Sending money abroad to family: how to avoid the 20% tax collection

Parents often want to send money to a son, daughter, or son-in-law living abroad. Done the wrong way, a big chunk gets held back as tax (called TCS) before the money even leaves. Done the right way, that does not happen. Here is how it works.

First, the gift itself is tax-free

A gift of money to a relative is fully tax-free in India, whatever the amount. A son, daughter, son-in-law, and daughter-in-law all count as relatives. For money, a gift deed does not need to be registered; a simple notarised gift deed is enough as proof.

So the gift is not the problem. The problem is how the money is moved out of India.

The tax trap: TCS on foreign transfers

If a resident sends money abroad directly under the Liberalised Remittance Scheme, tax is collected at source. From 1 April 2025, there is no TCS up to 10 lakh in a year, but above 10 lakh, TCS is 20% for gifts and most purposes. This is not an extra tax you lose; you can adjust it against your tax or claim it back. But it does lock up your money for months.

The cleaner route: use an NRO account

Here is the part most people do not know. If instead of sending money abroad you transfer rupees to your relative's NRO account in India, that is a domestic transfer, so no TCS applies. Your relative can then send the money abroad from the NRO account, up to 1 million US dollars a year, under the separate rules for NRO accounts (governed by FEMA and the RBI, not the Liberalised Remittance Scheme).

So the simple plan is:

1. Give a notarised gift deed to your relative.
2. Transfer the rupees to their NRO account (no TCS).
3. They repatriate from the NRO account, with the bank forms completed.

One change for 2026

When money is sent abroad, two forms are filed (a declaration and an accountant's certificate). From 1 April 2026 these are renumbered: the old Form 15CA is now Form 145, and the old Form 15CB is now Form 146. The process is the same, only the names changed.

Planning to send money to family abroad and want to do it without losing 20% to TCS? Get a quote and we will plan the cleanest route and handle the forms.

Related reading on our site: NRE vs NRO accounts explained.

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