There is good news for students and parents who want their children to study abroad. The Indian government has provided a much-needed relief for students and their families. The relief is that there will be no TCS (Tax Collected at Source) on education loans taken under the Liberalised Remittance Scheme (LRS). Let’s explore what this means, why it matters, and how it impacts your financial planning and ITR filing.
What is TCS under LRS?
TCS stands for tax collected at source and LRS means Liberalised Remittance Scheme. Thus, under the TCS regulations, the banks collect taxes when individuals send money abroad. It applies to funds you transfer internationally for travel, investment, gifts and education.
Previously, the 5% TCS was charged on remittances for education exceeding Rs. 7 lakhs per financial year. This 5% TCS applied even if funds were obtained through education loan. As a result, families suffered and it was a huge burden for them.
Latest Update: No TCS on Education Loans
As per the recent guidelines from the Government of India (effective October 1, 2023), TCS is not applicable on remittances made for foreign education if the payment is sourced from an education loan.
To give you a clearer picture, here’s how the new TCS structure looks across various purposes of outward remittances under the Liberalised Remittance Scheme:
| Purpose | Old TCS (till March 31, 2025) | New TCS (from April 1, 2025) |
| Education via loan | Nil up to ₹7 lakh, 0.5% above ₹7 lakh | No TCS at all – any amount |
| Education/Medical (not via loan) | Nil up to ₹7 lakh, 5% above ₹7 lakh | Nil up to ₹10 lakh, 5% above ₹10 lakh |
| Other purposes (e.g., travel, investment) | Nil up to ₹7 lakh, 20% above ₹7 lakh | Nil up to ₹10 lakh, 20% above ₹10 lakh |
What’s impacting you by the new TCS rule for education loans?
- You do not need to pay a hefty amount upfront.
- In order to claim refunds, you needed to adjust tax liabilities. However, if you are now paying through an education loan, you will need not to pay taxes and your ITR Filing gets simpler.
What if you are not using an education loan and sending money abroad?
If you’re funding your education abroad from savings or other sources without an education loan, the TCS still applies at 5% for remittances beyond ₹7 lakh. However, this amount can be claimed back through ITR Filing.
Tip: Always keep the remitter’s PAN details updated with your bank to ensure correct TCS deduction and accurate credit in Form 26AS.
Conclusion
In conclusion, “No TCS on Education Loans” rule is a welcome move for Indian students aiming to study abroad. It reduces financial pressure and eases tax-related complications during ITR filing.
If you need further assistance or have any doubts, our experts are here to help you. Call us: 8881-069-069.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.