Revised Tax Collected at Source (TCS) Rates on Outward Remittance: What Every Indian Remitter Must Know

Do you want to transfer money overseas for your child’s education, family vacation, or medical treatment? In that case, you can get some major relief now. Union Budget 2026 has made changes in TCS rules for outward remittance under the Liberalised Remittance Scheme (LRS). 

The change brings that the exemption limit will be increased from INR 7 lakh to INR 10 lakh starting from April 1, 2026, and the key TCS rates have been slashed to 2% only for several categories. This is obviously good news for Indian students, tourists, and medical travellers as it means less tax upfront and easier compliance. Here are the details of the changes, how new rates will work, and what to prepare for before your next international money transfer.

What Are the Revised TCS Rates on Outward Remittance?

The new TCS rates have been calibrated according to the reason for the remittance. For instance, Budget 2026 has reduced the rate to only 2% for education, medical treatment, and tour packages for amounts over INR 10 lakh. However, for all other purposes under LRS, the rate continues to be 5% except in the case where the PAN or Aadhaar has not been submitted, in which case the rate is 10%. It is important to note that the threshold applies to the total remittances in a financial year and not to each transaction.

TCS for Education and Medical Treatment – 2% (With a Big Exemption)

In case you send money abroad for education or medical treatment, the new TCS rate is 2% above INR 10 lakh. But that’s not all – if your educational expenses are met through an education loan taken from recognised financial institutions, no TCS will be levied, irrespective of the amount of remittance. The change will be a boon for Indian students going to Canada, Australia, the UK or the US.

TCS for Overseas Tour Packages – 2% Without Any Upper Limit

If you are planning to buy an international holiday package, the TCS rate on overseas tour packages has been brought down to 2% from earlier 5% (and up to 20% in certain cases). Besides, the 2% rate will be applicable for the total package value and there won’t be an upper limit; that is, even if the cost of your tour is over INR 10 lakh, the TCS will still be 2%. Yet, the INR 10 lakh threshold is not a factor for tour packages; TCS is charged on the full amount starting from the first rupee.

TCS for Other Purposes (Gifts, Investments, Maintenance)

Other outward remittances apart from education, medical treatment, and overseas tour packages – such as sending money to family members abroad, foreign asset purchase, or gift – will attract TCS at the rate of 5% on amounts over INR 10 lakh. If PAN/Aadhaar is not provided, the rates will be 10%. This type of remittance is regulated under Section 206CQ of the Income Tax Act.

Revised Threshold Limit: From INR 7 Lakh to INR 10 Lakh

One of the major changes which has been greeted with open arms is the increase in the TCS exemption limit. As per the Budget 2026 speech, the threshold limit for total outward remittances under LRS in a financial year beyond which TCS will be applicable is now INR 10 lakh. Previously, this limit was only INR 7 lakh.

For instance:

• If you are transferring INR 9 lakh as tuition fees for your son, then your TCS liability is NIL.
• If you transfer INR 12 lakh, then the TCS is calculated only on INR 2 lakh, which is the excess amount.

This will significantly help the lower and medium-sized remitters, including freelancers who buy software or families supporting relatives overseas.

Key Changes Made in TCS Rules for Remittances (Budget 2026)

Here are some of the major changes introduced by the Union Budget 2026:

• Exemption Limit Raised
  The TCS exemption limit under LRS has been increased from INR 7 lakh to INR 10 lakh per year. This is true for all categories except for tour packages, where TCS is computed from the first rupee.
• Rate Reduction to 2%
  There has been a major revision in TCS rates for education (except loan-financed), medical treatment, and overseas tour packages. The rate goes down to 2% from as high as 20% in some cases.
• Complete Exemption for Education Loans
  The funds for studies abroad, from an education loan sanctioned by an Indian financial institution (bank or NBFC) attract no TCS, no threshold, no rate. A big win for students!

How Is TCS Calculated on Your Total Remittance?

Many assume that TCS is charged only on the amount over the threshold. It is not right. Once the aggregate of your remittances crosses INR 10 lakh in a year, TCS will be applied on the total value of the transaction (or subsequent transactions) – not just the excess, depending on the scenario.

