TCS on Foreign Remittance (Section 206C(1G)) | FinTax24

TL;DR

TCS under Section 206C(1G) applies when an Indian resident remits money abroad under the RBI’s Liberalised Remittance Scheme (LRS) — studies abroad, family maintenance, foreign holidays, investment in foreign stocks, gifts, and similar transfers. The general rate is 20% (after the Finance (No. 2) Act, 2023 amendments), with 5% or nil for education financed by a loan from a specified Indian financial institution. The 20% is collected by the bank acting as an Authorised Dealer at the time of remittance; it is allowed as a credit in your ITR while filing, so the cash-flow impact at the time of remittance reverses when you file your return.

Quick Answer

If you send money abroad from an Indian bank account for any purpose other than a tightly defined set of exemptions, the bank is required to collect Tax Collected at Source (TCS) on the amount remitted under Section 206C(1G) of the Income Tax Act, 1961. The rates broadly break down as follows after the Finance (No. 2) Act, 2023 amendments and the subsequent notifications:

Purpose of remittance	TCS rate (general)
Education obtained from a loan from a specified Indian financial institution	5% of loan remitted
Education funded from own funds or any other loan	20% of amount remitted
Medical treatment abroad (funded from own funds)	20% of amount remitted
Foreign tour package (booked through a tour operator)	20% of package value
Any other LRS remittance — investments, gifts, family maintenance, business travel, foreign property	20% of amount remitted
Remittance by a person whose PAN is not available or who is classified as specified under Section 206CC	Twice the applicable rate

The TCS collected is allowed as a credit in the ITR of the remitter (Schedule TCS, Part B of the ITR). Most taxpayers see the 20% taken at the bank, treat it as an interest-free deposit of tax, and recover it either as a refund or as an adjustment against other tax liability when they file the return. The TCS paid does not change the income tax you ultimately owe — it only changes the timing of when tax is paid.

What Is Section 206C(1G)

Section 206C(1G), inserted into the Income Tax Act, 1961 by the Finance Act, 2020 and effective from 1 October 2020, requires the seller — in this case, an Authorised Dealer bank or an Authorised Dealer in Foreign Exchange — to collect tax at source on a foreign remittance made by a buyer. For LRS remittances, the “seller” is the bank through which the money is sent and the “buyer” is the resident individual, HUF, firm, company or other entity remitting the money.

This is conceptually different from TDS, where the deductor retains part of the payment and deposits it with the government. In TCS, the remitter pays the full amount to the bank, the bank adds the tax on top, and the bank deposits that tax with the central government. From the remitter’s perspective, it looks like the bank is charging an extra 20% over the amount being sent abroad.

The framework interacts with three other pieces of regulation:

1. RBI Liberalised Remittance Scheme (LRS) — sets the outer limit (currently USD 250,000 per financial year per resident individual for all current and capital account transactions put together) under the Foreign Exchange Management Act, 1999.
2. Section 94E under the Foreign Exchange Regulation Act and the related RBI Master Direction on LRS — operationalises how banks verify the purpose and source.
3. Form 15CA and Form 15CB — the procedural certification every bank needs before processing the remittance.

Each of these has its own exemptions, and Section 206C(1G) is layered on top.

Who Must Collect TCS — and On What

The collector of tax under Section 206C(1G) is the Authorised Dealer — i.e., the Indian bank or authorised money-changer through which the foreign remittance is made. The bank is responsible for:

• Identifying whether the remittance is covered by Section 206C(1G) at all.
• Applying the correct rate based on the purpose of remittance.
• Collecting the tax before executing the remittance instruction.
• Reporting the collection in Form 27EQ (quarterly TCS return).
• Issuing Form 27D as the TCS certificate within 15 days from the due date of Form 27EQ.

The collector’s role is mechanical but consequential. If the bank collects less than what is due (or fails to collect at all), the collector is treated as an assessee in default and faces interest under Section 206C(7) read with Section 201(1A). For practical purposes, this is why a bank will refuse to process a foreign remittance until the 20% is on the table.

The Rate Structure — What Changed in 2023 and Why

The current rates are the product of three successive Finance Act amendments:

• Finance Act, 2020 introduced Section 206C(1G) effective 1 October 2020 at 5% on all LRS remittances (other than the exempt categories).
• Finance Act, 2022 raised the rate to 7% effective 1 April 2022.
• Finance (No. 2) Act, 2023 (presented in Parliament in August 2023) raised the rate to 20% on most categories, with a 5% carve-out for education loan remittances from specified financial institutions. The 20% rate became effective from 1 October 2023 for remittances outside the 7% carve-outs. The overseas tour package rate was separately aligned to 20% from 1 July 2023.

