Sending money from India to the USA for students runs through the Reserve Bank of India’s Liberalised Remittance Scheme, which lets each resident individual remit up to $250,000 per financial year for tuition, hostel, travel, and living costs. The direct costs you will pay are Tax Collected at Source (TCS) at the bank counter, the exchange-rate markup built into whatever channel you use, and small wire fees on both ends. The 2026 Union Budget raised the TCS exemption to ₹10 lakh and cut the rate on non-loan education transfers to 2%, so the numbers below reflect the current rules.
How Much You Can Send in a Year
Under LRS, every resident individual can remit up to $250,000 per financial year (April through March) for permissible purposes, and education expenses qualify.1Reserve Bank of India. Liberalised Remittance Scheme That single ceiling covers tuition, hostel, travel, and maintenance combined. Anything above it needs separate RBI approval, which is rarely granted for routine educational costs.
The limit is per person, not per family. If both parents are resident individuals, each has an independent $250,000 quota under their own PAN. For most undergraduate and master’s programs a single parent’s allowance covers the year comfortably, but families funding expensive graduate degrees can split remittances across two senders if needed.
Tax Collected at Source: What the Bank Withholds
Before releasing the funds, your bank withholds TCS under Section 206C of the Income Tax Act, 1961.2Indian Kanoon. Section 206C in The Income Tax Act, 1961 The 2026 Budget lifted the exemption threshold from ₹7 lakh to ₹10 lakh and dropped the rate on non-loan transfers from 5% to 2%. The current structure for education remittances:
- Up to ₹10 lakh in a financial year: no TCS, whatever the funding source.
- Above ₹10 lakh, funded by an education loan from a specified financial institution: no TCS.
- Above ₹10 lakh, funded from personal savings: 2% TCS on the amount exceeding ₹10 lakh.
TCS is not a permanent cost. It is an advance credit against the sender’s income tax for the year, claimable when the sender files their return. Hold on to the TCS certificates the bank issues, because you will need them at filing time to reduce your tax owed or trigger a refund.
Documents You Need Before You Start
Banks will not process an outward remittance without a specific paper trail. Assemble everything before you visit the branch or start the online form.
From the Sender
A valid PAN card is mandatory. PAN is how the bank tracks your cumulative remittances against the $250,000 annual ceiling.1Reserve Bank of India. Liberalised Remittance Scheme You will also need proof of relationship if you are remitting as a parent or guardian, and a cancelled cheque or statement for the debiting account.
From the Student
A valid passport and the university’s official admission letter or I-20 (the eligibility certificate U.S. schools issue to F-1 visa holders). These establish the educational purpose, which drives the TCS treatment and the purpose code on the bank’s report to the RBI.
Form A2 and the Purpose Code
Every outward remittance requires Form A2, a declaration under the Foreign Exchange Management Act.3Reserve Bank of India. Form A2 On the form you enter the RBI’s purpose code. For education remittances the code is S0305, “Travel for education including fees, hostel expenses etc.”4Reserve Bank of India. Purpose Codes for Reporting Forex Transactions Using the wrong code can flag the transaction for extra scrutiny.
Forms 15CA and 15CB
Most education remittances also require Form 15CA, filed online on the Income Tax Department’s e-filing portal before the money leaves.5Income Tax Department. Form 15CA User Manual If the payment is not chargeable to income tax in India, Part D applies and the form is short. If the payment is taxable and the aggregate crosses ₹5 lakh in the financial year, a chartered accountant first issues Form 15CB certifying the tax treatment, and you then file Part C referencing that certificate. Families often discover the 15CB step at the last moment, so line up a CA before your first transfer of the year.
Receiving Bank Details
From the U.S. side, collect four things: the receiving bank’s name and address, the account number, the nine-digit ABA routing number, and the SWIFT/BIC code for international routing. Universities publish wire instructions on the bursar’s or student accounts page. For a student’s personal account, the routing and SWIFT codes appear in the online banking settings or can be confirmed by calling the bank.
Where to Send It From, and What It Really Costs
Three channels move education money out of India, and the total cost varies more than most families expect.
