If you’ve ever tried sending money abroad from India — maybe for your child’s college fee, family support, a dreamy summer holiday, or making a business payment — you’ve probably stared at the final bill and thought, “Why is this so expensive?” Taxes and hidden charges pile up, and GST on foreign remittance can feel like an unsolvable riddle. The rules for how much GST you must pay, who has to pay it, and on which services, have changed a lot in recent years. And, unless you have a tax expert on speed dial, it’s easy to get lost. The thing is, the Indian government isn’t just interested in your money transfers; it wants its share every time INR leaves Indian shores in a legal way. But how much exactly? And does everyone have to pay the same?
What is GST on Foreign Remittance and How Does It Work in 2025?
Let’s cut through the jargon. GST, or Goods and Services Tax, is a consumption tax that’s been hanging around since July 1, 2017. When you send money from India to another country — whether for studies, medical expenses, gifts, travel, investments, or business — your bank treats that transaction as an outward remittance. Since 2012, these have been regulated under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India, which lets you send up to $250,000 per financial year per individual.
But what about GST? Here’s where it gets confusing. You don’t pay GST on the amount you send itself; instead, GST is levied on the service fee (called the "foreign currency conversion markup" or "commission") that the bank or money transfer service charges you for handling the transfer. The standard GST rate on this markup is 18%. So, if your bank takes a conversion fee of ₹1,000 to help send your ₹5,00,000 abroad for tuition, you’ll pay ₹180 (18% of ₹1,000) as GST. This applies whether you’re transferring funds online or at a physical bank branch, using established players like HDFC, ICICI, SBI, Axis, Kotak, or even digital-first payment apps.
Here’s a quick look at how GST is levied on currency conversion for remittance:
| Amount of Currency Exchanged | GST on Bank Commission | Typical Example |
|---|---|---|
| Up to ₹1,00,000 | 1% (min ₹250) | Sending $500 to family |
| ₹1,00,001-₹10,00,000 | ₹1,000 + 0.5% of the excess over ₹1 lakh | Paying university fee |
| Above ₹10,00,000 | ₹5,500 + 0.1% of amount over ₹10 lakh (max ₹60,000) | Large business payment |
Remember, all these slabs are for the service fee charged by banks, not the amount you transmit. The 18% GST is then applied to this fee. Banks add it to your bill, and there’s often a TCS (Tax Collected at Source) too!
It doesn’t end there. Since October 1, 2020, the government has also started collecting TCS on certain foreign remittance transactions. For most purposes, TCS is 5% if you send more than ₹7 lakh a year (apart from some exceptions for education via loans, where it’s 0.5%, or medical reasons, and foreign tour packages, where it’s 20% of the amount over ₹7 lakh since FY24). This adds another layer to your cost.
Which Foreign Transfers Fall Under GST and When Are You Exempt?
All outbound foreign currency transfers from India conducted through banks or authorized Forex dealers fall under scrutiny — but the actual GST is always on the bank’s commission or service charge, not the outbound amount.
Here’s where it gets interesting (and often, frustrating):
- For Individuals: Whether you’re sending money for higher studies, covering medical costs, sending support to family, making investments, or just booking a vacation, GST is applicable on the bank’s service charge — no matter why you’re remitting. Even sending gifts above certain limits is covered.
- For Businesses: If you’re a business paying for imports (not goods, but services), royalties, consultation, investments, or franchisee fees abroad, you pay GST as described above. For import of goods, IGST applies at customs.
- Exemptions: The only real relief is if your transfer is processed through government channels, or if you’re remitting under very specific exemptions like donations to certain international charitable agencies approved by the government. Those are rare. Even if you claim an exemption, the bank has to comply strictly since fines and penalties can come their way for lapses.
There are also some misleading myths. People sometimes believe sending tuition fee means “no tax” — but you will pay GST on the markup fees, and TCS may also kick in. Even sending medical money doesn’t spare you if your bank charges a commission. If you’re thinking of transferring under the $250,000 LRS cap — say, breaking it up to stay under the radar — the tax and GST are still calculated in total across all transactions in the year.
Working with digital remittance apps? GST rules are exactly the same if they’re registered in India — even an app like Wise or Remitly, which partners with Indian banks for local recipients. If you route money via unauthorized informal channels (which is illegal), you dodge GST, but you risk prosecution, seizure, and even jail. There’s literally no wiggle room in the law.
On top of GST, banks and Forex operators sneak in a “spread”— a hidden margin on the exchange rate — which, while not taxed by GST separately, increases your cost. You don’t see this on the fee receipt but you feel it in the final tally.
Pitfalls, Hidden Costs, and Tips for Smart Foreign Remittance
So, if you’re planning a transfer, here are some tips, facts, and classic pitfalls you should watch out for.
- Check the Breakdown: Get a quote from your bank or app showing the commission, GST, and TCS separately before you hit send. Many banks won’t itemize until you ask.
- Doctor’s Orders: Sending money for overseas medical treatment? Collect all supporting bills and medical reports. While GST still applies on the bank’s fee, TCS rates are lower for medical or education remittances (5% after ₹7 lakh).
- Use Your Annual Limit Wisely: Since GST and TCS apply over cumulative annual remittances, try bunching necessary transfers to avoid multiple surcharges.
- Digital Doesn’t Mean Cheaper: You might think payment apps offer lower charges, but GST rules won’t budge. Still, fintech apps sometimes offer lower markups or fixed fees than traditional banks.
- Claiming TCS: You can claim TCS as a refund or against your income tax due — but GST on bank fees isn’t refundable. It’s a true "sunk" cost, embedded forever in your remittance trail.
- Beware of the Spread: That difference between the mid-market forex rate and what your provider gives you can eat up more money than GST and TCS combined. Always check the "live rate" online so you’re not taken for a ride.
Recent RBI data shows that remittances out of India have been rising steeply: in FY24, Indians outwardly remitted a record $31.7 billion, up from $19.6 billion just three years ago. The top uses: Travel, education, gifts, and investments. Banks and money transfer services make thousands of crores in fees, commissions, and GST each year. This fierce competition means it pays to shop around — one bank’s markup can be double another’s, so don’t just pick the closest branch.
To wrap up, anyone sending money abroad — whether as a private parent, a business owner, or an ambitious student — is now subject to GST on the provider’s markup fee, not the remittance amount. The current standard is 18%, and the only way to lower your total cost is to hunt for a bank or currency transfer app with the lowest possible markup, and keep your annual remittances below the TCS thresholds if possible. Always check the latest RBI notifications for changes, as these rules have a habit of shifting, especially around budget season.
Don’t let hidden GST charges bite into your foreign dreams. Ask, compare, and understand the fine print every single time you send money abroad. That way, your cash — not your taxes — travels the farthest.
