How the currency converter works
Three things happen when you convert money: the conversion at the market rate, the bank’s margin (its profit on top), and — for Indians sending money abroad — Tax Collected at Source (TCS) under Section 206C(1G) of the Income Tax Act. This calculator handles all three for INR ↔ ten major currencies (USD, EUR, GBP, AED, SGD, AUD, CAD, JPY, CHF, CNY) with cross-pair conversion via the INR peg.
Mid-market vs bank rate
The mid-market rate is the midpoint between the buy and sell rates on the wholesale interbank forex market. Reuters, Bloomberg, Google Finance, and X.com all show the mid-market rate. It’s what currency actually costs at the wholesale level — but no retail customer ever gets it.
Banks add a margin (forex spread) to the mid-market rate when they sell foreign currency to you, and subtract a margin when they buy it back. The margin is the bank’s profit on the transaction. Typical margins:
- Wise (formerly TransferWise) / Niyo / Forex cards — 0.5–1.0%
- Online bank transfers (NetBanking) — 1.0–1.5%
- Branch counter / forex card load at branch — 1.5–2.5%
- Airport forex counters — 3–4%
- Hotel currency exchange — 4–6% (worst)
On a $1,000 conversion, the difference between Wise (0.5%) and airport (4%) is about ₹2,950 — meaningful when you do this regularly.
Liberalized Remittance Scheme (LRS)
Under RBI’s LRS, every resident Indian can remit up to USD 250,000 (≈ ₹2.07 cr at current rates) per financial year for permitted purposes:
- Private travel
- Gift / donations
- Foreign education
- Medical treatment
- Employment / immigration
- Investment in shares, debt instruments, real estate abroad
- Purchase of any other current or capital account transaction (not listed in the “not permitted” list)
Cumulative across all purposes. Exceeding the cap requires explicit RBI approval, which is rarely granted. The calculator flags when your YTD remittance crosses the ceiling.
TCS u/s 206C(1G) — the new Indian forex tax
Section 206C(1G) was introduced in Budget 2020 and amended materially on 1-October-2023. Banks now collect TCS on outbound forex transactions, with rates that depend on the purpose:
- General remittances (investment, gift, maintenance of relatives) — 20% on amount above ₹7 lakh per FY.
- Education abroad funded by an education loan — 0.5% on amount above ₹7 lakh (preferential rate).
- Education abroad funded otherwise — 5% on amount above ₹7 lakh.
- Medical treatment abroad — 5% on amount above ₹7 lakh.
- Overseas tour package up to ₹7 lakh — 5% on the entire amount, no threshold.
- Overseas tour package above ₹7 lakh — 20% on the excess above ₹7 lakh.
Important nuances:
- The ₹7 lakh threshold is per-PAN per-FY — cumulative across all banks and remittance types.
- TCS is on the consideration (the INR amount you remit), not the gain. It is fully refundable as a credit against your final income tax liability when you file your ITR.
- The bank is the collecting agent. They report it via Form 26AS / AIS, so the IT Department sees every LRS transaction.
Worked example — ₹15 lakh foreign education remittance
You’re sending ₹15 lakh to your child’s university in the US for next semester. You took an education loan from SBI for it.
- Threshold: ₹7 lakh.
- Excess above threshold: ₹15L − ₹7L = ₹8 lakh.
- TCS rate (education-via-loan): 0.5%.
- TCS amount: ₹8L × 0.5% = ₹4,000.
- The bank charges ₹15L + ₹4K TCS = ₹15,04,000 from your account.
- The ₹4K TCS appears in your AIS and reduces your tax liability when you file your ITR (or is refunded if your liability is lower).
Same scenario but funded from your savings (not a loan):
- TCS rate (education-other): 5%.
- TCS amount: ₹8L × 5% = ₹40,000. Ten times more.
The TCS preference for education-loan-funded remittances was deliberately designed by the IT Department to nudge families toward formal education loans rather than self-funding from existing wealth.
Cross-pair conversion (EUR → GBP, etc.)
For pairs that don’t involve INR (e.g., EUR → GBP), the calculator triangulates via the INR peg. This is how all retail forex actually works — banks rarely have direct quotes for every cross pair, so they go via USD or local currency. The mid-market result is mathematically equivalent to the direct quote on the wholesale market within rounding.
Strategies to minimise forex cost
- Use Wise, Niyo, or Revolut for occasional transfers — sub-1% margins beat any bank.
- Open a multi-currency forex card for travel — load at home at branch rates (better than airport) and avoid DCC (Dynamic Currency Conversion) traps abroad which add 2-4%.
- Time large transfers when INR is stronger — monthly savings of 1-2% over a 12-month window are common.
- For LRS > ₹7L, plan around the FY boundary if possible — splitting one ₹14L remittance across two FYs avoids the 20% TCS hit on ₹7L.
- Avoid airport / hotel forex entirely. The 4% margin is rarely worth the convenience.
Frequently asked questions
- Is TCS the same as a tax I pay?
- No. TCS is collected by the bank and remitted to the IT Department as a credit toward your final tax liability. When you file your ITR, the TCS shows up as “tax already paid”. If your tax liability is lower, you get the difference back as refund.
- Can I avoid the 20% TCS?
- For purposes other than education-loan / medical / education-other (which have lower rates), no. TCS u/s 206C(1G) is mandatory above ₹7L. The only legal “avoidance” is to keep total outbound LRS below ₹7L per FY per PAN.
- Does sending money TO India attract TCS?
- No. TCS u/s 206C(1G) applies only to outbound LRS. Inbound remittances (NRI to India, foreign salary) are governed by different rules (FEMA, repatriation limits) but no TCS.
- How accurate are the rates in this calculator?
- Mid-market rates are RBI / FBIL reference rates as of 2026-04-17 — refreshed quarterly in the source code. For live rates, check Google Finance or your bank’s rate card. The margin and TCS calculations use exact logic verified by 90+ unit and property-based tests.
Sources
- RBI Master Direction on Liberalized Remittance Scheme
- Section 206C(1G), Income Tax Act 1961 (Finance Act 2020, amended 2023)
- FBIL reference rates (Financial Benchmarks India Pvt Ltd)
- RBI Foreign Exchange Management Act (FEMA) 1999
Disclaimer. Forex rates change every second; the rates shown here are static reference values for illustration. Always confirm with your bank at the moment of transaction. TCS rates are accurate as of the calculator’s last review date and do not substitute for professional tax advice.