When you send money abroad under LRS, the bank shows you one rupee number. Inside it are several costs, and the largest one never appears as a line on your statement.
1. The exchange-rate spread
Banks convert rupees to dollars at their own card rate, not the market rate you see on Google. The gap is the spread. It varies by bank, by amount and by relationship, from a few paise per dollar for large private-banking clients to more than a rupee for standard rates.
At a dollar near ₹97, a spread of 50 paise is about 0.5%. On a ₹50 lakh remittance, that is roughly ₹25,000, more than every other cost combined.
2. GST on currency conversion
GST at 18% applies to the bank’s conversion service, valued on a fixed formula rather than the full amount. For a remittance above ₹10 lakh, the value is ₹5,500 plus 0.1% of the amount above ₹10 lakh, capped at ₹60,000. On ₹50 lakh, that works out to GST of about ₹1,710.
3. The bank’s wire fee
Most banks charge a flat fee for an outward remittance, commonly ₹500 to ₹1,000 plus GST. Some also pass on a charge from the correspondent bank that routes the wire.
TCS: a cash-flow issue, not a cost
Above ₹10 lakh a financial year, your bank collects 20% TCS on remittances for investment. That money isn’t lost. It is credited against your income tax for the year, and if it exceeds your tax, it is refunded when you file. Salaried investors can also ask their employer to reduce TDS by the TCS paid.
The real cost of TCS is the time your money is tied up. Planning remittances across financial years, or across family members who each have their own ₹10 lakh threshold, reduces it.
How to pay less
- Ask for a quote before you send. Compare the bank’s rate to the market rate at that moment.
- Negotiate. Banks often improve the spread for larger amounts or relationship clients.
- Send fewer, larger remittances. Fixed fees fall as a share of the total.
- Mind the 180 days. Money sent under LRS and left uninvested should be invested or brought back within 180 days.
Example uses assumed figures for illustration. Actual rates and fees vary by bank and change frequently.