Studying abroad is a dream for many Indian students, but financing education often means transferring large amounts overseas. To regulate this, Tax Collected at Source (TCS) applies to foreign remittances.
In the Union Budget 2025, the Government of India raised the threshold for applying TCS on foreign remittances under the Liberalised Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh per financial year, and fully waived TCS on remittances made via specified education loans.
If you’re planning to send funds for tuition, living expenses, or accommodation, it’s crucial to understand how much TCS applies, when exemptions are available, and how to claim refunds.
In this guide, we’ll break down the latest rules introduced in the Union Budget 2025, explain thresholds, compare loan-funded vs. self-funded remittances, and provide practical strategies to reduce the burden.
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What Does TCS Mean in Foreign Remittance?
Before diving into numbers, let’s clarify the meaning of TCS.
- TCS mean: Tax Collected at Source. It is a tax collected by banks or authorised dealers when you remit money under the RBI’s Liberalised Remittance Scheme (LRS).
- TCS meaning in banking: Every time you transfer funds abroad, the bank collects TCS on behalf of the government and deposits it with the Income Tax Department.
- TCS charges meaning: It is not an extra tax but an advance tax, adjustable against your total income tax liability.
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TCS on Foreign Remittance for Education: 2025 Rates
The government revised TCS rules in Budget 2025 to make studying abroad more affordable. Here’s how it looks now:
Specified education loan refers to loans taken from financial institutions covered under Section 80E of the Income Tax Act.
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Loan vs. Personal Funds Examples
Let’s look at an example to understand how TCS on education remittance applies:
Case 1: Loan-funded remittance
Rohit takes an education loan of ₹25 lakh from a nationalised bank. Since it’s a specified education loan, no TCS is applied, even if he remits the full amount abroad.
Case 2: Personal funds remittance
Meera uses her family savings to remit ₹15 lakh for her tuition fees. Since the threshold is ₹10 lakh, 5% TCS is applied on the excess ₹5 lakh, i.e., ₹25,000 collected by the bank.
What Expenses Are Covered Under TCS Rules?
When calculating TCS on foreign remittance for education, the following expenses are included:
- Tuition fees and exam fees
- Hostel or rent payments abroad
- Living expenses such as food, books, and transport
- University deposits and caution fees
- One-time airfare for education purposes
Education-related remittances are clearly distinguished from leisure or holiday travel, which attracts 20% TCS.
How to Avoid or Reduce TCS on Overseas Education Remittance
Families often worry about paying extra tax when already stretched with education costs. Here are some innovative strategies:
- Use education loans – Opt for specified loans to enjoy 0% TCS.
- Stay under ₹10 lakh annually – Split payments across financial years.
- Distribute remittances – Parents can send from separate accounts to remain below thresholds.
- Plan forex card usage – RBI is reviewing rules on whether forex/prepaid cards attract TCS. Stay updated.
- Check university fee deadlines – Avoid lump-sum transfers that trigger higher TCS unnecessarily.
For updated limits under the RBI’s Liberalised Remittance Scheme (LRS), you can refer to the RBI’s official data.
How to Save on TCS on Foreign Remittance? Here’s What Students on Reddit Have Asked
Reddit User in r/IndiaTax shared:
“How to save TCS on foreign remittance from India to Australia?”
Insight:
This is a common doubt among students and parents. The short answer is that TCS on foreign remittance for education cannot be “avoided” entirely, since banks are required to collect it under the Income Tax Act. However, there are smart ways to minimise it:
- Using a specified education loan brings the TCS down to 0%, regardless of the remitted amount.
- Staying within the ₹10 lakh annual threshold for personal fund transfers avoids triggering the 5% deduction.
- Splitting remittances between parents/guardians or across financial years can reduce the applicable amount.
Takeaway:
TCS is not a penalty but an advance tax. Even if deducted, it is fully refundable at the time of filing your ITR. So the best way to “save” TCS is to plan remittances smartly and use education loans wherever possible.
TCS on Education Loan: Special Relief
The government introduced relief for students using formal loans. Under the TCS loan policy:
- If the loan is sanctioned by a financial institution (bank/NBFC under Section 80E), TCS is 0%, regardless of the amount.
- If borrowing from personal sources (family, informal loan), TCS applies at 5% beyond ₹10 lakh.
This makes education loans not only a financing option but also a tax-efficient choice.
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Is TCS Refundable on Foreign Remittance?
Yes. Since TCS is an advance tax, you can claim it back while filing your Income Tax Return (ITR).
Steps to claim the TCS refund on foreign remittance:
- Collect your TCS certificate (Form 26AS).
- Declare it while filing ITR.
- If your total tax liability is less than the TCS deducted, the excess will be refunded.
So, is TCS on foreign remittance refundable? Absolutely, provided you file your return correctly.
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How to Claim the TCS Refund on Foreign Remittance?
Yes. TCS on foreign remittance for education is fully refundable, because it is not an additional tax but an advance tax collected by your bank on behalf of the Income Tax Department. When you file your Income Tax Return (ITR), the TCS amount already deducted is adjusted against your total tax liability for that financial year.
- If your tax liability is higher than the TCS deducted → The deducted amount is adjusted, and you pay only the balance.
- If your tax liability is lower than the TCS deducted → The excess TCS is refunded to you by the Income Tax Department.
For example:
If you remit ₹15 lakh abroad for education through personal funds, the 5% TCS on the amount exceeding ₹10 lakh (i.e., ₹25,000) will be collected. When you file your ITR, this ₹25,000 is adjusted. If your total tax liability is less than this, the extra amount is refunded to your bank account.
Students using specified education loans don’t face this deduction in the first place, as TCS is 0% under Section 80E.
Pro tip: Always download your Form 26AS or the new Annual Information Statement (AIS) from the Income Tax portal to verify TCS credits before filing your ITR.
Misconceptions Around TCS and Loans
- Does TCS provide loan to employees? No, here “TCS” refers to Tax Collected at Source, not Tata Consultancy Services.
- TCS loan policy applies only in the tax context, where using an education loan avoids TCS deduction.
- Always remember that TCS is not an extra burden, only a prepayment of taxes.
Understanding TCS on foreign remittance for education is essential for every student and parent planning to study abroad. With the 2025 reforms, using specified education loans ensures zero TCS, while self-funded remittances above ₹10 lakh attract only 5%. By planning remittances smartly, families can minimise upfront deductions and later claim refunds smoothly.
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