The practical effect is that an Indian remitter sending money abroad today usually pays 20% TCS, with three limited paths to a lower rate or nil:

1. Education loan from a specified Indian financial institution — the loan amount remitted directly to the foreign educational institution is collected at the reduced rate of 5% under the first proviso to Section 206C(1G). The identity of “specified financial institutions” is prescribed by CBDT notification.
2. Certain categories of remitters are exempted outright — Central and State Governments, diplomatic missions and consular officers, RBI, SEBI, IRDA, certain banking and financial institutions, and persons remitting out of balances held in an NRO account under specified conditions. These categories are listed in the second proviso to Section 206C(1G) and the related Rule 37JA of the Income Tax Rules, 1962.
3. Remittances under specific purposes notified by the government — for example, certain remittances by tour operators for foreign tour packages, remittances under employment-related obligations, and others as the Central Government may notify.

If none of these apply, the default rate applies.

Worked Examples

Example 1: Foreign university tuition for the first year — own funds

A parent remits USD 35,000 (approx ₹29 lakh at ₹83/USD) to a US university for the first-year tuition. The PAN is on file with the bank.

• Amount remitted: ₹29,00,000
• Purpose: education, funded from own funds
• TCS rate: 20%
• TCS collected: 20% × ₹29,00,000 = ₹5,80,000
• Net amount credited to the university: ₹29,00,000

The parent recovers the ₹5,80,000 while filing the ITR for FY 2025-26 (assuming the remittance is made in that financial year), either as a refund or as an adjustment against other income-tax liability.

Example 2: Same tuition — financed by an education loan from an Indian bank

The same parent takes an education loan of ₹35 lakh from an Indian bank classified as a specified financial institution (the bank is on the CBDT notified list of specified FIs) and remits the tuition directly to the US university from the loan account.

• Amount remitted: ₹29,00,000 (the tuition portion of the loan; not the entire sanctioned loan amount of ₹35 lakh)
• Purpose: education, funded from a loan from a specified financial institution
• TCS rate: 5% (Section 206C(1G) first proviso)
• TCS collected: 5% × ₹29,00,000 = ₹1,45,000

If the parent funds the rent, living expenses and travel out of pocket (separate remittance from own funds), those follow the 20% rate from the first rupee. The loan carve-out applies only to the amount actually remitted from the loan account to the foreign institution.

Example 3: Family maintenance to NRI parents

A resident in India sends USD 1,000 per month (₹83,000) to parents in the US. Over the year, the aggregate is USD 12,000 (≈ ₹10 lakh).

• Total amount remitted: ₹10,00,000
• Purpose: family maintenance — does not fall under education, medical treatment, foreign tour or any notified exemption
• TCS rate: 20%
• TCS collected: ₹2,00,000 spread across 12 monthly remittances (each ≈ ₹16,667 TCS)

Example 4: Booking a foreign tour package through a tour operator

An individual books a 10-day overseas holiday through an Indian tour operator for ₹6 lakh.

• Package value: ₹6,00,000
• Purpose: overseas tour package
• TCS rate: 20%
• TCS collected by the tour operator (who is the collector under Section 206C(1G)(a)): ₹1,20,000

If the individual books the same components separately — flight, hotel, visa, sightseeing — directly through an overseas portal using an LRS debit card or bank transfer, the rate is still 20% as a general LRS remittance. The 20% tour-package rate and the 20% general LRS rate converge here, but the collector differs.

Example 5: PAN not available

An individual opens a savings account without submitting PAN, books an LRS remittance for a personal investment abroad for ₹5 lakh.

• Amount remitted: ₹5,00,000
• Applicable rate: 20%
• Rate under Section 206CC for non-PAN: twice the rate = 40%
• TCS collected: ₹2,00,000

PAN submission is therefore a near-mandatory prerequisite for any LRS transaction even at the bank-account level. Most banks will not enable LRS remittances from a PAN-missing account.

Step-by-Step — How a Section 206C(1G) Remittance Actually Flows

Step 1 — Confirm the LRS purpose and the eligible amount

Before initiating the remittance, the remitter has to be sure the transfer fits within the RBI LRS framework (USD 250,000 per financial year per individual across all current and capital account transactions) and within the documents the Authorised Dealer will request for that purpose. Education, medical treatment and other narrow purposes have specific documentation expectations; outside those, the bank needs a self-declaration with the purpose.

