The Finance Ministry announced a 20% tax collection at source (TCS) for all international transactions starting July 1, 2023 on May 16, 2023.
This is covered by the LRS (Liberalised Remittance Scheme).
The government then clarified that payments made with overseas debit or credit cards up to 37 lakh per financial year will not be subject to TCS
However, for students who are studying overseas, the 20% TCS will not apply if the tuition is paid with the help of an education loan. On the same, just 0.5% TCS will be assessed.
If source of funding is not an education loan, then money transferred overseas for the purpose of education will be subject to TCS at 5%, if the amount is above 27 lakh
Parents who send money to help their children with living expenses while they are studying abroad must pay a TCS of 20% because it is not a direct educational expense.
If one can demonstrate that money is being sent overseas for educational purposes, such as university-provided housing, then 5% TCS will be applied for the same.