TCS on Foreign Remittance (LRS)
Section 394 of the new Income-tax Act and the 2026 rate cuts changed the numbers. Here are the current ones.
Tax collected at source (TCS) is an amount the AD bank collects from the remitter on certain outward remittances and pays to the government against the remitter's PAN. It is not an extra tax: the remitter gets credit for it against their income-tax liability, or a refund, when filing the return.
Two things changed recently, and older notes miss both. From 1 April 2026 the provision sits in section 394 of the Income-tax Act, 2025 (it was section 206C(1G) of the 1961 Act), and the Finance Act, 2026 cut the rates for education, medical treatment and overseas tour packages.
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TCS Rates for Tax Year 2026-27
From 1 April 2026, section 394(1) of the Income-tax Act, 2025 as amended by the Finance Act, 2026.
LRS remittance for education, funded by a loan from a financial institution
Threshold
Any amount
TCS rate
Nil
LRS remittance for education (own funds)
Threshold
Above ₹10 lakh in the tax year
TCS rate
2% (was 5%)
LRS remittance for medical treatment
Threshold
Above ₹10 lakh in the tax year
TCS rate
2% (was 5%)
LRS remittance for any other purpose
Threshold
Above ₹10 lakh in the tax year
TCS rate
20% (unchanged)
Sale of an overseas tour programme package
Threshold
No threshold
TCS rate
2% (was 5% up to ₹10 lakh and 20% above)
| Transaction | Threshold | TCS rate |
|---|---|---|
| LRS remittance for education, funded by a loan from a financial institution | Any amount | Nil |
| LRS remittance for education (own funds) | Above ₹10 lakh in the tax year | 2% (was 5%) |
| LRS remittance for medical treatment | Above ₹10 lakh in the tax year | 2% (was 5%) |
| LRS remittance for any other purpose | Above ₹10 lakh in the tax year | 20% (unchanged) |
| Sale of an overseas tour programme package | No threshold | 2% (was 5% up to ₹10 lakh and 20% above) |
The Terms Behind the Table
- Collector
- For LRS remittances, the authorised dealer bank. For an overseas tour package, the seller of the package (the tour operator).
- ₹10 lakh threshold
- LRS remittances up to ₹10 lakh in a tax year attract no TCS for any purpose; the rates apply once the remittance or the aggregate crosses that figure.
- Education loan exemption
- No TCS where the amount remitted is a loan from a financial institution, as defined in the Act, taken for pursuing education.
- Tour package credit
- No TCS is collected by the bank on an amount on which the tour operator has already collected TCS, so the same money is not taxed at source twice.
- PAN
- The remitter must furnish a valid PAN. Without it, tax is collected at a higher rate under the Act's PAN provisions.
Rates, thresholds and purposes. No signup.
Why the Rates Differ by Purpose
TCS on LRS exists to track large outward remittances against the remitter's tax profile, not to discourage necessary spending. That is why education and medical treatment carry the lowest rate, a loan-funded education remittance carries none, and discretionary remittances above the threshold, such as investment or gifts, carry 20%.
The tour package change addresses a different problem. The Budget memorandum names the concern as business shifting from domestic tour operators to overseas ones, so the Finance Act, 2026 moved packages to a flat 2% with no threshold.
How CCFE Tests This, and the Courseware Gap
TCS questions are rate-and-threshold recall: which purpose gets which rate, and where the threshold sits. The trap is vintage. Courseware and question banks written before these changes carry a lower threshold, the 5% education and medical rate, or the old section 206C(1G) reference. If an option set has no current figure, pick the one consistent with the scheme's logic (education cheapest, discretionary highest) and check the latest IIBF updates before the exam.
FAQs
What is the TCS rate on foreign remittance for education in 2026-27?expand_more
Nil if the remittance is a loan from a financial institution for education. From own funds, 2% on remittances above ₹10 lakh in the tax year, reduced from 5% by the Finance Act, 2026.
Is TCS charged on LRS remittances below ₹10 lakh?expand_more
No. For LRS remittances the TCS rates apply only once the remittance, or the aggregate in the tax year, exceeds ₹10 lakh.
What is the TCS on overseas tour packages from April 2026?expand_more
2% on the full amount, with no threshold. Before 1 April 2026 it was 5% up to ₹10 lakh and 20% above.
Can I get TCS back?expand_more
TCS is credited against your PAN. You claim it against your tax liability when filing your return, and any excess is refunded.
Which section covers TCS on LRS now?expand_more
Section 394 of the Income-tax Act, 2025, in force from 1 April 2026. It replaced section 206C(1G) of the Income-tax Act, 1961.
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