Indian residents sent US$321.53 million abroad for investment in overseas equity and debt in August 2026 under the Liberalised Remittance Scheme, more than double the US$152.18 million sent in August 2025, according to RBI data reported on 24 October 2026. As more of this money goes into investments rather than travel, one practical question deserves more attention. GST on foreign remittance, together with the bank's exchange margin and transfer fees, is a cost that an investor pays in both directions and never gets back.
The distinction matters because the costs of a remittance fall into two groups. Tax collected at source (TCS) is large and visible, but it is a prepayment of income tax that can be claimed back. GST on currency conversion, exchange margins and bank fees are smaller, yet they are final. An investor weighing any overseas route, including U.S. real estate, should count the second group with care, because it reduces the amount actually invested and repeats each time money crosses the border.
What GST on Foreign Remittance Actually Taxes
GST is not charged on the money being sent. It is charged on the service of converting rupees into foreign currency, which the bank or authorised dealer provides. Rule 32(2) of the Central Goods and Services Tax Rules, 2017 sets out how the value of that service is measured, and bank fee schedules then apply GST at 18% to that value.
The rule offers two methods. Under the first, the value is the difference between the rate the bank gives the customer and the reference rate for that currency, multiplied by the amount converted. Under the second, which a bank may choose for a whole financial year, the value follows fixed slabs. The published charge schedules of Axis Bank and Ujjivan Small Finance Bank, for example, both use the slab method.
For amounts above ₹10 lakh, the slab value is ₹5,500 plus 0.1% of the gross amount converted, with a ceiling of ₹60,000. A transfer of ₹50 lakh therefore has a taxable value of ₹10,500, and GST at 18% comes to ₹1,890. Because of the ceiling, GST on a single conversion cannot exceed ₹10,800. Banks also charge GST at 18% on their own transfer and SWIFT fees, which adds a few hundred rupees more.
Why TCS Is a Different Kind of Cost
TCS works on a separate basis. Under section 394 of the Income-tax Act, 2025, the authorised dealer collects TCS once a person's LRS remittances cross ₹10 lakh in a financial year. For purposes other than education or medical treatment, which includes investment, the rate is 20% on the amount above that threshold.
On ₹50 lakh sent for investment in one financial year, the bank would collect ₹8 lakh in TCS, against GST of under ₹2,000. The difference in scale can mislead. TCS appears in Form 26AS and is set against the investor's income tax for the year, with any excess refunded after the return is processed. GST, by contrast, is a final cost for an individual, because only businesses registered under GST can claim input tax credit.
TCS still has a cost of its own. The money stays with the tax department until the return is filed and processed, which can take many months, and it earns nothing in the meantime. The U.S. real estate tax guide for Indian investors explains how this credit sits alongside the U.S. tax on the investment itself.
The Exchange Margin Is Rarely Shown as a Fee
The rate a bank offers for converting rupees into dollars is not the market reference rate. Financial Benchmarks India Private Limited (FBIL) has published the daily dollar-rupee reference rate since 10 July 2018, when it took over the task from the RBI. The gap between that benchmark and the bank's card rate is the bank's margin, and it is built into the price rather than shown as a fee.
Because the margin is a spread on the rate, it grows with every rupee converted, while GST under the slab method is capped. On a large transfer, even a small difference in the quoted rate adds up to a meaningful sum. Comparing the bank's offered rate with the FBIL reference rate on the same day, and asking whether the rate can be improved for a large transfer, is a simple check before money leaves India.
Correspondent bank charges can also apply when the money passes through an intermediary bank. The sender usually chooses whether to pay them in full (OUR), leave them to the recipient (BEN) or share them (SHA), and the choice affects how many dollars actually arrive.
The Same Costs Apply When Money Comes Home
An overseas investment involves at least two conversions, and usually many more. Distributions from a U.S. property and the proceeds of an eventual sale arrive in dollars and are converted back into rupees. The same GST slabs apply to inward conversions, and banks charge inward transfer fees as well. Since distributions may arrive several times over the life of an investment, these small charges repeat.
