| Tour package (₹7L or below, full year) | 5% | On the entire amount; no threshold |
| Tour package (above ₹7L, full year) | 20% | On amount above ₹7L |
| General / other (investing, gifts, emigration) | 20% | On amount above ₹7L |
The ₹7 lakh threshold is per PAN per financial year, aggregated across all forex dealers. Your first ₹7L in a year (for non-tour purposes) is TCS-free. The 8th lakh onwards attracts the rate in the table.
Worked example 1: ₹15L for a child’s US tuition
Parent remits ₹15,00,000 for a son’s master’s tuition. Payment is from a family loan against property, NOT an education loan under Section 80E. Categorised as education-other.
- Threshold: ₹7,00,000
- Taxable amount: ₹15,00,000 − ₹7,00,000 = ₹8,00,000
- TCS rate: 5%
- TCS collected: 5% × ₹8,00,000 = ₹40,000
- Amount actually remitted abroad: ₹15,00,000 − ₹40,000 = ₹14,60,000 (before forex margin)
If the same ₹15L went through an SBI / HDFC education loan that qualifies for 80E, TCS drops to 0.5% × ₹8L = ₹4,000. Worth the paperwork for the right fund source.
Worked example 2: ₹10L for medical treatment
Remitting ₹10,00,000 for a parent’s cancer treatment at a Singapore hospital. Categorised as medical.
- Threshold: ₹7,00,000
- Taxable amount: ₹10,00,000 − ₹7,00,000 = ₹3,00,000
- TCS rate: 5%
- TCS: ₹15,000
Worked example 3: two tour packages — the ₹7L inflection
A ₹5L family trip to Dubai (package through MakeMyTrip). Falls under tour-below-7L:
- No threshold; 5% on the entire amount
- TCS: 5% × ₹5,00,000 = ₹25,000
A ₹15L Europe trip later the same year (premium package):
- Because cumulative FY tour remittance now exceeds ₹7L, the 20% tour-above-7L bracket applies to the portion over ₹7L.
- YTD = ₹5L + ₹15L = ₹20L. Threshold ₹7L. Since first ₹5L was already taxed at 5% (tour-below-7L), incremental taxable for 20% = ₹20L − ₹7L = ₹13L; minus the already-taxed ₹5L = ₹8L newly taxable at 20%.
- 20% TCS on ₹8L of the new ₹15L + 5% TCS on the first ₹2L within threshold (stays in the 5% tier up to ₹7L total) — exact split depends on the order. Our Currency Converter handles the aggregation correctly via the
ytdLrsAmountInrinput.
Punchline: tour package remittances have no threshold when the annual total exceeds ₹7L. Budget a tour package knowing the 20% sits on top of the 5% you already paid on earlier trips the same FY.
Worked example 4: ₹20L investment remittance (general)
Buying US stocks through an INDmoney / Vested account, remitting ₹20L. Categorised as general.
- Threshold: ₹7,00,000
- Taxable: ₹13L
- TCS rate: 20%
- TCS: ₹2,60,000
That’s a big bite — ₹2.6L parked with the government on a ₹20L investment, earning 0% interest until you claim it back. Plan your foreign investment remittances accordingly.
How to recover the TCS
TCS is not a tax — it’s an advance collection. The collected amount appears in your Form 26AS / AIS under TCS credits. At year-end ITR filing:
- Your TCS credit automatically reduces your final income tax liability.
- If TCS + TDS exceeds your total tax liability (common for low- income earners remitting large education amounts), the excess is refunded with interest under Section 244A.
- You claim it in the “Tax paid / TCS” schedule of ITR-2 or ITR-3.
Practical tip: forex dealer compliance with 26AS reporting can lag by a quarter or two. Before filing, verify your total TCS credit appears in 26AS. If it doesn’t, chase the dealer’s compliance team; you can’t claim what isn’t reported.
Bank forex margin — the other 1-3% you never see
Banks (and airport forex counters, prepaid cards) don’t sell you foreign currency at the mid-market rate (ECB reference). They sell at card rate — mid-market plus a margin that funds their forex desk.
- Top-tier banks (HDFC / ICICI premium wealth): 0.5-1.0% over mid-market
- Regular bank retail forex: 1.0-1.5%
- Airport forex counters: 2.5-4.0% (worst option)
- Prepaid forex cards (Axis / HDFC / Niyo): 0.5-1.5%
- Wise / international transfer specialists: 0.3-0.7% (often best, ask if the recipient-country account qualifies)
On a ₹15L education remittance, the difference between a 1% margin and a 3% margin is ₹30,000. Add the TCS on top and the total friction cost of sending money abroad easily crosses ₹50K-₹1L for a mid-size remittance.
Our Currency Converter shows both the mid-market conversion and the post-margin amount, plus the LRS TCS impact — so you see the real cost of the remittance upfront.
Edge cases & common mistakes
- PAN not linked. Without PAN linkage, TCS doubles (Section 206CC) — 10% / 1% / 40% instead of 5% / 0.5% / 20%. Always remit with your PAN on file.
- Multiple forex dealers in one year. The ₹7L threshold aggregates across dealers via your PAN. Using 3 dealers to “avoid TCS” doesn’t work; dealer #4 pulls your YTD from the PAN and applies TCS on excess.
- Treating TCS as lost. It’s a credit, not an expense. File ITR even if you’re otherwise exempt — that’s how you claim the refund.
- NRI remittance confusion. LRS applies to residents only. Non-resident individuals can repatriate from NRE accounts freely (no TCS, no ceiling).
- Tour package vs self-booked travel. TCS rules apply to tour packages booked from a tour operator, not to individual bookings (airline tickets, hotels) you pay directly. Some operators game this by unbundling. Check whether the invoice reads “tour package” vs individual line items.
Planning checklist before a big remittance
- Identify the purpose category precisely (education-loan vs education-other makes a 10× TCS difference).
- Check YTD LRS usage — most banks show this in net banking under “LRS utilisation”.
- For education, check if your lender offers an education loan that qualifies for Section 80E — it drops TCS to 0.5%.
- Compare forex margin across 2-3 providers. Niyo / Vested / Wise often beat retail bank forex by 0.5-1%.
- Plan the amount to not cross the RBI $250K ceiling unless necessary. Cumulative from prior remittances that year counts.
- Keep remittance advice (Form A2) and TCS certificates — you need them for ITR reconciliation.
Run the numbers for your remittance
Plug amount + purpose + YTD usage into our Currency Converter to see the mid-market vs post-margin conversion, the exact TCS, and the amount credited to the beneficiary. For the tax recovery math, the Income Tax Calculator shows where the TCS credit lands in your return.
Sources
- RBI Master Direction on LRS (updated March 2024) — ceiling, permissible transactions, reporting requirements.
- Income Tax Act 1961, Section 206C(1G) — TCS rates and threshold, post Budget 2023 amendments effective 1-Oct-2023.
- Finance Act 2023 — rate rationalisation moving general remittance from 5% to 20%.
- Section 80E — educational loan deduction definition (underlies the 0.5% bracket).
- Section 206CC — penal TCS doubling when PAN is not furnished.