Planning a Foreign Trip or Sending Money Abroad? Here's How Much TCS You’re Paying

Planning a Foreign Trip or Sending Money Abroad? Here’s How Much TCS You’re Paying

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Introduction

Are you planning a dream vacation or considering studying abroad? Maybe you’re looking to support a family member’s overseas education or medical procedures. Whatever the case, there’s an important update on TCS  you should be aware of before you start transferring money abroad or booking that international package tour.

Keep That 7 Lakh Figure in Mind

If you send less than INR 7 lakh abroad in a year, you won’t have to worry about extra tax. This exemption isn’t in the income tax law, but based on press releases and clarifications. you can breathe easily. The tax won’t kick in until you cross that amount. But once you do, tax applies differently over INR 7 lakh in spending.

TCS Rates Based on Purpose of Remittance

The government has categorized remittances into three buckets, each with its tax rate beyond the INR 7 lakh threshold:

1. Educational Payments Financed by a Loan

A concessional TCS rate of 0.5% encourages higher studies financed through loans.
Personal Scenario: Sai’s Study Loan for Her Master’s in the UK

Sai was accepted into a master’s program in the UK, with the total expenses, including tuition and living expenses, amounting to INR 16 lakh. To finance this, Sai’s family took out an education loan. This is how the Tax Collected at Source (TCS) was involved in their situation.

For the first INR 7 lakh, there is no TCS.

The remaining INR 9 lakh attracts a TCS of 0.5% (as applicable on an education loan).

0.5% of INR 9 lakh = INR 4,500

Sai’s family will pay INR 4,500 as TCS, which they can claim as a tax credit when filing income tax returns.

2. Self-Funded Education and Medical Treatment

A TCS of 5% aims to moderate non-loan-funded education and urgent medical expenses.

Personal Scenario: Anil’s Self-Funded MBA in Australia

Anil decides to self-fund his MBA in Australia, costing INR 18 lakh. He uses his savings for this purpose. Here’s how TCS comes into play:

TCS of 5% on the remaining INR 11 lakh(as applicable on a self-funded education).5% of INR 11 lakh = INR 55,000

Anil will incur a TCS of INR 55,000, which, like Sai’s case, is creditable against his income tax.

Personal Scenario: Neha’s Medical Treatment in Germany

Neha needs a medical procedure in Germany, which costs INR 13 lakh. Since it’s a health-related expense, the TCS rate after the threshold is the same as for self-funded education.

The next INR6 lakh attracts a TCS of 5%. 

So,

5% of INR 6 lakh = INR 30,000

Neha’s family pays INR 30,000 as TCS, which they can offset against their taxes.