Quick answer: When you send money abroad under the RBI’s Liberalised Remittance Scheme, your bank collects TCS — Tax Collected at Source. In FY 2026-27 there is no TCS on the first Rs 10 lakh you remit in the year. Above that, education and medical remittances attract 2%, most other purposes attract 20%, and overseas tour packages attract a flat 2% from the first rupee. TCS is a tax credit, not a final tax — you claim it back in your ITR.
If you sent money abroad this year — for a child’s education, a foreign holiday, or an investment — you may have seen a TCS line on your bank statement and wondered what it is. This guide explains the TCS rates on foreign remittance in plain words: who collects it, when it applies, how the Rs 10 lakh threshold works, and how you get the money back.
What is TCS on foreign remittance?
TCS stands for Tax Collected at Source. It is a tax your bank or authorised dealer collects at the time you send money abroad. The bank does not keep the money. It deposits the amount with the government in your name, and the entry appears in your Form 26AS and AIS. When you file your income tax return, you claim it as a tax credit. If your total tax for the year is lower than the TCS collected, the extra amount comes back to you as a refund.
TCS applies only to outward remittances — money you send out of India. Money you receive from abroad is not covered.
The remittance itself happens under the RBI’s Liberalised Remittance Scheme, or LRS. The LRS lets a resident Indian send up to USD 250,000 abroad in a financial year, for permitted purposes such as education, travel, medical treatment, gifts, maintenance of relatives, and investment. The TCS rules sit on top of this scheme. The LRS limit and the TCS threshold are two different numbers, and people often mix them up. The USD 250,000 figure is the maximum you are allowed to send. The Rs 10 lakh figure is the point at which TCS starts.
Under the old law, TCS on foreign remittance sat in Section 206C(1G) of the Income-tax Act, 1961. From 1 April 2026, the Income-tax Act, 2025 applies, and the same rule now sits in Section 394(1) — Table Sl. No. 7 covers LRS remittances and Sl. No. 8 covers overseas tour packages. Bank notices may still quote the old section number, but the rule is the same.
What are the TCS rates on foreign remittance in FY 2026-27?
The rate depends on why you are sending the money. The table below shows the rates that apply from 1 April 2026.
| Purpose of remittance | TCS rate |
|---|---|
| Education or medical treatment, self-funded | Nil up to Rs 10 lakh in the year; 2% on the amount above Rs 10 lakh |
| Education funded by a loan from a bank or notified financial institution (Section 80E lender) | Nil — no TCS at any amount |
| Overseas tour package bought in India | Flat 2% on the full package price, from the first rupee |
| Any other purpose — investment in foreign shares or property, gifts, family maintenance | Nil up to Rs 10 lakh in the year; 20% on the amount above Rs 10 lakh |
Two points in this table surprise most people. First, the 20% rate applies only to the amount above Rs 10 lakh, not to the whole remittance. Second, the overseas tour package is the only category with no threshold at all — TCS starts from the first rupee.
How does the Rs 10 lakh threshold work?
The Rs 10 lakh threshold is counted on the total of all your LRS remittances in the financial year, per PAN, across all banks. It is not Rs 10 lakh per bank or per transfer. If you send Rs 6 lakh through one bank and Rs 6 lakh through another, your total is Rs 12 lakh, and TCS applies on the Rs 2 lakh above the threshold.
The threshold resets every 1 April. A remittance in March and the next one in April each get the full Rs 10 lakh of headroom, because they fall in different financial years.
TCS is collected when the bank debits your account or receives the money, whichever is earlier. The bank tracks your running total for the year from your declaration, so tell the bank about remittances you made through other banks. Splitting one large remittance across banks to stay under the threshold does not work — the law counts the aggregate per person.
Worked examples
Investment: You send Rs 15 lakh to buy foreign shares. The first Rs 10 lakh attracts no TCS. The remaining Rs 5 lakh is charged at 20%. TCS collected: Rs 1,00,000.
Self-funded education: You send Rs 12 lakh for your daughter’s university fees from your own savings. The first Rs 10 lakh attracts no TCS. The remaining Rs 2 lakh is charged at 2%. TCS collected: Rs 4,000.
Gift to a relative abroad: You send Rs 12 lakh as a gift. The first Rs 10 lakh attracts no TCS. The remaining Rs 2 lakh is charged at 20%. TCS collected: Rs 40,000.
Overseas tour package: You book a Europe holiday package for Rs 8 lakh from an Indian tour operator. There is no threshold for tour packages, so the flat 2% applies to the full amount. TCS collected: Rs 16,000.