Step 2 — Submit Form 15CA and Form 15CB (where applicable)

For every foreign remittance, the remitter uploads Form 15CA on the income tax e-filing portal — a self-declaration of the remittance details. For remittances that are not of the kind notified under Rule 37BB (mostly low-value or specific-purpose categories), a chartered accountant’s certificate in Form 15CB must precede Form 15CA to certify the nature and amount of the remittance and the TDS/TCS treatment.

Form 15CB in this context typically confirms that TCS under Section 206C(1G) has been accounted for — i.e., the CA states the applicable rate, the amount to be collected, and the relevant provisions of the Income Tax Act.

Step 3 — Authorised Dealer collects TCS and executes the remittance

The bank debits the remitter’s account for the remittance amount plus the applicable TCS. Most banks take 20% of the gross amount being sent (i.e., the remittance amount itself does not reduce — TCS is a flat percentage on top). The bank reports the collection in Form 27EQ for the relevant quarter and issues Form 27D to the remitter within 15 days from the due date of Form 27EQ.

Step 4 — Claim the credit in the ITR

The TCS paid in any financial year is required to be claimed in the ITR for that year. The ITR form has Schedule TCS in Part A and Schedule TCS in Part B for the collections. The taxpayer populates the TCS entries from the Form 27D, the quarterly AIS, and the Form 26AS — the credit shows up in the TDS/TCS section of Form 26AS. The system auto-adjusts the ITR against the final tax liability, and any excess is refunded under Section 143(1) or at regular assessment.

Step 5 — Reconcile Form 26AS and AIS at year-end

After Form 27EQ is filed by the bank, the TCS entry reflects in the remitter’s Form 26AS / AIS. If the entry is missing — common reason: PAN mismatch between the Form 15CA and the bank account PAN — the ITR processing will not auto-claim the credit. A correction statement by the bank or a manual adjustment in the ITR is needed, which can be a 30- to 90-day process depending on the mismatch.

Common Mistakes

The four mistakes below are the ones that create the most cash-flow damage for Indian remitters.

1. Forgetting that TCS is a credit in ITR, not an extra cost. A 20% TCS collected at the bank is treated as a prepayment of income tax for the remitter. In a refund-favourable year, it will come back; in an income-adequate year, it will reduce the balance tax payable. The mistake is treating it as a permanent loss and revising the actual outflow decisions (smaller cheque to foreign university, etc.) when the underlying tax liability will not change.
2. Missing the specified-financial-institution 5% carve-out for education. Where the loan is from a CBDT-notified financial institution, the loan remittance is collected at 5% under the first proviso to Section 206C(1G), not at 20%. Where the loan is from any other lender, family or non-banking source, the 20% general rate applies. The distinction is on the lender, not on the purpose of the loan.
3. Splitting a single LRS remittance into multiple smaller ones to “stay under a 5% threshold” that no longer exists. Several historic thresholds — including a ₹7 lakh per year threshold for non-education/medical remittances — have been progressively removed or have not been notified. The current default is 20% on the entire remittance, irrespective of head or amount.
4. Not matching the PAN on Form 15CA with the PAN on the bank account. A PAN mismatch between Form 15CA and the bank account means the bank will not include the TCS in Form 27EQ against the right PAN, Form 26AS will not show the credit, and the ITR processing will not claim the refund. Reconciling a mismatch requires a correction filing by the bank and can take months.
5. Ignoring the foreign tour package TCS versus LRS TCS. A tour package booked through an Indian tour operator attracts 20% TCS under Section 206C(1G)(a); a tour package booked separately (flights, hotels, sightseeing) directly through foreign websites and an LRS debit card attracts 20% under the general LRS clause. Either way, 20% is payable — but the collector differs (tour operator vs bank), and so does the Form 27EQ flow.
6. Using NRO-account funds as if they were NRE. Transferring money from an NRO account to an NRE/foreign account is a different transaction from an LRS remittance and is subject to different tax treatment, including Section 80QQB, Section 195 and Form 15CB / NRO-specific reporting. Section 206C(1G) TCS does not apply on NRO-to-NRE transfers by NRIs within the scope of the second proviso. Mis-classifying the account changes the rate.
7. Assuming TCS paid at the bank replaces advance-tax liability on the same income. For self-employed individuals remitting part of their business receipts abroad, the TCS is independent of advance-tax obligations. The advance-tax schedule under Section 207 still applies. TCS paid abroad is reconciled while filing the ITR; advance-tax paid in India is reconciled separately.

