20% Total Country Cost (TCC)
20% Total Cost of Study (TCS)
20% of the total cost of study (TCS)

The recent news that the TCS will be increased from 20% to 30% on foreign remittances has caused a lot of confusion among different segments of the Indian population, with each segment having its own reasons for remitting money abroad.

This is especially true for students who intend to pursue their academic goals overseas. This is a thorough handbook that will help students deal with this tax burden.

Understanding the 20% TCS on Foreign Remittances

Let's first make it clear what is meant by the 20% TCS on overseas remittances. This tax provision, which goes into effect on October 1, 2023, requires banks, money changers, and authorized dealers to withhold 20% of the amount remitted overseas for specified uses.

 

The TCS rates for sums below the Rs 7 lakh threshold are as follows:

a) A fixed fee of five percent when buying international travel packages.

b) 0% for any further remittance purposes.

The TCS charges are as follows for sums beyond the Rs 7 lakh threshold:

a) 0.5% in the case of remittances for educational costs covered by student loans.

b) 5% for transfers related to medical care or education (where the source is personal finances).

b) A fixed 20% fee for the acquisition of packages for foreign tour programs.

d) Twenty per cent of the total amount beyond Rs 7 lakhs for all additional uses.

TCS Calculation on Overseas Education Remittance

There won't be any TCS applied, meaning there won't be a 0% TCS rate and no TCS liability if the remittance amount is less than Rs 7 lakhs.

The TCS rate is 5% when the transfer amount is more than Rs 7 lakhs, such as Rs 10 lakhs, and the funds are coming from personal sources. This is only relevant to excess money beyond Rs 7 lakhs. Thus, the sum owed to TCS would be Rs 15,000, or 5% of Rs 3 lakhs.

When the amount remitted is equal to Rs 10 lakhs and the financing source is an education loan, the TCS rate drops to a mere 0.5% and is only applied to the amount that is more than Rs 7 lakhs, or Rs 3 lakhs. As a result, in this case, the TCS amount due would be Rs 1,500, or 0.5% of Rs 3 lakhs.

Sending money overseas for student maintenance is one area of concern. After you have received more than Rs 7 lakh in international remittances during that fiscal year, you are eligible for a TCS of 20% for "maintenance of close relatives." However, there is a method around this.

Navigating the 20% TCS Effectively

When sending money to students who belong to the "family support" category, their parents or guardians only need to provide documents that show that the money transfer is intended for a student studying abroad. If the link can be displayed, this category  only offers discounted TCS Foreign Education rates (0.5% / 5%).   It is assumed that the amount will be sent abroad to cover the student's living expenses. If the student lives in a university-recognized residence abroad, it is easy to prove that the transfer is for the maintenance  of the student, because the transfer is made to the university's bank account.

However, if the student has his own residence, additional documents such as the student's acceptance letter,  student visa, etc. may be required to establish the link. This allows parents to save money on TCS maintenance.  International credit card charges are currently not invited by TCS. A student can bring an international credit card from India to cover his overseas expenses. Thus, no additional TCS fee will be charged on their expenses  and they can use the savings for educational expenses.  Sending money abroad from India requires careful adherence to RBI rules and compliance with TCS regulations. When financing study abroad, parents should know which remittance  they are making, its LRS code and how much TCS is applied to the remittance.

Once the transaction is completed, related documents like invoice and TCS certificate should be kept safe as they are useful for presenting IT returns. They can facilitate potential tax refunds or deductions. Banks may not always provide sufficient guidance or assistance in these matters. Because of the complexity, it can be beneficial to choose a money transfer company that offers more personal care and guidance.  If you plan to finance your education abroad, it's important to keep a close eye on exchange rates. A well-timed trade can lead to significant savings in conversion costs. Using new age fintech platforms like ExTravelMoney, Remitly and TransferWise can prove beneficial. They not only  facilitate efficient remittance abroad but  also provide guidance on TCS compatibility and ensure affordable remittances.

The Way Forward

While  20% TCS is a financial challenge for students planning to study abroad, proactive financial planning and seeking professional guidance can help mitigate its impact. It is important to remember that pursuing an international education is still possible with careful financial management  and researching available resources, such as an education loan that reduces the impact of TCS at affordable interest rates. Students can  pursue their dreams of international education without jeopardizing their financial stability.

 IF YOU ARE ABOUT TO START YOUR OVERSEAS EDUCATION JOURNEY CONSULT WITH THE OVERSEAS CONSULTANT

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TOC is more than just a consulting firm; we are your educational journey's companions. We take great delight in making dreams come true, as seen by the innumerable success stories of people who have worked with us to achieve their objectives in foreign education.

Director: Vinit Kejriwal

Email: info@theoverseasconsultant.com

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