TCS on Foreign Remittance Under LRS: Rates & Exemptions FY 2026-27

Every resident Indian sending money abroad under the Liberalised Remittance Scheme - for a child's tuition, a medical procedure, a foreign investment, or simply a gift to family overseas - runs into TCS at the point of remittance. Budget 2026 meaningfully reshaped this structure effective April 1, 2026: the threshold moved up, and the rate for the two most common individual-facing purposes, education and medical, came down sharply. Here is exactly what changed and what it means in practice for FY 2026-27.

The Legal Basis: Section 394(1), Earlier Section 206C(1G)

TCS on LRS remittances is levied under Section 394(1) of the Income Tax Act, 2025 (the corresponding provision under the earlier 1961 Act was Section 206C(1G)). The substantive TCS obligation - collected by your Authorised Dealer bank at the point of remittance - carries forward under the new Act; what changed with Budget 2026 was the rate and threshold structure applied under it, not the underlying mechanism.

The Rs 10 Lakh Threshold

For most LRS purposes, TCS now applies only on the amount remitted above a cumulative Rs 10 lakh in a financial year, per individual remitter - up from the earlier Rs 7 lakh. This threshold tracks all your LRS remittances together across the year, regardless of which bank or which specific transaction pushes you over it, and regardless of how many separate purposes those remittances cover (excluding the two purposes below that have their own distinct treatment).

The Rate Structure for FY 2026-27

Two things stand out here. First, loan-funded education is now effectively TCS-free, which materially improves cash flow for families financing overseas education through an Indian lender rather than personal savings. Second, overseas tour packages have no threshold at all - even a small package attracts the 2% rate from the very first rupee, which is easy to miss since every other category has the Rs 10 lakh cushion.

Worked Example

Consider a resident parent remitting Rs 15 lakh in a financial year to fund a child's self-funded (not loan-financed) overseas education. TCS applies only on the Rs 5 lakh above the Rs 10 lakh threshold, at 2%: Rs 10,000 TCS. If the same amount had instead been routed through an education loan from an Indian bank, the TCS would be nil on the entire Rs 15 lakh. If, instead, the same Rs 15 lakh were remitted as a gift to an NRI relative (not for education), TCS would apply at 20% on the Rs 5 lakh above threshold: Rs 1,00,000 - a stark difference purely based on the stated purpose of remittance, which is why declaring the correct purpose on Form A2 matters well beyond simple paperwork accuracy.

Claiming the TCS Credit

TCS collected under LRS is not an additional tax - it is a prepayment that shows up as a credit in your Form 26AS and Annual Information Statement (AIS). You claim it against your total tax liability when filing your income tax return; if your actual liability for the year is lower than the TCS collected, the excess is refunded after processing. For remitters who anticipate a large mismatch between TCS collected and actual tax liability during the year - for example, a large one-time investment remittance - it is possible to apply to the Assessing Officer for a lower or nil TCS certificate in advance, avoiding the cash flow lock-up rather than waiting for a refund after filing.

How This Affects NRI Families

LRS itself is only available to resident Indians, not NRIs directly - but it is central to how resident family members in India fund an NRI relative's education, medical expenses, or receive gifts sent the other way. Where the NRI is the sender back into India, a different framework applies entirely; see our NRO repatriation guide and NRE vs NRO repatriation limits for that side. For the fuller LRS picture - permitted purposes, Form A2, and returning-NRI scenarios - see our complete LRS guide, now updated with these FY 2026-27 rates.