Tax Collected at Source on Foreign Exchange Transactions: Currency, Forex Cards, and Remittances

What is Tax Collected at Source?

Tax Collected at Source is an advance tax collected by authorized dealers when the aggregate remittance under TCS on LRS crosses ₹10 lakh in a financial year.

Authorized dealers must:

• Collect TCS at specified rates based on the nature of remittance.
• Obtain a self-declaration from customers, since there is no automatic cap-monitoring system.
• Deposit collected TCS with the government by the 7th day of the following month.
• Issue TCS certificates quarterly after filing Income tax returns. (If required by customer)

New TCS Rates and Thresholds (Effective April 1, 2025)

Nature of payment under LRS	TCS from 01/04/2024
For Education, financial by loan from a financial institution specified under 80E	NIL
For Medical Treatment/Education (not financed by loan)	Nil up to Rs 10 lakh & 5% above Rs 10 lakh
Other purposes	Nil up to Rs 10 lakh & 20% above Rs 10 lakh
Purchase of Tour Packages	5% up to Rs 10 lakh & 20% above Rs 10 lakh

Payment to Government Account:

Tax Collected at Source (TCS) on transactions will be remitted to the government by the authorized dealer on or before the 7th of the following month. After the quarterly TCS return is filed, the same will reflect in 26AS of the remitter and a certificate can also be issued to the taxpayer.

Different Purposes of Transactions and Tax Collected at Source:

There are several purposes listed below.

For Educational Purposes:

For remittances under LRS used to fund overseas education, the Tax Collected at Source depends on whether the student has taken an education loan from a recognized financial institution (Bank). Authorized dealers must verify the loan sanction letter or disbursement evidence before applying any exemption. Under the third provision of section 206C(1G), no TCS is collectible when the remittance is financed by an education loan.

If a student remits funds for education abroad without an education loan, TCS applies only when cumulative remittances exceed ₹10 lakh in a financial year. Authorized Dealers must collect TCS at 5% on the amount above ₹10 lakh, and if the cumulative transaction amount is less than Rs 10 lakh in a financial year, there will be no TCS applicable.

Purpose	TCS
Education	With Loan -> NIL Without Loan Up to 10 lakh -> NIL more than 10 lakh -> 5%

For Medical Purposes:

In this case, the transactions are made for medical purposes, including treatments or rehabilitation, and Tax Collected at Source will be applicable. Authorized Dealers have to collect if the cumulative transaction amount is in excess of more than Rs 10 lakh in a financial year, a TCS rate of 5% applicable.

Purpose	TCS
Medical	Up to 10 lakh -> NIL More than 10 lakh -> 5%

For Immigration, Employment, Private Visits, Gift, and Family Maintenance Purposes:

In this case, if a person is moving permanently from India to another country (Immigration), or for Employment or gifting money, or family maintenance, and sending money abroad from a traveler’s bank account, TCS will be applicable. If the cumulative transactions are less the Rs 10 lakh in a financial year. TCS will not be applicable if it exceeds more than Rs 10 lakh; TCS at the rate of 20% will be applicable.

Purpose	TCS
Immigration, Employment, Private Visits, Gift, and Family Maintenance	Up to 10 lakh -> NIL More than 10 lakh -> 20%

For Tour Cost Transaction by Individuals:

If an individual is paying for the Tour cost package, TCS will be collected even if the cumulative amount is below INR 10 lakh in a financial year. Includes expenses for travel or hotel stay or boarding, or any other expenses of a similar.

For overseas Tour packages of more than RS 10 lakh in a financial year, dealers have to collect TCS at 20% and if a foreign Tour package is below Rs 10 lakh, TCS will be at 5%.

Purpose	TCS
Tour Packages	Up to 10 lakh -> 5% More than 10 lakh -> 20%

No TCS on company-sponsored business visits

TCS on Currency / TCS on Card / TCS on Remittance transactions to Business Travelers from the Company:

For receipts originating from entities other than resident individuals, such as companies, no tax collected at source (TCS) is applicable on foreign exchange or forex cards sold for business travel.

TCS under section 206C applies exclusively to amounts remitted abroad by individuals under LRS. Since companies and other non-individual entities cannot use the Liberalised Remittance Scheme (LRS), their payments for business-travel TCS on forex fall outside the scope of TCS.

Purpose	TCS
Business Travelers from the Company	NIL

Outward Remittance:

Outward remittance is the process by which an individual sends money from their home country to an account in a foreign country. These are often expenses such as overseas education, medical treatment, and travel. TCS on Remittance will apply at the rate of 5% to 20% based on different purposes as per the LRS scheme in a financial year.

Why is TCS not an extra cost for you?

• TCS is an advanced tax, not an additional burden.
• You can adjust it against your income tax liability when filing ITR(Income Tax Return).
• If you don't have taxable income, you can claim a refund for the TCS collected.

How to claim the TCS refund?

Step-by-step guide to claim a refund in ITR:

• Collect your Tax Collected at Source certificate
• Verify TCS details in Form 26AS
• Choose the correct ITR form (https://www.incometax.gov.in/iec/foportal/)
• Fill in the TCS details in your ITR
• Calculate tax liability and claim a refund
• Verify and submit your ITR

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