27 Jan 2025Updated: May 2026
TCS (Tax Collected at Source) on foreign remittances under the Liberalised Remittance Scheme (LRS) has been in force since October 2023. The rules catch many individuals off guard — particularly those remitting for overseas investment, education, or family support. Understanding the current rates and how TCS interacts with your annual tax liability is essential for anyone transacting under LRS.
What Is TCS Under LRS and Why It Applies
Under Section 206C(1G) of the Income Tax Act, banks and authorised dealers (ADs) collect TCS when processing foreign remittances under LRS. TCS is not an additional final tax — it is an advance tax credit that is reflected in your Form 26AS and AIS. When you file your ITR, the TCS amount is set off against your total tax liability. If TCS exceeds your liability, the excess is refunded. The practical problem is cash flow: TCS is collected upfront at the time of remittance, and you recover it only after ITR processing — typically 6–12 months later.
Current TCS Rates for FY 2026-27
Overseas tour packages: 5% on amounts up to ₹7 lakh; 20% on amounts above ₹7 lakh. The tour package rate applies from the first rupee — the ₹7 lakh threshold determines the applicable rate for the full amount.
Other LRS remittances (investments, gifts, family maintenance, overseas bank transfers): Nil up to ₹7 lakh aggregate per financial year; 20% on the amount exceeding ₹7 lakh.
Overseas education — loan-funded: 0.5% on any amount.
Overseas education — self-funded: Nil up to ₹7 lakh; 5% above ₹7 lakh.
Medical treatment abroad: Nil up to ₹7 lakh; 5% above ₹7 lakh.
International credit card transactions: Currently not subject to LRS TCS — international credit card spends for personal use abroad remain outside LRS for the time being. Confirm the position at the start of each financial year as this may change.
How the ₹7 Lakh Threshold Operates
The ₹7 lakh threshold is per individual per financial year, tracked across all non-tour-package LRS remittances combined. Each bank you remit through is required to ask for a self-declaration of year-to-date LRS utilisation when processing a remittance — this self-declaration is your responsibility to provide accurately. If you have remitted ₹4 lakh from one bank and ₹4 lakh from another in the same year, the combined ₹8 lakh exceeds the threshold and TCS at 20% should apply on the excess ₹1 lakh — but the second bank may not know about the first bank's remittance unless you declare it.
PAN-Aadhaar Linking and Higher TCS Rate
Under Section 206AB, if your PAN is not linked to Aadhaar, TCS rates are doubled. This means the 20% rate becomes 40%, and the 5% rate becomes 10%. Ensure your PAN-Aadhaar linkage is current before making any LRS remittance.
Claiming TCS Refund: The ITR Process
TCS is credited to your PAN and appears in Form 26AS and AIS. When filing ITR, report the TCS in Schedule TDS/TCS and set it off against your total tax liability under Chapter XX. There is no separate application — the refund is processed automatically as part of ITR processing. If you do not file ITR (because your income was below the exemption limit, for instance), the TCS is not automatically refunded — you must file to claim it.
Planning Points
For family travel: split the booking across family members where feasible — each individual has their own ₹7 lakh threshold. Booking a ₹12 lakh tour in one name at 20% TCS (₹2.4 lakh TCS) vs splitting as two bookings of ₹6 lakh each at 5% (₹60,000 TCS total) is a legitimate and significant difference.
For overseas investments: stay aware of your cumulative LRS utilisation. The 20% TCS on amounts above ₹7 lakh creates a significant upfront cash outflow — factor this into your investment cash flow planning.
Regi Tom Antony And Associates advises on LRS compliance, TCS on foreign remittances, Form 15CA/CB for NRO repatriations, and ITR filing for refunds. For NRI advisory resources, visit nriblueprint.com. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.