FAQ

What is the TCS rate on foreign remittance today?

Section 206C(1G) TCS applies on LRS remittances by resident individuals at 20% under the general default, with two carve-outs: 5% on education loan remittances from a CBDT-specified Indian financial institution (first proviso), and nil or excluded remittances for the categories listed in the second proviso and the related notification. The 20% rate came into effect from 1 October 2023 following the Finance (No. 2) Act, 2023 amendments to Section 206C(1G).

Is 20% TCS refunded when I file my ITR?

Yes, generally. The TCS collected is allowed as a credit against your income tax liability for that financial year (Schedule TCS, Part B). If the credit exceeds the tax liability, the excess is refunded — either as a Section 143(1) refund after intimation, or at a regular assessment. The refund timeline varies: 2 to 6 weeks for an intimation-driven refund where everything reconciles, longer where corrections are involved.

What is the LRS limit under RBI rules?

Under the RBI Liberalised Remittance Scheme (Master Direction — LRS, as updated from time to time), a resident individual can remit up to USD 250,000 per financial year across all permissible current and capital account transactions. The limit is per PAN, not per account, and the bank reports aggregate remittances to RBI. The 20% TCS under Section 206C(1G) applies within this USD 250,000 envelope; it is not a separate cap.

Is TCS on foreign remittance different from TDS?

Yes. TCS is Tax Collected at Source — the bank collects the tax from the remitter by debiting the remitter’s account and deposits it with the government. TDS is Tax Deducted at Source — the deductor deducts part of the payment to the payee and deposits it with the government. From the remitter’s perspective, TCS looks like an extra amount paid to the bank; TDS, if applicable alongside, looks like the foreign payee receiving less than the agreed amount. For LRS, the principal mechanism is TCS; in limited cases (payments to non-resident vendors, royalty to non-residents under DTAA), Section 195 TDS applies alongside or instead.

Does Form 15CA / Form 15CB apply to LRS remittances?

Yes — for most foreign remittances. Form 15CA is filed by the remitter on the income tax e-filing portal as a self-declaration, and Form 15CB (a chartered accountant’s certificate) accompanies it for remittances not falling under the Rule 37BB exemptions. The forms have specific cell-level data items the bank will request. The forms are required regardless of whether TCS under Section 206C(1G) is applicable — they establish the basis on which the remittance is being made.

Can a student send money to themselves for living expenses without 20% TCS?

The 20% TCS under Section 206C(1G) is on the LRS remittance itself, not on who is receiving it. Living-expense remittances from own funds to a foreign account will be collected at 20% under the general LRS rate. Loan-funded remittances to a foreign educational institution qualify for the 5% rate only for the loan portion remitted to the institution; living expenses funded separately are outside the 5% carve-out. Where the loan proceeds are disbursed directly to the educational institution for tuition and fees, only that portion carries the 5% rate.

What happens if PAN is not provided to the bank?

Under Section 206CC, failure to furnish PAN attracts TCS at twice the otherwise applicable rate, i.e., 40% where the general 20% rate otherwise applies. Additionally, the credit for this TCS may not be available in the ITR claim in the usual way. Most Authorised Dealers disable LRS remittance functionality for non-PAN accounts, so this is often moot at the bank level — but where PAN is mismatched or Aadhaar-only linkage is in use, the higher rate applies.

Are NRI remittances subject to Section 206C(1G)?

Persons remitting from an NRO account in the manner specified under the second proviso to Section 206C(1G) (and as notified by CBDT) are outside the scope of Section 206C(1G). NRI remittances from NRE and FCNR accounts are also outside the LRS framework (LRS applies to resident individuals). The applicable regime for NRI transfers is governed by Section 195, Form 15CB / 15CA reporting (in different forms), and the foreign-exchange instructions under FEMA, 1999. The simplest rule: if you are an NRI transferring money from an NRO/NRE account to a foreign account, Section 206C(1G) generally does not apply; if you are a resident making an LRS remittance, it does.

How can TCS paid under Section 206C(1G) be matched in Form 26AS?

The bank that collected the TCS reports it in Form 27EQ by the bank account PAN. Form 26AS will reflect the TCS entry against the remitter’s PAN after the Form 27EQ processing. The taxpayer must verify in their Form 26AS that the TCS figure matches the total of Form 27D certificates issued by the bank. Any mismatch — typically a PAN mismatch, an FY mismatch, or a delayed Form 27EQ filing — calls for a correction statement by the bank before the ITR is filed.