Banks (AD Category I)
Traditional banks classified as AD Category I by the RBI handle most education remittances. You already have the account, FEMA compliance is handled internally, and branch staff can catch form errors. The trade-off is price. Banks set their own exchange rate, and the gap between that rate and the interbank mid-market rate you see on financial news is their markup. On a large transfer, that spread often costs more than any headline fee.
AD Category II Dealers
Specialized forex dealers licensed as AD Category II can process education remittances and sometimes offer tighter spreads than large banks. They handle fewer product types overall, and not all support fully online processing, so compare before committing.
Fintech Platforms
App and web platforms that partner with licensed AD banks typically show the exchange-rate markup as a separate line rather than folding it into the quoted rate, which makes comparison easier. The underlying transfer still moves through a licensed bank and correspondent banks, so the paperwork does not change.
The Exchange-Rate Spread Is the Real Cost
Across all three channels, the biggest cost is usually the exchange-rate spread, not a flat wire fee. A bank advertising “no transfer fee” may quote a rate 0.5% to 2% worse than the mid-market rate. On a ₹30 lakh transfer, a 1% markup is roughly ₹30,000 gone to the spread. When comparing providers, look at the dollar amount that will actually land in the recipient’s account after all fees and markups, not just the exchange rate on the screen.
On the receiving end, the student’s U.S. bank may charge an incoming wire fee in the range of $0 to $25 depending on account type. Intermediary correspondent banks in the SWIFT chain can also deduct small processing fees before the funds arrive, which is why the credited amount sometimes falls short of what was sent. Asking the sending bank to use the “OUR” charging option, where the sender pays all intermediary fees upfront, prevents most of these mid-route deductions.
Executing the Transfer and Tracking It
With documents in hand, you can submit through the bank’s online outward remittance portal or in person. Online is faster for repeat senders who have already cleared KYC. A branch visit is useful the first time so a representative can check Form A2 and the recipient details before the wire is queued.
Once the bank debits your account and initiates the wire, they generate an MT103, the SWIFT standard message for a single customer payment. It contains the sender’s reference, amount, currency, value date, and full routing path. Keep it. It is proof the payment was initiated and carries the reference number needed to trace the transfer through correspondent banks if it goes missing.
Share the MT103, or at least the SWIFT reference, with the university’s billing office as soon as you have it. Most schools will mark the account as “payment in transit” and hold off on late fees while the wire clears. India-to-U.S. transfers typically settle in one to five business days, depending on the number of intermediary banks and any weekends or holidays in between. If the funds have not arrived after five business days, contact the sending bank with the MT103 reference and ask them to open a trace.
What the Student Should Handle on the U.S. Side
Indian compliance is only half the picture. The student receiving the money may have separate reporting duties to the IRS, and one of them carries penalties large enough to matter.
Send Tuition Directly to the University
When parents wire money to the student’s personal U.S. account and the total gifts from a single nonresident alien exceed $100,000 in the tax year, the student must report them on Part IV of Form 3520, with each individual gift over $5,000 separately identified.6Internal Revenue Service. Gifts From Foreign Person No tax is owed on the gift, but missing the filing triggers a penalty of 5% of the unreported amount per month, up to 25%.7Internal Revenue Service. International Information Reporting Penalties On a $120,000 transfer that is up to $30,000 in penalties for a form most families have never heard of.
Under 26 U.S.C. § 2503(e), any amount paid directly to an educational organization as tuition on behalf of another person is a “qualified transfer” and is not treated as a gift at all.8Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts Wiring tuition straight to the university, rather than routing it through the student’s personal account, keeps that portion outside the gift-reporting rules entirely, whatever the amount. Living-expense money sent to the student’s account still counts toward the $100,000 threshold, so structure the transfers deliberately: tuition to the school, maintenance to the student.
FBAR and FATCA Usually Don’t Apply Early On
F-1 students are generally treated as nonresident aliens for their first five calendar years in the U.S. under the substantial presence test exemption in IRC Section 7701(b).9Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes10Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts11Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets For most undergraduates and two-year master’s students, this is a concern for later, not for the first transfer.