24 Oct 2026Updated 24 October 2026 · By Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
Almost every week someone calls me after a bank transfer abroad with the same complaint. "I sent money to my daughter's university and the bank took extra. Is that a tax I have lost?" Or a parent sees TCS on a holiday package invoice and asks why they are being charged for going on vacation.
The honest answer is that TCS is not an extra tax. It is an advance collection of your own income tax, and you get every rupee of it back as credit when you file your return. What has changed from 1 April 2026 is how much is collected, and for some purposes the amount has come down sharply.
Where the rules now sit
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act. The old section 206C(1G), which most bankers still quote, has been replaced by section 394(1) of the new Act. Serial number 7 of the table in that section covers remittances under the Liberalised Remittance Scheme, and serial number 8 covers overseas tour packages. The rates in both entries were substituted with effect from 1 April 2026, and you can read the current text on the Income Tax Department's page for section 394.
The Liberalised Remittance Scheme itself is an RBI scheme. A resident individual can send up to USD 250,000 abroad in a financial year for permitted purposes such as education, medical treatment, gifts, maintenance of relatives, travel and overseas investment, as set out in the RBI Master Direction on LRS. TCS is the income-tax layer that sits on top of that.
The rates from 1 April 2026
The first ₹10 lakh you remit under LRS in a financial year attracts no TCS at all, whatever the purpose. The threshold is for all your LRS remittances added together, which is why the bank asks you to declare what you have already sent through other banks.
Above ₹10 lakh, the rate depends on the purpose. For education or medical treatment, it is 2% (it was 5% until 31 March 2026). For every other purpose, including investment in foreign shares or property, gifts to children abroad and maintenance remittances, it is 20%. The rate is applied to the amount above the ₹10 lakh threshold, not the whole year's remittances.
If the money you are sending for education is a loan from a financial institution, there is no TCS at all. Sub-section (4) of section 394 says so specifically. So a student whose fees are paid directly out of an education loan disbursement should not see any TCS on that payment.
Overseas tour packages work differently. If you buy a package from a tour operator that includes travel, hotel stay, boarding or lodging, the seller collects TCS at 2% of the whole amount, with no threshold. Until March 2026 this was 5% up to ₹10 lakh and 20% beyond, so the change is a genuine relief for families travelling together. And the law prevents double collection: if TCS has already been collected by the tour operator, your bank should not collect it again on the remittance for the same package.
Getting your money back
TCS collected from you appears against your PAN in your annual tax statement and AIS. When you file your return, it is treated exactly like tax already paid. If your total tax for the year is less than the TDS, TCS and advance tax put together, the difference is refunded.
If you are salaried, you do not have to wait that long. The law now allows you to give your employer details of TCS collected from you, and the employer can take it into account when working out the tax deducted from your salary. That stops cash being locked up for a year.
Those who feel TCS most are people with little taxable income, typically retired parents funding family abroad. The money comes back, but only after the return is processed.
How it plays out
Take Leela (not her real name), a retired teacher in Thrissur. In 2026-27 she plans to send ₹8 lakh towards her granddaughter's university fees in Canada, ₹6 lakh to her son in Toronto as a gift, and to take a ₹4 lakh family tour package to Singapore.
Her first ₹10 lakh of LRS remittances carries no TCS. If the fees go first, the whole ₹8 lakh is covered by the threshold. The ₹6 lakh gift then takes her to ₹14 lakh: ₹2 lakh is still within the threshold and the remaining ₹4 lakh attracts TCS at 20%, which is ₹80,000. The tour package attracts 2% on the full ₹4 lakh, which is ₹8,000, collected by the tour operator.
Leela's own income is modest, so most of that ₹88,000 will come back as a refund. But if she had sent the gift first and the fees afterwards, the excess over ₹10 lakh would have been education money at 2% instead of gift money at 20%. Sequencing within the year is worth thinking about before you walk into the bank.
Things people ask me
People often ask me whether money sent to buy employer shares through an ESOP counts. If you exercise options by remitting money from India, yes, that is an LRS remittance and the 20% rate applies above the threshold. My post on foreign ESOPs and RSUs covers the rest of that picture.
Others ask whether they can avoid TCS by splitting remittances between family members. Each resident individual has their own LRS limit and threshold, so genuine remittances by a spouse from their own funds are treated separately. But the money must really be theirs. Routing your money through your spouse's account to stay under ₹10 lakh creates clubbing and gift questions that cost more than the TCS.
And NRIs ask whether this applies to them. LRS is for residents. NRIs sending money out of their NRO accounts use a separate RBI repatriation facility with its own paperwork, so these TCS rules are not the issue for them.
TCS is one small part of moving money across borders, and it often interacts with FEMA and the foreign asset reporting I discuss in my FAST-DS 2026 post. We look at these together in our cross-border tax and FEMA advisory work. If you are unsure where you stand, write to us at letstalk@rtaandassociates.com.
For how this fits with FEMA, treaties and GST more broadly, see our guide to cross-border tax and FEMA advisory.
Related guides
- Cross-border tax and FEMA advisory: the full guide
- Foreign ESOPs and RSUs: tax, FEMA and Schedule FA for employees in India
- GIFT City IFSC for NRIs and Gulf families: what it offers and what to check
- FAST-DS 2026 and Schedule FA: the disclosure window, the penalties, and who should use it
Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
Regi Tom Antony & Associates, Chartered Accountants, Kochi
This is general information based on the law as at 24 October 2026, not advice for your particular situation.