In this guide
Who does this apply to?
Tax collected at source (TCS) may apply when an authorised dealer processes a remittance by a resident individual under the Liberalised Remittance Scheme (LRS). For remittances from 1 April 2026, the rules are in Section 394 of the Income-tax Act, 2025.
The Reserve Bank of India’s LRS generally allows resident individuals, including minors, to remit up to USD 250,000 per financial year for permitted transactions. TCS is collected at the time of remittance. It is not necessarily your final tax liability, and it does not change the permitted purpose or limit under LRS.
TCS rates and threshold for Tax Year 2026-27
The ₹10 lakh threshold applies to aggregate LRS remittances during the tax year. TCS is collected on the amount above the threshold at the rate applicable to the remittance purpose.
| LRS remittance purpose | TCS rate on amount above ₹10 lakh |
|---|---|
| Education or medical treatment | 2% |
| Other purposes | 20% |
For example, if you remit ₹12 lakh for an LRS purpose other than education or medical treatment during the tax year, TCS would generally be 20% of ₹2 lakh, or ₹40,000. If your remittances are for different purposes, ask your authorised dealer how the threshold and rates apply to your transactions.
An exception may apply to an education remittance funded by a loan from a financial institution covered by the law. Confirm the loan and remittance details with your authorised dealer before sending the money.
These rates apply to transactions from 1 April 2026. Amounts debited or received on or before 31 March 2026 remain subject to the earlier law and rates.
When is TCS collected?
The authorised dealer generally collects TCS when the amount is debited or when it receives payment from you, whichever happens first. TCS may be collected along with the remittance charge.
Before the transaction, check:
- Your total LRS remittances for the tax year;
- The amount and purpose of each remittance;
- Whether an education-loan exception applies; and
- The TCS amount and how it will be reported against your PAN.
Keep the remittance advice and proof of TCS collection. If you use more than one authorised dealer, keep records of all transactions so you can reconcile the annual total.
How to claim TCS credit in your ITR
TCS may be claimed as a credit against your income-tax liability, subject to correct reporting and matching. For Tax Year 2026-27, check the relevant tax-credit information and Form 168 on the Income Tax e-Filing portal. Confirm that the credit is linked to your PAN and the correct tax year.
When filing your return:
- Compare the TCS shown on the portal with your remittance records.
- Enter the eligible credit in the return’s relevant TCS schedule.
- Make sure the amount claimed does not exceed the TCS collected and reported.
- Complete verification and keep the acknowledgement.
If the TCS is missing or incorrect, contact the authorised dealer to check its reporting. Do not claim an unsupported amount. Any excess credit may be considered when the return is processed, but a refund is not automatic.
TaxClear’s TDS and TCS compliance guide for Tax Year 2026-27 covers related reporting. For return preparation, see the online ITR filing guide.
Frequently asked questions
Does TCS apply to the full remittance?
Generally, the rates above apply to the amount exceeding the ₹10 lakh aggregate threshold, not the full amount.
Is the LRS limit the same as the TCS threshold?
No. The LRS limit governs permitted remittances. The ₹10 lakh threshold determines when TCS applies.
Is TCS an additional final tax?
No. It is collected at source and may be claimed as a credit in your return if it is reported correctly.
Does the 2% rate apply to every education remittance?
The 2% rate applies to eligible education remittances above the threshold. A separate exception may apply when the remittance is funded by a qualifying financial-institution loan.
Will the TCS automatically appear in my return?
Check the portal’s tax-credit information and Form 168 against your records before filing.
