Amendments in TCS provisions applicable for LRS transactions – W.e.f 1^st April 2025

The Government of India vide Finance Act, 2025 has introduced certain amendments in Section 206C (1G) and 206CCA of the Income Tax Act, 1961 (the Act).

Pursuant to the aforementioned amendments, effective 1^st April 2025, there are changes in the Tax Collected at Source (TCS) rates applicable for remittances, forex cards, foreign currency withdrawal or payment to a merchant establishment overseas during your visit abroad on debit cards and any other transactions made under Liberalised Remittance Scheme (LRS). The comparison between current TCS provisions and revised TCS provisions is tabulated below:

Important Information:

1. TCS will be applicable on all INR currency transfer from a Resident Account to a Non-Resident (NRO) account which qualifies as LRS.
2. As announced by the Ministry of Finance on 28 June 2023, use of International Credit Cards while overseas will not be considered as a remittance under LRS until further notice. Hence, TCS is not applicable on expenditure on International Credit Cards.
3. TCS amount will be recovered from your account.
4. TCS, once collected, cannot be refunded by the Bank in case of any return of transaction or remittances.
5. Quarterly certificates for the TCS collected will be made available for customers on their registered e-mail ID or couriered to their registered mailing address.
6. If you have already applied TDS, a declaration confirming that TDS has been paid along with the tax paid challan and form 15CA/CB will have to be furnished at the time of remittance. In such a case, TCS would not apply.
7. Credit of TCS amount can be claimed while filing the return of income.
8. Please note that a higher rate of TCS is applicable if PAN – Aadhaar is not linked (inoperative PAN)
9. Section 206CCA requiring banks to check for tax return filling status of customers and applying higher TCS rate has been omitted.

There have been amendments to the Tax collected at Source (TCS) provision on foreign remittance made during the Union Budget 2025-26. Please find details of the original and amended provision below.

Initial

• Effective 1^st April 2020, banks are obligated to collect a 5% tax at source (10% in case customers do not have PAN/Aadhaar) for remittance(s) remittances over INR 7 lakh out of India under the Liberalised Remittance Scheme (LRS) of RBI.
• The provision of TCS shall now be effective from 1^st October 2020 instead of 1 April 2020.
• Once the threshold of INR 7 lakh in a financial year is crossed, TCS would apply on remittances which exceed INR 7 lakh in that financial year.

• W.E F. 1^st October 2023, TCS shall be applicable on amounts more than INR 7 lakh in a financial year and not on the total amount.
  In cases where the amount is remitted for pursuing education paid through a loan obtained from any financial institute, rate of TCS shall be 0.5% on the amount exceeding INR 7 lakh.
• The Remittance for purchase of overseas tour program package, rate of TCS shall be charged without any threshold limit.

Amendment

• Basis the Finance Act 2025, w.e.f 1^st April 2025 TCS shall be applicable on amounts more than INR 10 lakh in a financial year and not on the total amount. The remittance is for education paid through a loan obtained from any financial institution, rate of TCS shall be Nil on the amount exceeding INR 10 lakh.

Frequently Asked Questions:

1. What all transactions will be impacted by this TCS provision?
All remittances financial year done under the LRS will be liable for a TCS as follows:

2. Will GST be applied on the 5% Tax collected at source (TCS)?
No GST will be applicable on the tax collected TCS. However, GST will be applicable on the currency conversion & remittance service charge.

3. What are the different purposes on which the tax collection is applicable?
The tax will be applicable on all remittance(s) out of India that fall under the Liberalised Remittance Scheme (LRS) of RBI.

Important note

1. TCS amount would be recovered from the customer’s account. Please ensure the account is sufficiently funded to cover the remittance amount, TCS amount, remittance charges, correspondent bank charges and other taxes/charges as applicable. In case of insufficient balances, transactions will not be processed.
2. TCS once collected cannot be refunded by the bank in case of any return of transaction or remittances.
3. Credit of TCS amount may be available while filing the return of income.
4. Quarterly certificate for the TCS will be made available to the customers in their registered email id or the registered mailing address.