The rupee value of those dollars also depends on the exchange rate on the day of conversion, which can be higher or lower than when the money left India. That is a currency risk rather than a fee, and it can work in either direction. The guide on why Indian investors hold dollar assets discusses how investors think about this exposure, while U.S. tax withheld before the money arrives is covered in how U.S. dividend tax is treated in India.
Risks and Limits of Focusing on Transfer Costs
Lower transfer costs do not make an investment better. Private U.S. real estate carries the risk of loss of capital, and money is usually committed until the property is sold, so an investor cannot pick the exchange rate at exit. Property values can fall, tenants can leave, distributions may not be paid, and debt on a property can be hard to refinance.
Cost estimates have limits too. Bank charges, margins and GST rules can change, and the TCS position depends on each person's total remittances and tax return. The figures in this article show how the rules work as of October 2026 and are not an estimate for any particular transfer. A CA should confirm the tax position, and the bank reviews the purpose and terms of each remittance on Form A2.
Counting Every Cost Before the First Transfer
The RBI figures show Indian investors using LRS for investment far more than a year ago. The tax that draws the most attention, TCS, is the one that can be recovered. The costs that cannot be recovered are smaller for each transfer, but they recur at every conversion out and back, and the exchange margin among them rarely appears on any receipt.
A sensible approach is to treat transfer costs as part of the investment decision, estimate them over the full life of the holding, and read them alongside the structure, fees and risks of the investment itself. The guide to sending money abroad under LRS sets out the remittance process step by step. Eligible investors can review how investing in U.S. real estate from India works on Raveum, including the property, sponsor, ownership structure, fees, risks and offering documents for each opportunity.
Frequently Asked Questions
Is GST charged on foreign remittance from India?
Yes, but not on the amount sent. GST at 18% applies to the bank's currency conversion service and to its fees, such as transfer and SWIFT charges. The value of the conversion service is set by rule 32(2) of the CGST Rules, 2017, so the GST is a small fraction of the remittance.
How is GST on currency conversion calculated?
Under the slab method in the CGST Rules, the taxable value for amounts above ₹10 lakh is ₹5,500 plus 0.1% of the gross amount, capped at ₹60,000, and GST is 18% of that value. On ₹50 lakh, GST comes to ₹1,890, and it can never exceed ₹10,800 for one conversion.
Can an individual claim back the GST paid on a foreign remittance?
Usually not. Input tax credit is available only to businesses registered under GST that use the service in their business. For an individual sending money abroad for personal investment, the GST on currency conversion and bank fees is a final cost, unlike TCS, which is credited against income tax.
What is the difference between TCS and GST on a foreign remittance?
TCS is an advance income tax of 20% on LRS investment remittances above ₹10 lakh a year, and it can be claimed back through the income tax return. GST is a tax on the bank's conversion service and fees, it is much smaller, and an individual cannot recover it.
Is GST charged when money comes back to India from abroad?
Yes. When dollars received from abroad, such as distributions or sale proceeds, are converted into rupees, the bank's conversion service attracts GST under the same slabs. Banks may also charge an inward remittance fee. These costs repeat with every transfer back to India over the life of an investment.
Do lower remittance costs make an overseas investment less risky?
No. Transfer costs affect how much money is invested and how much comes back, but they do not change the investment's risks. Private U.S. real estate can lose value, is hard to sell before exit, may not pay distributions and is exposed to currency movements, whatever the remittance costs.
This article is for general education only and is not investment, tax or legal advice. Rules change and depend on individual circumstances. Investing in private real estate involves risk, including loss of capital, illiquidity, falling property values, distributions not being paid and currency movements. Participation is limited to non-U.S. persons under SEC Regulation S and verified U.S. accredited investors under Regulation D Rule 506(c), and offerings on Raveum are not open to the general public.
