20% TCS on Foreign Remittances, Who Actually Pays, and How NRIs Are (Mostly) Untouched.

Section 206C(1G) of the Income-tax Act was introduced by the Finance Act, 2020 at a 5% Tax Collected at Source rate on most foreign remittances under the Liberalised Remittance Scheme, above an annual threshold of seven lakh rupees per person. The Finance Act, 2023 raised the rate to 20% for most purposes. The original 2023 notification briefly removed the ₹7L threshold for non-education / non-medical purposes; a subsequent Ministry of Finance clarification in June 2023 restored it. The final 20%-above-₹7L structure took effect from 1 October 2023. The number stuck. WhatsApp forwards stitched together a version where India was quietly taking a fifth of every dollar leaving the country.

That version is wrong. Three things make it wrong, especially for an NRI reading the forward.

LRS, Liberalised Remittance Scheme, is a Reserve Bank framework. The eligibility rule sits at the top of the master direction: only a person resident in India under FEMA can use LRS. An NRI is, by definition, not eligible.

Your NRO repatriation does not move through LRS. It moves through a separate regime. One million US dollars per financial year per person (aggregated across all your NRO accounts), certified by Form 15CB from a Chartered Accountant, channelled via your AD bank. No 20% TCS. A different rulebook entirely, with its own caps and its own paperwork.

If your bank ever quotes you 20% TCS on an NRO repatriation, the request was filed wrong. The correct route is Form A2 with 15CA/15CB documentation, not LRS.

The most common case we see is not the NRI paying TCS. It is their parents.

Picture this. Your father in Bengaluru sells his old flat. He wants to send you fifty lakh for a property down payment in Seattle. He uses LRS. That remittance crosses the ten-lakh annual threshold, and the AD bank collects 20% TCS on the excess. He still gets the money out. The TCS shows in his Form 26AS. He claims it as a tax credit in his next ITR.

If his total tax liability for the year is lower than the TCS collected, he gets the difference back as refund. The 20% is a temporary cash flow hit, not a permanent tax. Many seniors do not know this. They file no ITR because their pension is below the threshold, and the TCS sits trapped at the IT Department.

A few sub-rules that matter:

You came home for two months. Bought a laptop. Paid hospital bills. Booked a domestic flight. None of that triggers Section 206C(1G). The TCS scheme applies to remittances OUT of India. Money spent INSIDE India from your local cards or NRO account is invisible to this rule.

The tricky case is the NRI who is briefly resident again. FEMA residency under Section 2(v) is not a one-day-count rule. The base test is the preceding financial year, did you spend more than 182 days in India in that year. But the purpose test can override the count either way. If you satisfy the 182-day count but you are abroad for employment, business, or any uncertain-duration purpose, you remain a non-resident. And if you don't satisfy the day count but you came to India for an uncertain-duration stay, you can become a resident from day one. Most NRIs who move back permanently fall into that second bucket, resident under FEMA from arrival, even before the 182 days tick over. From that point, your next outbound remittance from your Indian bank to your foreign account starts counting toward LRS. The ₹10L threshold and the TCS rules now apply to you. (FEMA residency and Income-tax Section 6 residency are different tests with different day-counts. Your CA needs to map both before your next remittance.)

This is the trap that catches returning NRIs in their transition year. Your old expat outflows used to move through non-resident channels. Your new outflows are LRS-channelled. The bank may not flag the change. Your KYC categorisation still shows 'NRI' months after your actual return, but the rule has switched under the hood.

We see this every season. A retired couple sells a flat, wants to gift the proceeds to their NRI child. They route it through LRS. The bank collects TCS. Two months later they call us asking why ₹15 lakh of their gift money is sitting with the IT Department.

What they did not know:

The trick is timing. The remittance should happen in a financial year where the ITR will be filed promptly. Split a ₹14 lakh gift across two financial years, say ₹6.99L on 30 March and ₹6.99L on 1 April, and the threshold doesn't trigger in either year. The TCS doesn't kick in. One transfer of ₹13.98L on a single date, on the other hand, hits the threshold and the bank collects ₹1.4 lakh upfront.

If you are advising your parents, sister, or anyone resident sending you or your children money abroad:

Keep all the TCS challans. Form 27D is what the bank issues. Save it.

File ITR even if income is below the basic exemption. The TCS credit only flows through if the ITR is filed. Many seniors skip ITR because their pension is below threshold, and the TCS stays trapped, sometimes for years, sometimes forever.

Plan large gifts across financial years if the timing allows. Two ₹6.99 lakh remittances on either side of 31 March don't cross the threshold. One ₹13.98 lakh crosses it.

If your parents have already lost TCS to a remittance and never filed ITR, past assessment years can still be recovered under the CBDT's Section 119(2)(b) condonation framework. The window has narrowed in recent years, so the sooner you start, the more you can pull back. A late ITR with proper condonation paperwork, in the right hands, can pull back lakhs of trapped TCS.