If you are paying overseas tuition, paying a foreign hospital, sending money to family overseas, buying foreign equity directly, or booking an overseas tour package, the bank or tour operator collects Tax Collected at Source (TCS) on the remittance under Section 206C(1G) of the Income-tax Act. The rates and thresholds were rationalised in the previous Budget cycle and remain in force for FY 2026-27. Here is the working ready-reckoner.
The threshold — ₹10 lakh per financial year
The general threshold for TCS on outward remittances under the RBI’s Liberalised Remittance Scheme (LRS) is ₹10 lakh aggregate per financial year, per remitter. The bank applies TCS on the portion of remittances that exceeds ₹10 lakh in a financial year, not on the first ₹10 lakh.
The aggregate is across all LRS remittances by you in a financial year — not per transaction, not per bank. So if you remit ₹7 lakh through Bank A in May 2026 and another ₹5 lakh through Bank B in October 2026, TCS applies on the ₹2 lakh that takes you above the ₹10 lakh aggregate.
The rate card
| Purpose of remittance | TCS rate (FY 2026-27) | Applies on |
|---|---|---|
| Education funded by an approved education loan | 0% | No TCS, any amount |
| Education (self-funded) | 2% | Amount above ₹10 lakh |
| Medical treatment | 2% | Amount above ₹10 lakh |
| Overseas tour package (booked through a tour operator) | 2% from the first rupee | No threshold — flat 2% |
| All other LRS remittances (investment, family maintenance, gifts, equity purchase, real estate, etc.) | 20% | Amount above ₹10 lakh |
Note: the “0% on education funded by an approved education loan” rate is one of the most under-used reliefs. It applies to remittances funded by a loan obtained from a notified financial institution under Section 80E. If you can structure your overseas tuition payments through such a loan, even partially, you preserve cash flow that would otherwise be locked up in TCS.
What “tour package” means — the trap
The 2% from-rupee-one rate applies to overseas tour packages booked through a tour operator. If you book your flight, hotel and visa separately and pay them on your card, those individual payments fall under the general 20% (above ₹10 lakh) bucket if they are remittances under LRS — or under no TCS at all if they are direct merchant transactions on an international card. The structure of how you pay matters.
For practical purposes:
- Travel-agent package → flat 2% on entire amount
- Card transactions made overseas (not through LRS remittance) → outside the LRS TCS net
- Forex card loaded for travel → falls under LRS, but typically under the ₹10 lakh threshold for short trips
Education — what counts and what doesn’t
Education-rate (2% above ₹10 lakh, or 0% if loan-funded) covers tuition, mandatory hostel and on-campus living charges, and university-recognised expenses. It does not cover personal travel, recreation, or capital remittances tagged as “maintenance” without a clear education link. Banks ask for the university’s offer letter, fee schedule and identification of the remittance’s purpose code (S0306 or S0301 / S0303 in the RBI’s purpose-code list).
How to claim TCS back
TCS deducted is credited to your Form 26AS. It is not a tax paid on income — it is a tax collected on a transaction, available as a credit against your final tax liability. Two outcomes:
- If your total tax liability for the year is more than the TCS credit, the TCS reduces what you have to pay at the year-end. No special action.
- If your total tax liability for the year is less than the TCS credit (e.g., you have low taxable income but a large remittance), the excess is refundable. File an income-tax return — even if you wouldn’t otherwise have to — to claim the refund.
From AY 2024-25 onwards, salaried individuals can also adjust LRS TCS against their TDS via Form 12BAA, so the cash isn’t locked up till year-end.
What we recommend
- Plan large remittances by financial year, not by date. A ₹15 lakh tuition payment split as ₹9 lakh in March and ₹6 lakh in May falls in two separate FYs and avoids TCS on the first tranche.
- Use the loan-funded education route where you have access to it — 0% TCS plus Section 80E interest deduction is a clean combination.
- Choose tour structure deliberately. Flat 2% on package vs general 20% above ₹10 lakh on raw LRS — for some itineraries the package wins, for others the LRS route does. Run the numbers.
- Track your aggregate. If you bank with multiple institutions, no single bank knows your full LRS aggregate. You do. Keep a running tally so the year-end isn’t a surprise.
- File an ITR even if you don’t otherwise need to, in any year you have meaningful TCS — to claim it back.
If you have a large overseas remittance planned for FY 2026-27 — tuition, medical, investment or relocation — write to us at [email protected] and we’ll structure the timing and route to minimise the TCS lockup.
Sources
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