Why is tax collected at source deducted when I remit money abroad under LRS

Question

My bank collected extra tax when I sent money abroad for my child's education, and I want to know why and how to get credit for it. What I am unsure about is the procedure — where the application goes, what it costs, and how long tcs on foreign remittance matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to tcs on foreign remittance here is Income-tax Act, 1961, Section 206C(1G), Foreign Exchange Management Act, 1999, Section 5 and Income-tax Act, 2025. The detail below matters, because Income-tax Act, 1961, Section 206C(1G) draws the line differently depending on what your documents show.

Section 206C(1G) of the Income-tax Act, 1961 requires an authorised dealer to collect tax at source on remittances made under the Reserve Bank's Liberalised Remittance Scheme once the aggregate remittance in a financial year crosses the prescribed threshold, currently ten lakh rupees for most purposes.

The rate of TCS varies depending on the purpose of remittance: a lower concessional rate applies to remittances for education funded through an education loan, a different rate applies to remittances for medical treatment or other education, and a higher rate applies to remittances for overseas tour packages or other general purposes.

The Liberalised Remittance Scheme itself is a Reserve Bank facility under Section 5 of the Foreign Exchange Management Act, 1999 permitting resident individuals to remit a specified dollar limit abroad each financial year for permitted current and capital account transactions, and TCS is collected in addition to, not instead of, this limit.

TCS collected under Section 206C(1G) is not an additional tax cost by itself; it is adjustable against the remitter's final tax liability and can be claimed as credit while filing the income tax return, or refunded if the remitter's total tax liability is lower.

Salaried employees can request their employer to account for TCS credit while computing monthly TDS on salary by declaring the collected amount, which helps avoid a cash flow mismatch during the year.

In practice, in this order: 1) Check the TCS certificate or bank remittance advice for the amount collected; 2) Confirm the purpose-wise TCS rate applied by the authorised dealer; 3) Claim TCS credit in the income tax return using the challan details reflected in Form 26AS; 4) Declare the TCS to your employer if you want it adjusted against salary TDS during the year.

Timing matters here: Income-tax Act, 1961, Section 206C(1G) works on limitation periods, so a tcs on foreign remittance claim that is right on the merits can still fail if it is brought late. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in tax law.