India's 20% TCS on Foreign Remittances: What NRIs Must Know
Sending money out of India under the LRS? A 20% TCS can apply above ₹10 lakh. Here's who it hits, the exceptions, and how to claim it back.
Reviewed by Deepak Middha, CA, Series 65
Updated May 24, 2026 · 5 min read
Reviewed by Deepak Middha, CA, Series 65
Deepak has experience in cross-border finance, tax-aware planning, and immigrant money decisions.
If your parents are sending you money from India, you may hit a confusing line on the statement: a 20% Tax Collected at Source (TCS). It feels like a penalty for sending your own money, but it isn't a new tax — it's a *prepayment* of income tax the bank collects upfront and the sender reclaims later. Knowing when it applies and how to recover it prevents nasty surprises and the false belief the money is lost.
In a nutshell
TCS applies to money sent abroad by Indian residents under the Liberalised Remittance Scheme (LRS). The rate is 20% on amounts above ₹10 lakh per year for most purposes (lower for education and medical); the ₹10 lakh threshold applies from FY 2025-26, raised from the earlier ₹7 lakh. TCS is not an extra tax — it's creditable against the sender's Indian income tax or refundable when they file their ITR. It primarily affects residents (like parents sending gifts), not NRO repatriation by NRIs.
Key takeaways
- TCS applies to residents remitting abroad under the LRS, not to most NRI NRO repatriation.
- Rate: 20% on remittances above ₹10 lakh in a financial year (most purposes); the threshold was raised to ₹10 lakh from FY 2025-26.
- Education funded by a loan and other education/medical remittances follow lower, separate treatment — verify the current rate for your purpose before sending.
- TCS is collected upfront by the bank but is creditable/refundable via the sender's Indian ITR.
- It affects cash flow, not final tax — plan timing around the ₹10 lakh threshold.
- Relevant when parents send you gifts from India — see gift tax rules.
What TCS actually is
Tax Collected at Source is exactly what it sounds like: the bank collects a slice of tax *at the moment of the transaction* and deposits it against your PAN. It's a mechanism to improve tax compliance and tracking — not a separate or additional tax. Whatever is collected as TCS shows up in the remitter's Form 26AS and can be set off against their total income tax liability for the year, or refunded if they've overpaid.
When does the 20% apply?
TCS on foreign remittances flows from the Liberalised Remittance Scheme (LRS), under which a resident individual can send up to USD 250,000 abroad per financial year. The general treatment, with the threshold raised to ₹10 lakh from FY 2025-26:
| Purpose of remittance | TCS rate |
|---|---|
| Education financed by an education loan | Lower / concessional (verify current rate) |
| Education/medical (self-funded) | 5% (above ₹10 lakh) |
| Gifts, investments, travel, maintenance, etc. | 20% (above ₹10 lakh) |
The ₹10 lakh threshold is per individual per financial year, aggregated across remittances. Below ₹10 lakh, generally no TCS applies (with some exceptions for tour packages). Education- and medical-purpose rates are concessional and change periodically — confirm the current figure for your purpose, and estimate the TCS and total cost of a transfer with the remittance & TCS cost calculator.
Who this really affects
This is the part that trips people up:
- Indian residents remitting abroad — yes. This includes your parents sending you a gift or money for a house. Above ₹10 lakh, the 20% TCS applies to them (creditable on their return).
- NRIs repatriating from an NRO account — generally not under the LRS/TCS regime; that follows the property/NRO repatriation rules with Forms 15CA/15CB instead.
So when you read about "20% TCS on money sent to the US," it's mostly about resident senders, not NRIs moving their own NRO funds.
For parents gifting you money: the 20% TCS reduces the cash that arrives now, but your parents recover it against their Indian income tax or as a refund when they file. It's a timing/cash-flow issue, not a permanent 20% loss. Plan large gifts with this in mind, and remember the US Form 3520 side if the gift exceeds $100,000.
How to claim it back
The sender (the Indian resident) recovers TCS by:
- Confirming the TCS appears in their Form 26AS / AIS.
- Filing their Indian income tax return (ITR).
- Setting off the TCS against their tax liability, or claiming a refund of the excess.
There's nothing the US-side recipient needs to do about Indian TCS — it's the sender's credit to reclaim.
Frequently asked questions
Is the 20% TCS an extra tax I lose?
No. It's a prepayment of income tax collected upfront. The remitter credits it against their Indian tax or gets it refunded when filing their ITR.
Does TCS apply when my parents send me money?
Yes, if they're Indian residents remitting above ₹10 lakh in a year under the LRS, the 20% TCS generally applies — recoverable on their return. The gift itself isn't taxable to you in the US, but Form 3520 may apply over $100k.
Do NRIs pay TCS when repatriating NRO funds?
Generally no — NRO repatriation follows the 15CA/15CB process, not the LRS TCS regime. See repatriating property proceeds.
What's the threshold before TCS kicks in?
₹10 lakh per individual per financial year, aggregated across remittances, for most purposes.
The bottom line
The 20% TCS sounds alarming but is mostly a cash-flow timing issue for resident senders — your parents, not you as an NRI moving NRO funds. It kicks in above ₹10 lakh, varies by purpose, and is fully creditable or refundable on the sender's Indian return. Plan large gifts and remittances around the threshold, keep the Form 26AS records, and treat TCS as a temporary withholding rather than a tax you lose.