Scenario A (Education without loan):
First, you make a remittance of INR 9 lakh in May (no TCS, as under the threshold). Then, in November, you send another INR 4 lakh. Total amount = INR 13 lakh. The entire amount of the second remittance of INR 4 lakh is charged with 2% TCS = INR 8,000. The first INR 9 lakh remains exempt.

Scenario B (Tour package):
You book a trip abroad for INR 3 lakh. TCS at the rate of 2% = INR 6,000 will be charged from the first rupee itself (threshold not applicable).

Scenario C (Other purposes):
You gift INR 12 lakh. TCS at 5% on INR 12 lakh = INR 60,000.

TCS is deducted by the bank or your forex dealer at the time of remittance and will be shown in Form 26AS.

Can You Claim a Refund on TCS Paid?

Yes, of course. TCS is not a separate tax. It is a tax collected at source in advance. You can claim the credit for the TCS when you file your Income Tax Return (ITR).

If the tax payable by you for the year is much less than the TCS already deducted, the difference will be refunded by the Income Tax Department.

For example:
If you have paid INR 60,000 as TCS on a gift remittance and at the end of the year, you owe only INR 40,000 as tax, you can claim INR 20,000 as refund.

Make sure that the TCS amount is rightly reflected in your Form 26AS or AIS so that there are no discrepancies.

Understanding TCS on Remittances Above INR 10 Lakh

Once your outward remittance goes beyond INR 10 lakh in a financial year, then the TCS provisions come into play, depending on the purpose.

Here is a simple orienting guide:

• Up to INR 10 lakh
  • Purpose: Any (except tour packages)
  • TCS Rate: 0%
  • TCS Amount: 0
• Above INR 10 lakh
  • For education (without loan), medical, and other purposes:
    TCS is applied only on the portion above INR 10 lakh
  • For tour packages:
    TCS is applied to the full amount

Conclusion

The revised rates of TCS on outward remittance that will be in effect from April 1, 2026, should be a source of relief for Indian students, medical travellers, and tourists. The threshold has been raised to INR 10 lakh, and rates have been brought down to 2% for major categories. As a result, sending money abroad has become less expensive.

It is also essential to keep in mind that TCS is an advance tax. Hence, you may claim a credit or a refund when you file your income tax return. Moreover, if you are someone who is studying in Germany, vacationing in Thailand, or providing financial support to the family sector in the case of remittances, knowing these updated rules can help you avoid unwelcome surprises and facilitate your cash flow.

FAQ Section

Q1: Is TCS applicable for outward remittance under LRS?

Yes, the government imposes TCS on outward remittances under LRS when the total amount of remittance for a financial year exceeds INR 10 lakhs (except for tour packages, where TCS is charged even for the first rupee). However, if the remittance is for the purpose of education and is funded by an education loan, no TCS is charged.

Q2: How can I avoid TCS on foreign remittance legally?

Technically, if your remittance exceeds the threshold, TCS has to be charged on you. However, there are ways to soften the blow:

1. Make sure your remittance does not exceed the INR 10 lakh limit.
2. Take an education loan if you are studying abroad (zero TCS).
3. Plan your remittances such that neither of them lies in the same financial year.
4. Provide your PAN to bank or authorized dealer to avoid the 10% which is a higher TCS rate.

Important: TCS doesn’t mean a deduction; it’s just an advance tax, and you get a refund at the time of filing your Income Tax Return.

Q3: What does the RBI Circular say about TCS on foreign remittance?

The Reserve Bank of India (RBI) has issued circulars to bring its instructions in sync with the amendments of the Finance Act. The latest RBI Circular states that the authorised dealers will have to collect TCS as per the income tax rates on LRS remittances. The changes from April 1 2026, have been reflected in the RBI’s Master Direction on LRS.

Q4: What is the current TCS rate on foreign remittance for 2026-27?

For the year 2026-27, onwards April 1, 2026:

• Education/medical (2% on amount exceeding INR 10 lakhs, zero if loan-financed)
• Tour packages (2% on the full amount)
• Other purposes (5% on amounts exceeding INR 10 lakhs, or 10% without PAN)

Q5: Is tax applicable on inward remittances to India?

No, generally, inward remittances to India (money received from abroad) do not attract TCS. However, they may become liable to TDS or other tax provisions depending on their nature (e.g. salary, business income). As far as pure gift or family maintenance inward remittances are concerned, no tax is collected at source in India.