What is TCS on foreign remittance under LRS?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-07-28 · ~5 min read

⚡ Quick answer

Under the RBI's Liberalised Remittance Scheme (LRS), banks collect TCS (Tax Collected at Source) on foreign remittances once your total crosses ₹10 lakh in a financial year. Rates changed on 1 April 2026 under section 394(1) of the Income Tax Act 2025: education or medical treatment above ₹10 lakh is now 2% (down from 5%), an overseas tour package is a flat 2% with no threshold, and education funded by a loan from a section 80E institution is exempt. Investments, gifts and general travel remain 20% above ₹10 lakh. Crucially, this TCS is not an extra cost — it's a prepaid credit you adjust against your income-tax or get refunded.

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Sending money abroad — for your child's education, an overseas trip, a foreign investment, or to family — can come with a chunky TCS deduction at the bank. Many people panic, thinking they've lost that money to tax. They haven't: TCS is fully recoverable. The rates were also cut on 1 April 2026, and plenty of guidance still quotes the old ones. This guide explains when TCS applies, the current rate for each purpose, the ₹10 lakh threshold, and exactly how to get it back.

1When TCS applies

TCS under LRS kicks in once your foreign remittances in a financial year cross ₹10 lakh (the threshold is aggregate across all your LRS transactions in the year). Below ₹10 lakh, most remittances attract no TCS — except overseas tour packages, which now carry a flat 2% from the first rupee.

⚠️ ImportantThe ₹10 lakh is a per-financial-year, per-person threshold, raised from ₹7 lakh by Budget 2025. TCS applies only on the amount above ₹10 lakh for most purposes.

2The rates by purpose

The rate depends entirely on why you're sending the money. These are the rates from 1 April 2026 under section 394(1) of the Income Tax Act 2025 — a lot of guidance online still quotes the old ones:

Education funded by a loan from a section 80E financial institution: exempt — no TCS at all
Education or medical treatment, not loan-funded (above ₹10 lakh): 2%, reduced from 5%
Overseas tour packages: a flat 2%, with no threshold at all — this replaced the old 5%/20% split
Overseas investments, gifts, general foreign travel (above ₹10 lakh): 20%, unchanged

💡 ExampleSuresh sends ₹15 lakh for his daughter's university fees. If the remittance is funded by an education loan from a section 80E institution, there is no TCS at all. If he funds it himself, TCS applies only to the ₹5 lakh above the ₹10 lakh threshold, at 2% — ₹10,000, which he gets back as a credit against his tax. A friend remitting ₹15 lakh for an overseas property investment would face 20% TCS on the ₹8 lakh above the threshold.

3It's a credit, not a cost — how to get it back

The single most important point: TCS is not a tax you lose. The bank deposits it against your PAN, and it appears in your Form 26AS/AIS. You then:

Claim it as a credit against your total income-tax liability when filing your ITR, OR
Get it refunded if your final tax is lower than the TCS collected
Salaried individuals can also have it adjusted against their salary TDS by informing their employer

✅ TipKeep the bank's TCS certificate and check that the amount reflects in your AIS. When you file your ITR, include it as TCS credit — it directly reduces your tax payable or comes back as a refund.

4Planning your remittances

A few practical tips to manage the cash-flow impact:

The ₹10 lakh threshold is per person — a family can plan remittances across members
For education, a loan from a section 80E financial institution removes the TCS entirely rather than merely reducing it
Remember the money isn't gone — factor TCS into timing, not into your final cost

Key takeaways

TCS under LRS applies once foreign remittances cross ₹10 lakh in a financial year, raised from ₹7 lakh by Budget 2025.
Rates from 1 April 2026: 2% (education/medical, down from 5%), exempt (education via a section 80E loan), 20% (investment/gifts/travel, unchanged).
Overseas tour packages are a flat 2% with no threshold, replacing the old 5%/20% split.
TCS is a prepaid credit, not an extra tax — it shows in your AIS.
Claim it against your income tax or get a refund when you file your ITR.

Frequently asked questions

Can I get the TCS on foreign remittance back?

Yes — TCS is not a tax on you; it's a prepaid credit. It appears in your Form 26AS/AIS, and you adjust it against your income-tax liability or claim a refund when you file your ITR.

What is the TCS rate on money sent abroad for education?

From 1 April 2026 it is 2% on the amount above ₹10 lakh in a year, reduced from the earlier 5%. If the education is funded by a loan from a section 80E financial institution there is no TCS at all — the old 0.5% concessional rate no longer applies. Either way it is recoverable when you file your ITR.

Is there TCS below ₹10 lakh of remittance?

For most purposes, no — TCS applies only on remittances above ₹10 lakh in a financial year, a threshold raised from ₹7 lakh by Budget 2025. The exception is an overseas tour package, which now attracts a flat 2% from the first rupee with no threshold at all.

Does TCS increase my actual cost of sending money abroad?

No — it only affects your cash flow temporarily. The TCS is credited to your PAN and you recover it fully against your income tax (or as a refund), so it isn't a real additional cost.