Planning to Study Abroad? 0.5% Tax on Student Loan Over Rs. 7 lakh


Subhashri Roy
Updated on Jan 14, 2021 02:11 PM IST

All foreign fund transfers will attract a TCS of 5% for an amount above INR 7 lakh. However, the tax on all education-related foreign remittances funded by loans will be just 0.5%. 

Planning to Study Abroad? 0.5% Tax on Foreign Education Loan Over Rs. 7 lakh

Planing on going abroad for higher education? All education-related foreign remittances funded by loans will attract a tax collected at source (TCS) of 0.5 per cent for an amount exceeding INR 7 lakh. However, all other foreign fund transfers along with educational remittances not financed through a loan and above INR 7 lakh will be taxed at a TCS rate of 5 per cent.

From foreign tour packages to every other foreign remittance where the money is transferred under Reserve Bank of India’s Liberalised Remittance Scheme (LRS), a tax will be collected at source unless it is already deducted at source (TDS) on the amount. Under the LRS, all resident individuals including minors are allowed to remit up to $250,000 (approx. INR 1.83 crore at an exchange rate of 73.50) in a given financial year. The same can be utilised to pay travel expenses, studying, medical treatment, supporting close relatives, buying gifts and donations, and so on.

Further, it should be noted that the tax will not be an additional cost or tax on the fund transfer which will be reflected as a tax credit in the Form 26AS and any remittances made after March 2020 will be count towards the 7 lakh threshold for the financial year 2020-21. 

Also Read: Over 91% of Indian Students Wish to Study Abroad Despite COVID-19: Study

Naveen Wadhwa, deputy general manager of Taxmann, said that for students planning to study abroad, if the amount being remitted has been paid from an education loan as defined in Section 80E, then the TCS shall be 0.5 per cent on an amount above INR 7 lakh. However, if the buyer fails to provide his/her PAN, the tax will be collected at the rate of 5 per cent.

Many financial institutions have said that the tax-collected-at source is applicable on remittances to customers from October. 

Also Read: US Still the Most-Preferred Study Abroad Destination for January 2021 Intake: Survey

Wadhwa further added that the provision in the new sub-section (1G) in Section 206C under The Finance Act, 2020 says that the collection of tax shall be done by an authorised dealer or an overseas tour operator.

Stay tuned to catch all the latest news and updates on foreign education!

You can share this post!

Admission Open 2024

University of Hartford

West Hartford, USA

University of Southampton

Southampton, United Kingdom

Related Articles

Aug 18, 2023 04:28 PM IST

How to Apply for Masters in USA?

Aug 03, 2023 01:18 PM IST

Documents Required for TOEFL

Our Study Abroad Offerings

Related Articles

Popular Universities to StudyAbroad

Planning to study abroad?

Interested in Studying Overseas?

Connect with us and kickstart your learning journey for a rewarding experience!

By proceeding ahead you expressly agree to the CollegeDekhoAbroad Terms of Use & Privacy Policy.