Starting 1st of July 2023, Indian students will have to pay 20% Tax Collection at Source (TCS) for outward remittances under the Liberalised Remittance Scheme (LRS). Under the LRS of the government of India, the new TCS will apply to overseas funds transfers, foreign trips, overseas investments, and all other foreign transactions.
However, study abroad education loans and medical expenses in foreign lands will not be included in the new scheme. Under LRS, money remitted for both these essential services will attract only 0.5% TCS. This percentage will be applied to funds transferred beyond INR 7 lakh.
Furthermore, the 2023 Budget also stated that 5% TCS will be levied on the living expenses of study abroad Indian students. Parents must show proof of education expenses of their wards before making an overseas transfer to avoid paying 20% TCS.
Another clause of the new Liberalised Remittance Scheme is that there is no Tax Collection at Source on outward remittances below INR 7 lakh.
Ways to Send Money Abroad under LRS
Parents of study abroad students can follow these steps to make international money transfers under LRS:
- Visit the bank
- Fill up the A-2 Form
- Mention the purpose of outward transfer
- Attest the Declaration Form
It is essential that parents provide sufficient information to establish that their child is pursuing higher education abroad. This will provide a hefty TCS exemption of 15% on foreign remittances.
Other Transactions Under LRS
The Government of India’s Liberalised Remittance Scheme also includes the following transfers:
- International money transfers between banks
- Overseas transfers via Forex cards and debit cards
For the latest updates about international money transfers, stay in tune with Fly Finance News Desk.
