Sending money abroad to your NRI child under the LRS — the limit, the TCS, and getting it back

The Liberalised Remittance Scheme lets a resident individual send up to USD 250,000 abroad in a financial year, for almost any legitimate purpose — funding a child's education, supporting their living costs, gifting them money, even helping with an overseas property. The limit is per person, per year, so two parents together can remit up to USD 500,000 in a year if the funds are genuinely each of theirs.

For most families funding a child abroad, that ceiling is generous and rarely the binding constraint. Where it can matter is a one-off large transfer — a property deposit, or a full year of tuition plus living costs at an expensive university — which is why it is worth planning the timing across the parents and across financial years rather than discovering the cap mid-transfer.

The LRS limit and the TCS are two separate things. The limit is how much you are allowed to send; the TCS is the tax collected on part of what you do send. A remittance can be well within the limit and still attract TCS.

The bank does not collect tax on every rupee you remit. TCS applies only to the amount you send abroad above ₹10 lakh in a financial year (aggregated across your LRS remittances). Send ₹8 lakh in the year and no TCS arises at all; send ₹15 lakh and TCS applies to the ₹5 lakh above the threshold, not the whole ₹15 lakh.

The rate on that excess depends entirely on the purpose of the remittance, and this is where parents most often overpay by not flagging the purpose correctly:

The gap between 2% and 20% is large, so it genuinely matters whether a remittance is recorded as education or as a general transfer. Tuition paid to the university, and often associated living costs while studying, fall in the education bucket at 2%. A plain gift to the child, or money for a deposit on a flat, is a general remittance at 20%. And if the education is being funded by a loan from a recognised Indian financial institution, the remittances that loan funds carry no TCS at all — a meaningful reason to route education funding through an eligible loan where it makes sense.

The single most important thing to understand is that TCS is not a fee and not money lost. It is your own income tax, collected in advance and parked against your PAN. Whatever the bank collects appears in your Form 26AS and your Annual Information Statement (AIS), exactly like TDS on your salary or bank interest.

When you file your income tax return for the year, that TCS is set off against your total tax liability. If you owe tax, the TCS reduces what you have to pay. If the TCS is more than your liability — which is common, because 20% of a large remittance can dwarf a retired parent's actual tax — the excess comes back to you as a refund. So a 20% collection on a general remittance is, in cash-flow terms, an interest-free advance of your own money that you recover at filing; it is not a 20% tax on sending money to your child.

The two things that turn this from theory into actual recovery are simple: the TCS must be correctly tagged to your PAN at the time of remittance (so it lands in your 26AS / AIS), and you must actually file a return and claim the credit. A parent who never files, or whose PAN was mis-keyed by the bank, is the one who loses the money — not because the system took it, but because the claim was never made.

Most of the value here is in getting things right before the money leaves, not after. A practising CA looks at the purpose of each remittance and makes sure it is classified correctly with the bank — education at 2% rather than general at 20% where it genuinely is education, or routed through an eligible education loan for nil TCS where that fits. Getting the purpose right at source is the difference between a small collection and a large one.

On the recovery side, the CA confirms the TCS is sitting against the right PAN in Form 26AS and the AIS, and then claims it as a credit in the parent's income tax return — so it reduces tax or returns as a refund rather than being forgotten. For a retired parent with little other income, this is frequently a full refund of everything the bank collected.

Where the funding is large or spans a year, the CA also helps plan the timing — across both parents' USD 250,000 limits and across financial years — and keeps the gift documentation tidy on the Indian side, since a remittance to an adult child abroad is itself an exempt gift between relatives. The aim is a remittance that goes out at the lowest correct TCS and a credit that is fully recovered, with a clean paper trail behind both.

Ramesh and Sunita Sharma, both resident in India, are funding their daughter Neha's master's degree in Canada. Over the financial year they expect to remit about ₹35 lakh — roughly ₹25 lakh of tuition paid to the university and ₹10 lakh toward Neha's living costs and a small gift to help her settle in.

The tuition and living costs are an education remittance. The first ₹10 lakh of the year carries no TCS at all; the amount above ₹10 lakh that is for education is collected at just 2%. So on the education portion, only the slice above the threshold attracts 2% — a modest sum, not a fifth of the money. Had the whole ₹35 lakh been sent as a plain gift instead, the amount above ₹10 lakh would have attracted 20%, a far larger collection.

Whatever TCS the bank does collect lands in the Sharmas' Form 26AS against their PANs. When they file their returns, that TCS is set against their tax; because their taxable income is modest, much of it comes back as a refund. To keep the rate low and the credit clean, they split the remittances sensibly across both their LRS limits, make sure the bank tags the education purpose correctly, and keep the university invoices and bank advices on file. Nothing here is a tax on helping their daughter — it is their own tax, paid a little early and recovered at filing.