LRS and TCS explained: sending money abroad for education and investing

What the LRS allows

The Reserve Bank of India's Liberalised Remittance Scheme (LRS) lets every resident individual send up to US$250,000 each financial year (April to March) for permitted purposes — paying university fees and living costs, supporting a child studying abroad, and investing in shares, ETFs or funds overseas. Each parent has their own limit, so a couple can send up to US$500,000 a year between them.

How TCS works

When you send money abroad, your bank collects Tax Collected at Source (TCS) on the amount above ₹10 lakh in a financial year (the ₹10 lakh threshold is per person, across all banks). The rate depends on the purpose:

• Education, paid from your own funds: nil up to ₹10 lakh, then 2% on the amount above it (from 1 April 2026; it was 5% earlier).
• Education, paid from a loan taken from a bank or financial institution: nil.
• Investing abroad (and most other purposes): nil up to ₹10 lakh, then 20% on the amount above it.

TCS is not a cost — but it ties up cash

TCS is an advance tax. It appears in your Form 26AS and can be adjusted against your income tax for the year, or refunded when you file your return. What it does cost you is the use of that cash until you file. Spreading investments across financial years, and between both parents, keeps more of each year's remittance under the ₹10 lakh threshold.

A worked example

A parent sends ₹25 lakh for fees in one financial year from savings. TCS applies only to ₹15 lakh (the part above ₹10 lakh): 2% of ₹15 lakh is ₹30,000, which the parent can claim back against tax. Had the same ₹25 lakh been an investment remittance, TCS would be 20% of ₹15 lakh — ₹3 lakh, also adjustable.