The recent changes to LRS as part of Budget 2023 have created understandable concern among Indian students and their families. That's why Flywire is committed to providing comprehensive information about the implications of these changes, helping you understand the key aspects and how it affects you.
Before diving in, we’ll address a key question: Will this impact TCS for education expenses? No!
With that out of the way, the rest of this post will help you understand the changes taking place, what exactly it means for Indian students and their families, and the steps Flywire is taking to ensure our TCS process remains simple and robust.
What is changing?
The Reserve Bank of India (RBI) announced updates to the Liberalized Remittance Scheme (LRS) in February. Effective July 1, Tax Collected at Source (TCS) of 20% will be levied for all outward remittances except those for Education and Medical Expenses.
Education Expenses remain unchanged at 5% and 0.5% for amounts over 7 lakh where the source of funds is a bank account or education loan, respectively. Leisure travel will fall under the 20% tax, but travel for education will not be impacted.
Type of remittance | Old tax rates (through June 30, 2023) | New tax rates (effective July 1, 2023) |
| Studies abroad, where the source of funds is a resident bank account Or Medical Expenses | 5% of amount in excess of INR 700,000 in a financial year | 5% of amount in excess of INR 700,000 in a financial year |
| Remittance related to studies abroad, where source of fund is an educational loan | 0.5% of remittance amount in excess of INR 700,000 in a financial year | 0.5% of remittance amount in excess of INR 700,000 in a financial year |
All outward remittances other than education and medical treatment | 5% of remittance amount | 20% of remittance amount |
How do these changes affect Indian students and their families?
While other remittances under LRS will be experiencing changes, Education Expenses will remain at 5% (for bank accounts) and 0.5% (for education loans) for amounts over ₹700,000. Education Expenses include tuition, accommodations, utilities, and daily living expenses (e.g., groceries, transportation)
It is important to note that travel for education will fall under Education Expenses, while leisure travel will be subject to a 20% TCS.
At this time, it is unclear whether the forex cards which many international students choose to use will be subject to the lower tax rate. The Reserve Bank is expected to issue a decision on the matter in the coming months.
What is Flywire doing for students and their families?
We here at Flywire have put a lot of thought into making the journey simple and easy. Our goal is to create a best-in-class payment experience. We as an entity ensure that when the hard-earned money of an Indian parent is converted into tuition fees and living expenses that it is done in a safe, simple, and easy manner.
We’re very proud to make the statement as Flywire is one of the very few companies who have built a very robust TCS process into our user journey for Tuition Payments and Living Expense Transfers.
Tuition Payments:
Flywire partners with schools and universities, this ensures that tuition and other education payments are classified correctly for LRS. Our Global Payments team has worked with our banking partners to ensure that the TCS process will remain simple and hasslefree.
This commitment to simple, hassle-free payments applies to all the schools shown at pay.flywire.com.
Living Expense Transfers:
Because of our expertise in education, our Student Expenses solution is designed to only move funds which are classified as living expenses related to education.
To learn more about how Flywire is helping to fund student’s living expenses, visit studentservices.flywire.com
Disclaimer: This article is meant for education purposes only and should not be considered financial advice. Please consult with an accountant, financial planner or other financial professional with regards to your specific situation.