What is TCS on foreign remittance under LRS?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-08-18 · ~8 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

5Adjusting TCS against your salary TDS

Waiting until you file the return is not the only way to recover TCS, and for a salaried person it is rarely the best one.

Section 192(2B) allows an employee to declare TCS collected during the year to their employer, who must then take it into account when computing monthly TDS on salary. The effect is that your take-home pay rises for the rest of the year instead of the money sitting with the department until a refund arrives.

The declaration is made in the prescribed form with the TCS certificate attached. Most payroll teams will process it; most employees never ask.

✅ TipDo this in the same financial year the TCS was collected. It cannot be carried back once the year closes.

6Getting the paperwork right

The credit is only as good as the record of it, and two documents matter.

The bank or authorised dealer must issue Form 27D, the TCS certificate, and the collection should then appear against your PAN in Form 26AS and in the AIS. If it does not appear there, the credit cannot be claimed however clearly the bank statement shows the deduction.

The commonest failure is a PAN not quoted, or quoted incorrectly, at the time of remittance — which also causes TCS to be collected at a higher rate. Check the PAN on the A2 form before the transfer, not afterwards.

7The LRS limit itself, separate from the tax

TCS is a tax question. The LRS cap is a separate exchange-control question and the two are often conflated.

The scheme permits a resident individual to remit up to USD 250,000 per financial year for permitted current or capital account transactions, without RBI approval. The limit is per person, so a family can remit a multiple of it, and it includes remittances by minors, for whom the guardian countersigns.

Certain purposes remain prohibited under the scheme regardless of amount — margin trading, lottery, and the purchase of foreign currency convertible bonds among them.

8Non-residents are outside the scheme

The Liberalised Remittance Scheme and the TCS attached to it apply to resident individuals. A non-resident cannot use LRS at all, so the rates on this page do not govern their remittances.

An NRI repatriates from an NRO account under a separate limit of up to USD 1 million per financial year, supported by a chartered accountant's certificate in Forms 15CA and 15CB. Balances in an NRE or FCNR account are freely repatriable without that limit.

Residential status is determined by the days-of-stay test for the year in question, not by citizenship or by holding an overseas address.

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.

Can I adjust TCS against my salary TDS instead of waiting for a refund?

Yes. Section 192(2B) lets you declare TCS collected during the year to your employer, who must then take it into account when computing monthly TDS on salary. Your take-home rises for the rest of the year rather than the money sitting with the department. It must be done in the same financial year — it cannot be carried back.

How much can I actually remit abroad in a year?

Up to USD 250,000 per financial year under the Liberalised Remittance Scheme, without RBI approval, for permitted current and capital account transactions. That limit is an exchange-control rule and is entirely separate from TCS. It applies per person, including minors, so a family's combined capacity is a multiple of it.

What happens if my PAN was not quoted on the remittance?

TCS is collected at a higher rate, and — more damaging — the collection may not appear against your PAN, in which case the credit cannot be claimed at all however clearly your bank statement shows it. Check the PAN on the A2 form before the transfer rather than trying to correct it afterwards.

Where do I check that the TCS was actually credited to me?

In Form 26AS and the Annual Information Statement, both on the income-tax portal, and against the Form 27D certificate the bank must issue. If the collection does not appear there, take it up with the authorised dealer before filing, because the return can only claim what has been reported.