Education loan: You send Rs 25 lakh for education, fully funded by a loan from a bank covered under Section 80E. TCS collected: nil, at any amount.
Overseas tour packages: why is TCS charged from the first rupee?
An overseas tour package is treated differently from a plain remittance. When you buy a package from an Indian tour operator — flights, hotel, and sightseeing bundled together — the seller collects TCS on the package price. There is no Rs 10 lakh threshold for this category.
From 1 April 2026, the rate is a flat 2% on the whole package price. Before that date, the rate was 5% on the first Rs 7 lakh of packages in the year and 20% above it. The change to a flat 2% is one of the biggest savings in the Budget 2026 TCS changes — a Rs 10 lakh holiday package that earlier attracted Rs 50,000 of TCS now attracts Rs 20,000.
Note that this 2% applies to packages bought in India. If you book flights and hotels yourself and pay the foreign hotel directly, that payment is an LRS remittance, not a tour package, and the normal Rs 10 lakh threshold and purpose-based rates apply.
TCS on education abroad: loan vs self-funded
Education is where the TCS rules are kindest, and the difference between a loan and self-funding is large.
If the money comes from an education loan taken from a bank or a financial institution notified under Section 80E, there is no TCS at all — whatever the amount. This exemption started on 1 April 2025, when the Finance Act 2025 removed the earlier 0.5% rate on education loans. The loan must be from a qualifying lender. A loan from a relative or an informal source does not count, and the remittance is then treated as self-funded.
If you pay from your own savings or family funds, the rate is 2% on the amount above Rs 10 lakh in the year, from 1 April 2026. Before that date it was 5%. On a Rs 12 lakh self-funded education remittance, the TCS fell from Rs 10,000 to Rs 4,000 because of this change.
The same 2% rate applies to medical treatment abroad. Keep the admission letter or the hospital estimate ready — the bank asks for the purpose of the remittance and the documents that support it.
What changed in 2025 and 2026?
The TCS rules on foreign remittance changed twice in two years. The table below puts the changes in one place.
| What changed | Before | Now |
|---|---|---|
| TCS-free threshold | Rs 7 lakh per year | Rs 10 lakh per year, from 1 April 2025 |
| Education or medical, self-funded | 5% above the threshold | 2% above the threshold, from 1 April 2026 |
| Education loan from a Section 80E lender | 0.5% | Nil, from 1 April 2025 |
| Overseas tour packages | 5% up to Rs 7 lakh, 20% above | Flat 2%, from 1 April 2026 |
| Other purposes (investment, gifts) | 20% above the threshold | 20% above the threshold — unchanged |
| Governing section | Section 206C(1G), 1961 Act | Section 394(1), Income-tax Act, 2025, from 1 April 2026 |
| TCS certificate | Form 27D | Form 133, from 1 April 2026 |
| Quarterly TCS statement | Form 27EQ | Form 143, from 1 April 2026 |
Two old provisions also disappeared. TCS on sale of goods above Rs 50 lakh under Section 206C(1H) was omitted from 1 April 2025, so it no longer applies — it is covered in our Section 194Q guide, which explains the old 206C(1H) rule. The higher TCS rate for people who had not filed income tax returns, under Section 206CCA, was omitted from the same date.
How do I claim TCS back in my ITR?
Claiming TCS back is a normal part of filing your return. Follow these steps.
First, check your Form 26AS and your AIS on the income tax portal before you file. The TCS your bank collected should appear there as a tax credit. If an entry is missing, ask your bank for the TCS certificate — Form 27D for remittances before 1 April 2026, and Form 133 for remittances after that date.
Second, when you file your ITR, enter the TCS amount in the TCS credit section of the return. The portal usually pulls the figure from your 26AS, but check that it matches your bank certificate.
Third, the TCS is adjusted against your total tax for the year. If the TCS is more than the tax you owe, the balance is refunded to your bank account, just like excess TDS.
From 1 January 2025, the law also lets the TCS credit be passed to another person. For example, if a parent pays TCS on a remittance for a child’s education, the parent can transfer the credit to the child, and the child claims it in their own return. Ask your bank about the declaration needed for this.
What happens if I do not give my PAN?
If you do not give your PAN to the bank, TCS is collected at a higher rate: twice the normal rate or 5%, whichever is higher, capped at 20%. This rule sat in Section 206CC of the old Act and now sits in Section 397(2)(b)(ii) of the Income-tax Act, 2025.
In practice: on a self-funded education remittance, the normal 2% becomes 5% without PAN (twice 2% is 4%, and 5% is higher). On an investment remittance, the normal 20% stays at 20% because of the cap. Always give your PAN before the remittance — the higher rate applies at the time of collection, and getting it corrected later takes effort.
