TCS 20% on foreign remittance, what every Indian founder needs to know.

Section 206C(1G) of the Income Tax Act requires Authorised Dealer (AD) banks to collect TCS on outward remittances under LRS. Current rates (effective 1 October 2023):

• Overseas education financed by education loan: 0.5% above INR 7 lakh/year
• Overseas education from own funds: 5% above INR 7 lakh/year
• Medical treatment abroad: 5% above INR 7 lakh/year
• Overseas tour package: 5% up to INR 7 lakh/year, 20% above
• All other LRS remittances (investment, maintenance, gift, inheritance): 20% above INR 10 lakh/year

The TCS is collected by the AD bank at the time of remittance and deposited with the government. The remitter receives a TCS certificate (Form 27D). TCS is credited against the remitter's final income tax liability for the year.

Who it affects for Indian founders:

• Investing in a Delaware C-Corp (FEMA ODI route) — any outbound equity investment above INR 10 lakh in a year triggers 20% TCS.
• Funding a Dubai Free Zone LLC setup from India — same.
• Paying overseas tuition fees above INR 7 lakh — 0.5% (loan-funded) or 5% (own-funded).
• Buying US stocks via Indian broker platforms using LRS — 20% above INR 10 lakh/year.
• Gift to overseas relative — 20% above INR 10 lakh.

Scenario: Indian founder remits USD 20,000 (~INR 16.6 lakh at INR 83/USD) to fund a new Delaware C-Corp as equity contribution.

• LRS category: Investment (equity in overseas entity) — falls under 'all other' at 20%.
• Threshold: TCS applies on amount above INR 10 lakh. Taxable amount = INR 16.6 lakh - INR 10 lakh = INR 6.6 lakh.
• TCS at 20%: INR 1,32,000 collected by the AD bank.
• Founder actually remits INR 16.6 lakh to Delaware + INR 1,32,000 to the government via TCS = INR 17.92 lakh cash outflow.

The INR 1.32 lakh TCS is NOT a tax; it is advance tax credit against the founder's final income tax for the year. Claimed on ITR as TCS credit (Section 206C(4)). If the founder's final tax liability is lower than the TCS collected, excess is refunded (12-18 months typical).

TCS on LRS does NOT apply where:

• Remitter is below the threshold — aggregate LRS remittances in the financial year are below INR 10 lakh (or INR 7 lakh for education/medical).
• Remitter is a non-resident — NRIs transferring their own foreign-currency balances abroad are not under LRS (LRS applies only to Resident Indians).
• Payment via credit card for overseas transactions is EXCLUDED from LRS under current CBDT clarification (though this has been contested; check current status). Credit-card spend abroad is not currently subject to the 20% TCS on LRS.
• Business remittances under FEMA automatic/approval route (not LRS) — Indian company remitting to foreign vendor for business services does not use LRS; different reporting framework; no TCS under 206C(1G).
• Repayment of foreign loans and specific business-purpose remittances have their own frameworks.

1. TCS certificate (Form 27D) — retrieve from the AD bank after remittance. Shows TCS amount deducted.
2. Form 26AS / AIS verification — TCS will reflect in your Annual Information Statement within 1-2 months of deposit.
3. Claim as advance tax credit on ITR — file ITR by 31 July (or 31 October for audit cases); TCS credit automatically applied to final tax liability.
4. Excess refund — if TCS collected exceeds final tax, refund processed by Income Tax Department. 12-18 months typical from ITR filing to refund receipt (sometimes faster).
5. Section 206CC higher rate — applies if remitter is a 'specified person' who has not filed ITR for prior years. Rate becomes 10% or 20% depending on circumstances. Keep ITR filings current to avoid.

Working-capital impact: for a founder remitting USD 50K-100K to seed a Delaware structure, TCS is INR 7-15 lakh locked up for a year. Factor this into cash planning.

• Spread remittances across financial years if timing allows. Threshold is per financial year (April-March).
• Use spouse's LRS limit for larger structures. Each Indian resident individual has a separate USD 250K LRS limit and separate INR 10 lakh TCS threshold.
• Combine credit-card spend (not LRS) and LRS for mixed overseas obligations where feasible under current CBDT position.
• File ITR promptly after TCS to accelerate refund processing.
• Keep TCS certificates organised — one certificate per remittance. Store with ITR papers.
• Factor TCS into FEMA ODI cash planning — if setting up a USD 50K Delaware structure needs INR 42 lakh at INR 83/USD, plan for ~INR 46 lakh total cash outflow including TCS.

Use our TCS LRS Calculator: lrs-tcs-calculator.html

Last updated: 2026-10-07.