When does Form 27D come from the bank and how is it reconciled with the ITR?

The bank issues Form 27D to the remitter within 15 days from the due date of the corresponding Form 27EQ. Form 27EQ is a quarterly TCS return. Since TCS on LRS is event-based (each remittance), a year-end remitter typically receives several Form 27D entries. The ITR’s Schedule TCS – Part A2 lists each Form 27D received (PAN of collector, TAN of the bank, TCS amount, tax rate). Where the bank issues a single consolidated Form 27D at the end of the year, the same entries populate Schedule TCS – Part A1 instead. Either way, the credit sums to the same value and flows to the tax-payable / refund calculation.

Related guides

• TDS on Rent: Section 194I Rates and Common Mistakes — for businesses paying rent to NRI landlords, where Section 195 TDS interacts with Form 15CB certification rather than Section 206C(1G) TCS.
• TDS on Professional Fees: Section 194J Rates and Common Mistakes — the Section 195 + Form 15CA/15CB paper trail often runs alongside Section 206C(1G) for businesses with a foreign vendor arrangement.
• Income Tax Notice Response: Section 143(1), 148 & 245 — what to do when Form 26AS does not reflect Section 206C(1G) TCS paid in a prior year and a Section 143(1) intimation raises a demand for the unreconciled amount.

Sources and References

• Section 206C(1G), Income Tax Act, 1961 — Tax Collected at Source on foreign remittances under LRS
• Section 206CC, Income Tax Act, 1961 — Higher TCS rate for non-furnishing of PAN/Aadhaar
• Section 201(1A), Income Tax Act, 1961 — Interest for failure to collect and deposit TCS
• Section 143(1), Income Tax Act, 1961 — Intimation of refunds and demand after ITR processing
• Rule 37JA, Income Tax Rules, 1962 — Categories of persons excluded from Section 206C(1G)
• Rule 37BB, Income Tax Rules, 1962 — Forms and returns for remittance (Form 15CA / 15CB / 27EQ / 27D)
• Finance Act, 2020 — Introduced Section 206C(1G) effective 1 October 2020 at 5%
• Finance Act, 2022 — Raised Section 206C(1G) rate to 7% effective 1 April 2022
• Finance (No. 2) Act, 2023 — Raised Section 206C(1G) rate to 20% effective 1 October 2023; tour package TCS aligned to 20% from 1 July 2023
• RBI Master Direction — Liberalised Remittance Scheme (LRS) — Foreign Exchange Management Act, 1999 framework setting USD 250,000 per financial year per resident individual limit
• Form 15CA — Self-declaration by the remitter on the income tax e-filing portal before foreign remittance
• Form 15CB — Chartered accountant’s certificate accompanying Form 15CA for non-exempt remittances
• Form 27EQ — Quarterly TCS return filed by the Authorised Dealer / collecting bank
• Form 27D — TCS certificate issued by the collecting bank to the remitter
• Income Tax e-filing portal: https://www.incometax.gov.in
• RBI foreign-exchange page: https://www.rbi.org.in

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Disclaimer: This article is for general informational purposes and reflects the position of Section 206C(1G) of the Income Tax Act, 1961 and the related rules as understood at the time of publication. TCS rates, exemptions, and the LRS dollar limits have been revised multiple times since 2020 and can change with subsequent Finance Acts, notifications and RBI directions. The treatment of a specific remittance — particularly where multiple types are bundled, where PAN is mismatched, where the remitter is an NRI in transition, or where the loan is from a non-specified financial institution — depends on the specific facts and bank posture. Consider professional advice before relying on this article for a large remittance or for a refund claim on past TCS.

If your remittance involves a foreign tour package, an education loan from a non-bank lender, or an NRI → resident account reconciliation, the bank paperwork alone can take longer than the tax paperwork. FinTax24 supports end-to-end income tax return filing — including Form 15CA / 15CB preparation, Section 195 vs Section 206C(1G) classification, TCS certificate reconciliation in Schedule TCS, and follow-up with the Authorised Dealer where Form 26AS does not reflect the credit. For back-year claims and notices, our income tax notice reply service covers the Section 143(1) intimation mismatch, rectification under Section 154, and Section 245 adjustment disputes. Share a copy of Form 27D and the remittance advice on WhatsApp for a no-charge assessment.