By the numbers
- USD 250,000 — the RBI’s LRS limit per person per financial year (RBI).
- Rs 10 lakh — the TCS-free threshold per PAN per year, from 1 April 2025 (Finance Act 2025).
- 2% — the rate on education and medical remittances above Rs 10 lakh, and on overseas tour packages, from 1 April 2026 (Finance Act 2026).
- 20% — the rate on investment, gift, and other remittances above Rs 10 lakh.
- 0% — TCS on education remittances funded by a Section 80E loan, from 1 April 2025.
Common mistakes to avoid
Splitting remittances across banks. The Rs 10 lakh threshold is per PAN, not per bank. Two banks do not give you two thresholds.
Treating TCS as a final tax. TCS is an advance collection. If you never claim it in your ITR, the money stays with the government. File your return and claim the credit.
Confusing the LRS limit with the TCS threshold. USD 250,000 is how much you may send. Rs 10 lakh is the point where TCS starts. They are different rules from different authorities — the RBI sets the first, the Income-tax Act sets the second.
Forgetting the PAN. Without PAN, the bank collects TCS at the higher rate. Give your PAN and keep it updated with every bank you remit through.
Paying by international credit card and expecting TCS. Payments made with an international credit card while travelling abroad are currently outside TCS collection. Do not expect a TCS entry for those spends, and do not claim one.
Booking a tour package as a remittance. A package bought from an Indian operator attracts flat 2% TCS from the first rupee. A self-booked trip paid directly abroad follows the normal LRS rules with the Rs 10 lakh threshold.
Frequently asked questions
What is the TCS rate on foreign remittance in 2026?
In FY 2026-27, education and medical remittances attract 2% on the amount above Rs 10 lakh in the year, and all other purposes such as investment and gifts attract 20% on the amount above Rs 10 lakh. Overseas tour packages attract a flat 2% on the full price. Education funded by a Section 80E loan attracts no TCS at all.
Is TCS applicable below Rs 10 lakh?
No, for LRS remittances there is no TCS on the first Rs 10 lakh you send in a financial year. TCS applies only to the amount above Rs 10 lakh. The one exception is overseas tour packages, where a flat 2% TCS applies from the first rupee with no threshold.
Is TCS on foreign remittance refundable?
Yes. TCS is not a final tax — it is an advance tax credit. It appears in your Form 26AS and AIS. When you file your ITR, claim it as a TCS credit. If your total tax for the year is lower than the TCS collected, the excess is refunded to your bank account.
What is the TCS rate for education abroad?
If the education is funded by a loan from a bank or notified financial institution under Section 80E, the TCS rate is nil at any amount. If you pay from your own savings, the rate is 2% on the amount above Rs 10 lakh in the financial year. The rate was cut from 5% to 2% from 1 April 2026.
Does TCS apply on overseas tour packages?
Yes. A tour package bought from an Indian operator attracts a flat 2% TCS on the full package price, from the first rupee. There is no Rs 10 lakh threshold for tour packages. The rate was cut from 5%/20% to a flat 2% from 1 April 2026.
How do I claim TCS refund in my ITR?
Check your Form 26AS and AIS on the income tax portal and match the TCS entry with the certificate from your bank — Form 133 for remittances after 1 April 2026. Enter the TCS amount in the TCS credit section while filing your ITR. The portal adjusts it against your tax, and any excess is refunded.
Does TCS apply on international credit card payments abroad?
No. Payments made with an international credit card while travelling abroad are currently outside TCS collection. This is different from a bank remittance or a forex card load, where TCS can apply.
What happens if I do not give my PAN?
The bank collects TCS at twice the normal rate or 5%, whichever is higher, capped at 20%. For example, a 2% education remittance becomes 5% without PAN. Give your PAN to the bank before you remit, because the higher rate applies at the time of collection.
Official sources
- Income Tax Department — incometax.gov.in — Section 394 of the Income-tax Act, 2025 and Form 26AS/AIS.
- Central Board of Indirect Taxes and Customs — cbic.gov.in — Finance Act 2025 and Finance Act 2026 changes.
- Reserve Bank of India — rbi.org.in — Liberalised Remittance Scheme, USD 250,000 annual limit.
Reviewed by Asuthod Rathod, CA. Last updated: 11 November 2026.
Disclaimer: This article is for general information only. Tax rates, thresholds, and forms change with Budgets and notifications. Check the official portals above or ask a qualified professional before you remit.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.