Foreign Remittance Tax: Meaning, Rates & Limits

Sent ₹12 lakh overseas for education? You have likely encountered a ₹10,000 tax under the new TCS (Tax Collected at Source) rules. It’s a change many NRIs are still adjusting to.

In recent months, the guidelines around foreign remittances have been updated to align with evolving tax and compliance frameworks. These updates aim to bring more clarity and consistency—they also mean individuals need to be more mindful while planning international transfers.

This guide walks you through the basics of taxation on foreign remittance—so you can transfer funds with confidence and stay fully compliant.

Table of Content

What is Foreign Remittance?
Why Remittance Tax Matters for NRIs
Is Foreign Remittance Taxable in India?
Common Misconceptions
FAQs

What is Foreign Remittance?

Foreign remittance is simply the transfer of money from a person or business in one country to a person or business in another country.

Whether you're sending funds for education, medical treatment, business purpose, or family support, it qualifies as a foreign remittance under Indian foreign exchange regulations.

While resident Indians are allowed to remit up to USD 250,000 per financial year for various purposes, NRIs are allowed to remit up to USD 1 million dollars per financial year, subject to certain conditions.

Common types of foreign remittance include:

Educational expenses for studying abroad
Medical treatment overseas
Family maintenance and support
Business and investment purposes
Travel expenses
Gift remittances to relatives abroad
Property purchases in certain countries

Why Remittance Tax Matters for NRIs

The tax implications can significantly impact your financial planning, especially for large transfers or regular remittances.

Who is an NRI/PIO?

Non-Resident Indian (NRI): A citizen of India residing outside India.
Person of Indian Origin (PIO): A foreign citizen (other than those from Bangladesh or Pakistan) who at any time held an Indian passport, or whose parents/grandparents were Indian citizens, or is a spouse of such a person.

Remittance Facilities Available

NRIs and PIOs can repatriate current income from India—such as rent, dividends, or interest—based on certification by a Chartered Accountant regarding eligibility and tax compliance.
Remittances can be credited to an NRE (Non-Resident External) account or to an overseas NRI account, subject to the satisfaction of the authorised dealer bank.

Regulatory Framework

Remittance facilities for NRIs/PIOs are governed by the Foreign Exchange Management Act (FEMA), 1999, and its associated notifications and amendments.
NRIs/PIOs can remit up to USD 1 million per financial year from balances held in NRO (Non-Resident Ordinary) accounts, sale proceeds of assets, or inherited assets, subject to payment of applicable taxes and documentation.

Importance of Remittance Tax Compliance

Tax Deducted at Source (TDS)/Tax Collected at Source (TCS): Remittances may be subject to TDS or TCS, depending on the nature and purpose of the transfer.
Reporting Requirements: Proper documentation, including Form 15CA/CB, is required to ensure that remittances comply with Indian tax laws and avoid penalties.
Repatriation of Assets: Tax compliance is essential for the repatriation of assets, especially when selling property or transferring large sums.

Special Facilities for Students

Students going abroad for studies are treated as NRIs and are eligible for all remittance facilities under FEMA.
As for all NRIs, they can receive up to USD 1 million per financial year from India, including maintenance and educational expenses, subject to prescribed limits and documentation.

Why Does This Matter?

Legal Compliance: Ensures NRIs/PIOs do not face legal issues or penalties.
Financial Planning: Helps optimise tax liability and maximise the amount remitted.
Transparency: Facilitates smooth transactions and builds trust with financial institutions.

Is Foreign Remittance Taxable in India?

Foreign remittance taxation in India is governed by the Income Tax Act, 1961, and the Liberalised Remittance Scheme (LRS) as regulated by the Reserve Bank of India (RBI).

The rules differ based on whether the remittance is inward (money received from abroad) or outward (money sent abroad).

Outward Remittance (Sending Money Abroad)

Tax Collected at Source (TCS):

When a resident individual remits money to an NRI’s bank account abroad or in India (NRE/NRO) under the LRS, a specific percentage is collected as TCS by the authorised dealer (typically a bank).

Inward Remittance (Receiving Money from Abroad)

Generally, not taxable: Money received in India as a gift or personal transfer from abroad is not taxed, unless it is income (e.g., salary, consultancy fees), in which case it is taxed as per the recipient’s income tax slab.

Reporting and Compliance

Form 15CA/CB: For outward remittances, the remitter must submit Form 15CA (and Form 15CB, certified by a Chartered Accountant) to the Income Tax Department, declaring the nature and amount of the remittance.
Documentation: Proper documentation and compliance with RBI and Income Tax rules are mandatory to avoid penalties.

Common Misconceptions about Foreign Remittance Tax

Understanding foreign remittance tax rules helps avoid errors and penalties. Here are the most common misconceptions, clarified with official guidance:

TCS is an Extra Tax
- Fact: Tax Collected at Source (TCS) is not an additional tax. It is an advance tax collected by banks on outward remittances. You can claim TCS as a credit or refund when filing your Income Tax Return (ITR).
All Remittances Are Taxable
- Fact: Only specific remittances—such as income or gifts from non-relatives above ₹50,000—may be taxable. Personal transfers, gifts from relatives, or remittances for education/medical (with proper documentation) are generally exempt or attract lower TCS rates.
TCS Applies to NRIs Sending Money to India
- Fact: TCS under the Liberalised Remittance Scheme (LRS) applies to resident Indians sending money abroad, not to NRIs remitting funds to India.
TDS and TCS Are the Same
- Fact: TDS (Tax Deducted at Source) is deducted by the payer on certain payments (like salary), while TCS is collected by banks on outward remittances. Both are adjustable against your tax liability.
No Forms Needed if Remittance is Not Taxable
- Fact: Most outward remittances require Form 15CA (and sometimes 15CB), even if not taxable, for compliance and tracking by the Income Tax Department.
TCS Cannot Be Refunded
- Fact: TCS is fully adjustable. If your final tax liability is less than the TCS paid, you can claim a refund in your ITR.

Conclusion

With the right guidance and planning, you can manage your international transfers efficiently while staying fully compliant with tax regulations.

At Kotak Mahindra Bank, our foreign exchange specialists are available to help you navigate these requirements and optimise your remittance strategy.

Start your remittance journey with Kotak NRI Forex and Remittance Services — tailored for your needs.

Ready to initiate your foreign remittance? Contact our NRI services team or visit your nearest Kotak branch for personalised assistance with your international money transfer needs.

Related Information

Frequently Asked Questions

Is there any tax on receiving foreign remittance in India?

Generally, no TCS applies when receiving money from abroad into your Indian account. However, if the received money represents income earned abroad, it may be taxable under Indian income tax laws based on your residential status.

Do NRIs need to pay TCS when sending money to India?

No, NRIs are not subject to TCS when sending money from abroad to India. However, they should be aware of repatriation rules and tax implications in their country of residence.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.

Foreign Remittance Tax Guide for NRIs: Complete 2025 Guide