Sending money abroad as a gift is one of the most heartfelt ways to support family members or celebrate special occasions. With new regulations now in place, it is important to understand how TCS on gift remittances works under the RBI’s Liberalized Remittance Scheme (LRS). From 1 April 2025, gift remittances fall under Section 206C(1G) of the Income Tax Act, which requires banks to collect tax at source once an individual’s outward transfers cross the prescribed threshold.
This guide explains the rules, thresholds, applicable rates, documentation, and refund process in simple, practical terms.
What is TCS on Gift Remittances?
TCS on gift remittances is a tax collected upfront by banks when you send money abroad as a gift. It only applies if your total outward transfers under LRS in a financial year exceed ten lakh rupees. Importantly, this is not an additional tax. It acts as an advance credit, which you can later claim back while filing your income tax return.
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The Threshold Explained
From April 2025, the threshold for TCS on gift remittances is set at ten lakh rupees per individual, per financial year. This is not limited to gifts alone. Education, medical expenses, overseas tour packages, and other purposes all add up toward this limit. Once your cumulative transfers cross ten lakh rupees, the next remittance is subject to TCS at the rate applicable to that purpose.
Know more: All You Need To Know About TCS On International Money Transfers
Current TCS Rates in Simple Terms
The applicable rates under LRS are:
- Education through an eligible education loan – Nil, even beyond the threshold.
- Education or medical transfers without a loan – Nil up to ten lakh rupees, then five percent.
- Overseas tour packages – Five percent up to ten lakh rupees, then twenty percent.
- Gifts and other purposes (maintenance, investments, donations) – Nil up to ten lakh rupees, then twenty percent.
In short, TCS on gift remittances applies at twenty percent, but only on the amount that exceeds the annual threshold.
How Gift Remittances Work Under RBI LRS
Gift transfers are fully permitted within the annual LRS ceiling of USD 250,000 per person. To send funds abroad as a gift, banks typically require:
- PAN and updated KYC
- Form A2 with purpose code S1302 (gifts)
- Beneficiary details such as name, account number, bank, and country
- Declaration of cumulative LRS usage for accurate TCS application
Also know: How to Avoid TCS on Foreign Remittances?
Threshold Logic Across Multiple Banks
A common myth is that the threshold applies separately to each bank. The reality is different. The limit applies to the individual across all banks and for all purposes. This means if you remit through multiple banks or for different reasons, everything adds up. The moment your transfers cross ten lakh rupees in total, the very next transaction whether a gift, education, or travel, will trigger TCS on gift remittances if applicable.
Practical Scenarios
- You remit ₹8 lakh first. Later you send a gift of ₹4 lakh. Here, TCS applies at 20 percent only on the excess ₹2 lakh.
- If you have already crossed the threshold earlier, a fresh gift of ₹5 lakh attracts 20 percent TCS on the entire ₹5 lakh.
- If you cross the threshold but remit education expenses through an eligible loan, no TCS applies.
Refund and Credit: Step-by-Step
- Check Form 26AS to confirm the TCS entry under your PAN.
- File your income tax return and claim the TCS credit reflected in 26AS.
- If the total of advance taxes, TDS, and TCS exceeds your liability, the refund is credited directly to your bank account.
- In case of mismatches, raise a correction request with your authorized dealer or through the Income Tax portal.
Also read: Refund of TCS on International Remittance
Documentation Checklist
To ensure smooth processing of TCS on gift remittances, keep these ready:
- PAN and updated KYC
- Form A2 with purpose code S1302
- Beneficiary details abroad
- Year-to-date record of LRS usage across all banks
- Bank challans and authorised dealer statements
Timing and Cash Flow Tips
- Plan gift transfers strategically to remain within the ₹10 lakh threshold if you want to avoid upfront TCS.
- If you know you will exceed the threshold, be prepared for a temporary 20 percent hold on your funds.
- Reconcile your Form 26AS each quarter so refunds are processed smoothly.
Also know: TCS on Foreign Tour Packages
Common Misconceptions Debunked
- “TCS is an extra tax” – False. It is only a credit that can be claimed back.
- “Threshold applies per bank or per purpose” – False. It applies per individual across all LRS purposes.
- “Even small remittances like $2,000 are taxed” – False, if your total transfers are within ten lakh rupees.
- “Recipient bears the tax” – False. TCS is levied on the sender, not the receiver.
Infographic: TCS on Gift Remittances explained in a simple 2025 cheat sheet for Indian senders
International Cards and Travel Expenses
Currently, international credit card transactions made while you are physically abroad remain outside the LRS framework and are not subject to TCS. However, prepaid forex cards and debit card transactions that qualify as LRS remittances follow the same rules as TCS on gift remittances.
Expert Pre-Send Checklist
Before sending money abroad as a gift, make sure to:
- Confirm the correct purpose code (S1302 for gifts)
- Recalculate your total LRS usage for the year
- Save dealer advice and acknowledgement with TCS details
- Check Form 26AS after each quarter
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Conclusion
The revised framework for TCS on gift remittances brings clarity but requires careful planning to manage cash flow and compliance. By understanding the threshold, applicable rates, and refund process, you can send funds abroad without surprises. With trusted platforms like HOP Remit by moneyHOP, you not only ensure compliance but also gain peace of mind that your remittance is handled with accuracy and care.
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