Under Section 206C(1G), tax is collected at source on foreign remittances under the Liberalised Remittance Scheme (LRS) and on overseas tour packages, generally at 20%, with a 5% concessional rate for education and medical remittances above the threshold. The TCS is creditable against the remitter's income tax.
The rates
| Purpose | TCS rate |
|---|---|
| Education funded by an education loan (above threshold) | 0.5% |
| Education / medical treatment (above threshold) | 5% |
| Overseas tour programme package | 5% (up to Rs.10 lakh) / 20% (above Rs.10 lakh) — Finance Act 2025 |
| Other LRS remittances (above threshold) | 20% |
The threshold for LRS TCS was raised to Rs.10 lakh per year by Finance Act 2025 (from Rs.7 lakh earlier). Rate: 5% up to Rs.10L, 20% above. Confirmed for FY 2026-27.
How it works
The authorised dealer (bank) or the tour operator collects the TCS at the time of the remittance/booking and deposits it. The amount is reflected in the remitter's Form 26AS/AIS and can be claimed as a credit against income tax (or adjusted against salary TDS by intimating the employer).
Worked example
An individual remits Rs.15 lakh abroad for investment (non-education, non-medical) in a year, threshold Rs.10 lakh. TCS at 20% applies on the amount above the threshold = 20% of Rs.5 lakh = Rs.1,00,000, collected by the bank and creditable in the return. TCS under Section 206C(1G) / new Act Section 394 — threshold Rs.10L, rate 5%/20% depending on purpose.
Practical points
- TCS is a credit, not a cost — claim it in the return or adjust against TDS.
- Education via a loan gets the concessional 0.5% rate.
- Salaried taxpayers can ask the employer to factor LRS TCS into salary TDS.
- Coordinate with FEMA for the underlying remittance.
Key takeaways
- 206C(1G): TCS on LRS remittances and tour packages.
- 20% generally; 5% education/medical; 0.5% education loan.
- Threshold raised to ~Rs.10 lakh (Finance Act 2025).
- TCS is a creditable prepaid tax, not a cost.