TCS on foreign remittances up to Rs 10 lakh; none on foreign education loan
New Delhi, Feb 1, 2025
Sitharaman announced the removal of TCS on remittances for education when the money comes from a loan taken from a specified financial institution
Finance Minister Nirmala Sitharaman on Saturday proposed raising the threshold for tax collection at source (TCS) on foreign remittances under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) from Rs 7 lakh to Rs 10 lakh. She also announced the removal of TCS on remittances for education when the money comes from a loan taken from a specified financial institution.
Mamta Shekhawat, founder of Gradding.com, said the removal of TCS on education-related remittances would benefit both students and their families. “As the TDS rate was 0.5% over Rs 7 lakh earlier, this step has made the transferring process less hectic and ensures the full amount is received at the other end,” she said.
Nikhil Behl, co-founder and CEO of Stocks at INDmoney, described the move as a step towards reducing the tax compliance burden. “Removing TCS on education-related remittances funded through loans and raising the TCS threshold from Rs 7 lakh to Rs 10 lakh simplifies tax compliance for individuals and provides greater flexibility for investors diversifying into global markets,” he said.
What is the current rule?
The 2023 Budget increased TCS on foreign remittances from 5% to 20% under the Liberalised Remittance Scheme (LRS), effective from October 1, 2023. The rule was introduced to prevent tax avoidance, particularly by high-income individuals.
Educational expenses: No TCS is applied for remittances up to Rs 7 lakh. Beyond this, a 0.5% TCS is charged if the money comes from an education loan. If the funds come from other income sources, a 5% TCS is applicable.
Non-educational remittances: A 20% TCS applies unless exemptions or lower rates apply.
Lack of PAN card: If the sender does not provide a PAN card, the TCS rate increases. For education loans, it rises to 5%, and for other income sources, it jumps to 10%.
What will change after Budget 2025-26?
Higher threshold for TCS: The exemption limit for TCS on remittances will increase from Rs 7 lakh to Rs 10 lakh.
No TCS on education loans: If remittances for education are made using an education loan, no TCS will be charged.
Lower compliance burden: Families sending money abroad for education or investment purposes will have a higher exemption limit, reducing tax-related paperwork and financial strain.
The changes will come into effect after the Budget is passed in Parliament and notified by the government.
[The Business Standard]
