When you send money abroad under the RBI's Liberalised Remittance Scheme (LRS), your bank collects tax at source (TCS) once your remittances in a financial year cross ₹10 lakh. Above that, TCS is 2% for education and medical treatment, nil for education funded by a loan from a financial institution, and 20% for every other purpose including investments. Overseas tour packages carry a flat 2% from the first rupee.
TCS is not an extra tax. It is credited to your PAN, and you set it off against your income tax or get it refunded. Below are the FY 2026-27 rates, how the threshold is counted, how your purpose code decides the rate, and how to get the money back.
Table of contents
- What is TCS on LRS?
- What are the TCS rates on LRS for FY 2026-27?
- How does the ₹10 lakh threshold work?
- How is TCS charged on tour packages, education loans and credit cards?
- How does your purpose code decide the TCS rate?
- How do you claim TCS back?
What is TCS on LRS?
TCS (tax collected at source) on LRS is tax your bank collects from you, on top of the amount you send, when your LRS remittances in a financial year go above ₹10 lakh. It is collected under section 394 of the Income-tax Act 2025, which replaced section 206C(1G) of the old Act from 1 April 2026.
The bank, as the authorised dealer, collects it when it debits your account or receives the money from you, whichever comes first. It then deposits the tax against your PAN.
That is why TCS works like advance tax rather than a fee. The amount shows up in your tax records, and you use it to pay your income tax for the year or claim it as a refund.
What are the TCS rates on LRS for FY 2026-27?
The rate depends on why you are sending the money. These are the rates in Table Sl. No. 7 and 8 of section 394:
| Purpose of remittance | Usual purpose code | TCS up to ₹10 lakh | TCS above ₹10 lakh |
|---|---|---|---|
| Education, funded by a loan from a financial institution | S0305 | Nil | Nil |
| Education, paid from your own money | S0305 | Nil | 2% |
| Medical treatment abroad | S0304 | Nil | 2% |
| Overseas tour package bought from a tour operator | Collected by the operator | 2% | 2% |
| Every other purpose: investments, gifts, family maintenance, property, travel you book yourself | S0001, S1302, S1301, S0005, S0306 and others | Nil | 20% |
The higher rate applies only to the part of your remittances above ₹10 lakh, not to the whole amount. If you send ₹12 lakh to a brokerage account in a year, TCS is 20% of ₹2 lakh, which is ₹40,000.
Note: These rates apply from 1 April 2026. Until then, TCS on education and medical remittances was 5% above ₹10 lakh, and tour packages carried 5% up to ₹10 lakh and 20% above. The Finance Act 2026 cut all three to 2%; the 20% rate for other purposes did not change.
If you don't give your bank a valid PAN, TCS is collected at twice the normal rate or 5%, whichever is higher, capped at 20% (section 397(2)).
How does the ₹10 lakh threshold work?
The ₹10 lakh threshold is per PAN, per financial year (April to March). It counts the total you remit under LRS in that year, across every bank you use and every purpose. It is not a separate ₹10 lakh for each purpose or each bank.
Because it is one shared threshold, the order of your remittances decides which purpose uses it up. Once your total crosses ₹10 lakh, each later remittance is charged at the rate for its own purpose.
Example. Suppose you send ₹6 lakh for your child's tuition in April and ₹8 lakh to your brokerage account in August, both from your own money.
| Remittance | Amount | Counted towards ₹10 lakh | Above the threshold | TCS |
|---|---|---|---|---|
| April: tuition (2% purpose) | ₹6,00,000 | ₹6,00,000 | Nil | Nil |
| August: investments (20% purpose) | ₹8,00,000 | ₹4,00,000 | ₹4,00,000 | ₹80,000 |
| Total | ₹14,00,000 | ₹10,00,000 | ₹4,00,000 | ₹80,000 |
The result: ₹80,000 in TCS, or ₹8,000 if the investment goes out first
If you had sent the ₹8 lakh investment in April, it would have used up most of the threshold. The tuition in August would then be ₹4 lakh above it, charged at 2%.
Note: Each family member has their own PAN and their own ₹10 lakh threshold. If both parents remit for the same child, each gets their own nil band.
How is TCS charged on tour packages, education loans and credit cards?
Three cases work differently from the general rule.
Overseas tour packages. When you buy a package of travel and hotel stay from a tour operator, the operator collects TCS at 2% of the full price, with no ₹10 lakh threshold. Your bank does not collect TCS again on an LRS remittance for a package the operator has already collected on.
Flights, hotels and forex you book yourself are not a package, so they fall under the general rule: nil up to ₹10 lakh and 20% above. The LRS for travel guide covers this in detail.
Education funded by a loan. There is no TCS at all when the money you send for education is a loan from a financial institution, however large the amount. Your bank will ask for the loan sanction letter. If you pay part of the fees from your own money, that part is charged at 2% above ₹10 lakh.
International credit cards used abroad. These are outside LRS. The Finance Ministry's press release of 28 June 2023 confirmed that spends on international credit cards while overseas are not counted under LRS and attract no TCS. Debit card and forex card spends abroad do count, and so does loading a forex card.
How does your purpose code decide the TCS rate?
Your bank applies the TCS rate that matches the purpose code you declare on Form A2. It only accepts the 2% education or medical code when you back it with documents, such as the university's admission letter and fee schedule or the hospital's estimate.
Without them, the bank usually codes the transfer under another purpose. Money sent to a student's own account with no admission papers, for example, often goes under family maintenance (S1301), which is a 20% purpose.
Example. Suppose you send ₹15 lakh for your daughter's tuition this year, and it is your only LRS remittance.
| How the remittance is coded | Amount above ₹10 lakh | TCS rate | TCS |
|---|---|---|---|
| Education (S0305), with admission letter and fee schedule | ₹5,00,000 | 2% | ₹10,000 |
| Family maintenance (S1301), without documents | ₹5,00,000 | 20% | ₹1,00,000 |
The result: the right code and papers keep ₹90,000 more in your hands
You get either amount back as tax credit, but the extra ₹90,000 sits with the tax department until then. The RBI's purpose code list sets out which code fits which remittance.
How do you claim TCS back?
TCS collected by your bank is credited to the PAN used for the remittance. It shows up in your Form 26AS (Form 168 from Tax Year 2026-27) and in your Annual Information Statement (AIS) on the income-tax portal once the bank files its quarterly TCS statement.
You get it back in one of three ways:
- In your tax return: enter the TCS under taxes paid. It is set off against your tax for the year, and anything left over is refunded to your bank account.
- Against salary TDS: if you are salaried, you can declare the TCS to your employer so that less TDS is deducted from your salary during the year.
- Against advance tax: if you pay advance tax, the TCS already credited reduces each instalment you owe.
Our guide on adjusting TCS against advance tax and salary TDS walks through the second and third routes step by step.
Note: The credit goes to the person whose PAN the bank used. If a parent remits for a child's education, the parent claims the TCS, not the student.
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