The 20% outward remittance tax, also known as Tax Collected at Source (TCS), was introduced in India's Union Budget 2023. Here are the key points:
- Applicability: This tax applies to most foreign remittances made by Indian residents and Non-Resident Indians (NRIs) under the Liberalized Remittance Scheme (LRS).
- Threshold: A 20% TCS is deducted on foreign remittances over Rs. 7 lakhs.
- Purpose: It covers remittances for investments, purchase of foreign assets, gifting money abroad, etc.
- Exceptions: Remittances for medical treatment and education expenses abroad have lower TCS rates.
- Collection: TCS is collected by banks/authorized dealers at the time of remittance.
- Tax Credit: NRIs can claim the TCS paid as a tax credit.
This tax adds an extra burden on large foreign remittances by NRIs under the LRS, but remittances from NRO/FCNR accounts are exempt when done through The Remittor Process.
TCS Rates:
- 20% on foreign remittances over Rs. 7 lakhs (except education and medical)
- 5% on remittances for overseas tour packages (no threshold)
- 5% on education remittances over Rs. 7 lakhs (non-loan case)
- 0.5% on education loan remittances over Rs. 7 lakhs
Calculation Method:
- Calculate the amount exceeding the threshold limit (if any) for the transaction type.
- For example, if an NRI remits Rs. 10 lakhs under LRS (non-education/medical), 20% TCS applies on Rs. 3 lakhs (Rs. 10 lakhs - Rs. 7 lakhs threshold).
TCS Amount = (Remittance Amount exceeding threshold) x Applicable TCS Rate
- For Rs. 10 lakhs, TCS amount = Rs. 3 lakhs x 20% = Rs. 60,000
The TCS is deducted upfront by the authorized dealer (bank) before transferring funds. For remittances without a threshold limit, like overseas tour packages, the TCS rate applies to the full amount.
Remittor is a wealth transfer platform for Global Indians, ensuring compliance management for transactions. The Remittor Process helps you transfer wealth globally without losing money to unnecessary taxes. Our services include:
- Transaction advisory
- Integrated banking services
- Competitive remittance rates up to INR 8 crores
- Compliance management to avoid the 20% TCS
The Remittor Process includes four steps:
- Transaction Advisory: Our financial experts understand and structure your remittance to ensure compliance and maximum forex in your residing country.
- Banking Compliance: We help you open an NRI account with ICICI Bank from home, coordinating all necessary appointments and documents.
- Remittance: Facilitating the transfer process.
- Compliance: Ensuring all transactions are compliant and legit through RBI-authorized partners.
Yes, as a registered remittance agency, our partners hold an FFMC license for currency conversion, and all transactions are processed through RBI-authorized partners.
- NRIs can remit up to $1 million per year from NRO accounts without TCS.
- Under LRS, every Indian resident can send up to USD 2,50,000 in a financial year for various purposes.
If you are an Indian citizen residing abroad, you can convert your regular savings account to an NRI account for benefits like higher interest rates, no remittance restrictions, special investment schemes, and easy fund repatriation.
Remittor will schedule a call with the bank for you. You'll need to submit documents like proof of NRI status, passport copy, overseas address proof, and an NRI declaration form.
Intermediary and beneficiary bank charges (NOSTRO Charges) apply, varying based on transaction size. Additional charges of 1.25% to 2.5% may apply if paying via debit card.
A PAN card is mandatory. For proof of address, provide any one of Aadhar, Passport, Voter ID, or Driving License. Document verification is done in real time.
You can send funds for:
- Overseas education (fees and living expenses)
- Family maintenance
- Personal gifts or donations
- Private visits
- Business travel
- Emigration and related fees
- Employment processing fees
- Medical treatment abroad
You can send money to:
- Parents
- Children
- Spouse
- Siblings
- Grandparents/Grandchildren
- Parents-in-law
Gifts to these relatives are tax-exempt, and there is no monetary limit on the value of gifts sent to them. Gifts to non-relatives are taxable if the aggregate value exceeds Rs. 50,000 in a financial year. Compliance with FEMA regulations like LRS limits may be required for large sums.