Most people meet TCS the same way: they are at the end of a remittance, everything is agreed, and the final figure is several thousand rupees higher than the one they were quoted. Nothing has gone wrong. TCS is not a fee and it is not a tax on the transfer — it is your own income tax, collected early. Here is exactly when it applies, at what rate, and how to get it back.
TCS is a prepayment, not a charge
Tax Collected at Source does what the name says. The bank or money changer collects a slice of tax at the moment you remit and deposits it against your PAN. It appears in your Form 26AS, and at the end of the year it is set against whatever income tax you owe. If you owe less than was collected, the difference is refunded to you.
That is the part worth internalising. Sending ₹20 lakh abroad does not cost you TCS. It costs you the use of that money until you file. For a salaried person that is a cash-flow question, not a cost question — and it can be managed, which we come to below.
The threshold, and the rates that follow it
TCS applies to remittances under the Liberalised Remittance Scheme once your total for the financial year passes ₹10 lakh. Everything below that line is free of it. The rate above the line depends on what the money is for.
- Education or medical treatment abroad — 5% on the amount above ₹10 lakh.
- Education funded by a loan from a specified financial institution — nil, at any amount. This is the single most valuable exemption on the list and the most frequently missed.
- Everything else — travel, gifts, maintenance of relatives, investment, property — 20% on the amount above ₹10 lakh.
The threshold is cumulative across the year and across providers. Remit ₹6 lakh through your bank in May and ₹6 lakh through a money changer in November, and the second transaction crosses the line even though neither did on its own. Each provider asks you to declare what you have already sent; answer accurately, because the reconciliation happens at your PAN regardless.
Worked through, with real numbers
- 1A parent remits ₹18 lakh of university fees, no education loan. The first ₹10 lakh is untouched. TCS at 5% applies to the remaining ₹8 lakh — ₹40,000, collected and credited against their PAN.
- 2The same ₹18 lakh, funded by a sanctioned education loan. TCS is nil. The loan sanction letter is what makes the difference, and it has to be produced at the time of remittance, not afterwards.
- 3A family remits ₹25 lakh to buy property overseas. The first ₹10 lakh is untouched; 20% applies to ₹15 lakh — ₹3 lakh collected. Substantial, and entirely recoverable against their tax liability.
Getting it back
Check it reached your PAN
Roughly a quarter after the remittance, the entry should appear in Form 26AS and in your Annual Information Statement on the income tax portal. If it is missing, the collector has not filed correctly — take it up with them immediately, because you cannot claim what was never reported.
Claim it in your return
TCS is claimed the same way as TDS: it reduces the tax payable on your return. If your liability is smaller than the TCS collected, the balance is refunded.
Or stop it being collected in the first place
A salaried person can give Form 12BAA to their employer, who then reduces the TDS on your salary to account for the TCS already collected. That recovers the money over the remaining months of the year instead of after you file.
Planning around it, legitimately
- The ₹10 lakh threshold is per person, per financial year. A couple remitting for the same purpose has two thresholds between them, provided the funds genuinely come from each person's own account.
- The financial year runs April to March. A remittance planned for late March and one for early April fall in different years — worth knowing when a payment date is flexible.
- If an education loan is anywhere in the picture, route the fees through it. Nil is a better rate than 5%.
- Keep the sanction letter, the invoice and the A2 form together. Every one of them is what turns a rate into the rate you actually get.
