New LRS & TCS Rules for International SaaS and Cloud Payments in 2026

If you are an Indian startup founder, freelancer, or digital marketer, you likely rely heavily on international SaaS tools—AWS, Google Cloud, Figma, GitHub, or OpenAI.

However, paying for these services using an Indian credit card has become increasingly complex and expensive due to the updated Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS) rules in 2026. This article explains the regulatory framework, what it means for your cash flow, and how to remain fully compliant while managing costs.

Understanding the LRS and TCS Framework

The Liberalised Remittance Scheme (LRS), administered by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), allows resident individuals to remit up to $250,000 per financial year outside India for permissible purposes—including education, travel, investments, and software subscriptions. This limit is cumulative across all outward remittances made by an individual in a given financial year (April to March).

To monitor high-value foreign spending, the Finance Ministry introduced Tax Collected at Source (TCS) on remittances made under LRS. The current TCS structure for most LRS transactions (other than education and medical purposes) is:

• Under ₹7 Lakhs per financial year: 0% TCS applies. Your bank or card network will not deduct any additional tax.
• Above ₹7 Lakhs per financial year: A 20% TCS is levied on the amount exceeding the ₹7 Lakh threshold.

Education and Medical Exceptions: Remittances for education (through a loan from a financial institution) and medical treatment attract a lower TCS rate of 0.5% and 5% respectively, subject to specific conditions. General SaaS or cloud subscriptions do not qualify for these reduced rates.

Practical Example: If you spend ₹10 Lakhs in a year on international software subscriptions using your personal credit card, the first ₹7 Lakhs is exempt. On the remaining ₹3 Lakhs, your bank will deduct ₹60,000 (20%) directly from your linked account as TCS. This is deposited with the government against your PAN.

FEMA Compliance and Permissible Transactions

All outward remittances under LRS must comply with FEMA regulations. Paying for legitimate international SaaS subscriptions and cloud services is a permissible current account transaction under FEMA. However, several compliance obligations apply:

• Purpose Code Reporting: Banks require individuals to declare the purpose of each remittance. Payments for software subscriptions typically fall under purpose codes related to “computer services” or “business and management consultancy services” as defined by the RBI.
• Annual Cap Adherence: Individuals must not exceed the $250,000 annual LRS cap. Exceeding this limit without RBI approval constitutes a FEMA violation and can attract penalties under Section 13 of FEMA, including fines up to three times the amount involved and possible compounding proceedings.
• Self-Declaration: For transactions below specified thresholds, banks rely on the customer’s self-declaration regarding the purpose and LRS utilisation. Providing false declarations is a serious regulatory offence.

Form 15CA and Form 15CB Requirements

For certain cross-border remittances, Indian tax law (Section 195 of the Income Tax Act) requires the remitter to furnish Form 15CA (an online self-declaration) and, in some cases, Form 15CB (a certificate from a Chartered Accountant).

• Form 15CA: Required for most taxable foreign remittances. It is submitted online on the Income Tax e-filing portal before the remittance is made. The bank will typically ask for the acknowledgement number before processing the wire transfer.
• Form 15CB: A CA must certify the nature of the remittance, the applicable Double Taxation Avoidance Agreement (DTAA) provisions, and the tax deductibility, if any. It is required for remittances above ₹5 Lakhs in a financial year that are not covered by specific exemptions.

For routine SaaS subscription payments made via international credit cards, banks generally handle TCS deduction automatically and Form 15CA/15CB may not always be required—particularly for small consumer-grade transactions. However, larger wire transfers to foreign SaaS vendors may trigger these requirements. Consult your CA to determine when filings are mandatory for your specific situation.

How International SaaS Companies Handle Indian Subscriptions

From the vendor side, international SaaS companies selling to Indian customers face their own compliance landscape:

• GST on Digital Services (OIDAR): Foreign companies providing Online Information and Database Access and Retrieval (OIDAR) services to Indian consumers are required to register for GST in India and charge 18% GST. This is separate from LRS/TCS and applies to the vendor, not the buyer.
• Billing in INR vs. USD: Some international SaaS platforms have begun billing Indian customers in INR through local payment processors. INR billing avoids forex markup charges and may reduce or eliminate TCS applicability since the transaction does not constitute a foreign remittance. Confirm the billing currency and underlying settlement mechanism with your vendor.
• Tax Invoices for Input Tax Credit: Always request a proper GST-compliant tax invoice from international vendors registered in India. This allows your business to claim Input Tax Credit (ITC) on the GST paid.

Impact on Startups Buying International SaaS

For a bootstrapped startup, paying AWS or Google Cloud bills from a founder’s personal credit card is common practice. However, cloud bills can easily exceed the ₹7 Lakh threshold within a single financial year.

When you hit the limit, the consequences compound:

1. Cash Flow Crunch: A 20% upfront TCS deduction severely impacts working capital, even though the amount is refundable.
2. Forex Markups: Banks charge a 2% to 3.5% currency conversion markup, plus 18% GST on that markup—costs that are not refundable.
3. Transaction Declines: If your savings account does not hold sufficient balance to cover both the SaaS bill and the 20% TCS, the bank may decline the transaction, potentially causing service interruptions on your cloud infrastructure.
4. Accounting Complexity: Tracking TCS credits across multiple personal card transactions and reconciling them in your books adds administrative overhead.

The Corporate Card Exemption

The LRS limits and TCS rules apply only to resident individuals. They do not apply to corporate entities.

If your business is registered as a Private Limited Company, LLP, or other recognised legal entity, and you obtain a corporate credit card or make wire transfers through the company’s current account, those international payments are treated as business remittances—not personal LRS transactions. As a result:

• The ₹7 Lakh threshold and 20% TCS do not apply to the company.
• The company’s outward remittances are governed by FEMA’s current account rules for businesses, which permit payments for legitimate imports of services without the LRS ceiling.
• Proper invoicing, purpose declarations to the bank, and GST treatment still apply.

This is not a workaround—it reflects the actual legal distinction between individual and corporate remittances under FEMA and the Income Tax Act. Using a corporate structure for genuine business expenses is fully compliant.

How to Claim Your TCS Refund

If TCS has already been deducted on your personal international card spend, it is not lost—it is an advance tax payment credited against your PAN.

1. Check Form 26AS and AIS: The deducting bank deposits TCS with the government against your PAN. It will appear in your Form 26AS and Annual Information Statement (AIS) within a few weeks of the deduction.
2. Adjust Against Tax Liability: When filing your Income Tax Return (ITR), the total TCS paid is available as a credit and reduces your final tax payable for the year.
3. Claim a Refund: If your total income tax liability for the year is less than the TCS deducted, the Income Tax Department will refund the excess amount to your bank account, along with applicable interest under Section 244A.

Keep all credit card statements, bank TCS certificates, and vendor invoices as documentation to support your ITR filing and any scrutiny by the tax authorities.

Domestic Payments and UPI

It is important to note that UPI (Unified Payments Interface) is a domestic payment rail. Solutions like VyaparGateway that operate on UPI are designed for rupee-denominated transactions between Indian parties. They do not facilitate international remittances or foreign currency payments. For cross-border SaaS subscriptions, you will need to use international credit cards, forex cards, or wire transfers through your bank—all subject to the LRS/TCS framework described above.

---

This article is for informational purposes only. LRS/TCS rules are subject to change based on government notifications and RBI circulars. The information above reflects the regulatory position as understood at the time of writing. Consult a Chartered Accountant or FEMA specialist for advice tailored to your specific cross-border payment compliance needs.