# TCS on LRS: The 20% Surprise Most Foreign Remitters Don't Plan For

If aap kabhi foreign trip lete ho, bachhe ko videshi padhaai ke liye paise bhejte ho, ya foreign investment karte ho — Indian tax department aapse pehle hi 20% TCS wasul leti hai. Yeh Tax Collected at Source under Section 206C(1G) kehlata hai.

Good news — yeh refundable hai. But agar aap planning nahi karte, your travel/education budget se ₹2 lakh+ upfront block ho jata hai.

Aaj is article me CA guide: - Section 206C(1G) kya hai aur kab apply hota hai - Current rates FY 2025-26 (post Budget 2024) - From 1 April 2026 kya changes aa rahe (Finance Act 2026) - Credit card exemption rule - Claim refund process

# 🎯 What Is LRS (Liberalised Remittance Scheme)?

LRS = RBI's framework allowing resident Indians to send money abroad up to USD 2,50,000 per financial year without RBI approval.

### Permitted Uses Under LRS: - Education abroad (tuition + living) - Medical treatment abroad - Travel and tourism - Gifts to relatives abroad - Investment in foreign stocks/funds/properties - Maintenance of relatives abroad - Donations to foreign institutions

### Not Permitted Under LRS: - Remittance for margin/forex trading - Lottery/gambling activities - Investment in PFCEs in non-cooperative jurisdictions - Capital account transactions prohibited under FEMA

# 💰 Current TCS Rates FY 2025-26 (Post Budget 2024)

# Threshold: ₹10 Lakh per Financial Year (raised from ₹7L)

💡 Key change Budget 2024: Threshold raised from ₹7L to ₹10L, providing relief to genuine middle-class remitters.

# Examples

Example 1: Family Holiday to Europe (Tour Package) - Buy package worth ₹8 lakh via Indian tour operator - TCS rate: 5% (on entire amount, tour package has no LRS threshold) - TCS collected: ₹40,000 - Reduces to ₹0 if package via direct foreign payment > ₹10L threshold (then 20%)

Example 2: Son's MS Education in USA - Annual tuition + living: ₹35 lakh per year - TCS rate: 5% (education without loan) - TCS on excess above ₹10L = 5% × ₹25L = ₹1,25,000

Example 3: Investment in US Stocks - Transfer ₹15 lakh to Interactive Brokers account - TCS rate: 20% (other purpose) - TCS = 20% × ₹5L (excess above ₹10L) = ₹1,00,000

Example 4: Same Investment via Education Loan - ₹15L investment, ₹5L from education loan u/s 80E - For the loan portion (if applicable to education): 0.5% - For investment portion: 20%

# 🔄 From 1 April 2026 — Finance Act 2026 Changes

Per Finance Act 2026, Section 506 of IT Act 2025 (corresponding to 206C(1G)):

💡 Big relief: Medical/travel/tour package TCS slashed to 2%. Investment TCS unchanged at 20%.

# 📋 Compliance & Documentation

### When You Make LRS Remittance: 1. Bank collects TCS at the time of payment 2. Self-declaration form (Form A2) — Purpose of remittance 3. PAN mandatory — Higher TCS u/s 206CC if no PAN 4. TCS reflects in 26AS / AIS within 30-60 days 5. You claim TCS as credit in ITR (Schedule TCS)

### Tracking Your LRS Limit: - Banks track cumulative ₹10L per PAN per FY across all banks - Excess triggers TCS at higher rate - For overseas tour packages, separate logic (no LRS threshold)

# 🚫 What's NOT Subject to TCS u/s 206C(1G)

### International Credit Card Spends (CURRENT EXEMPTION): - As of June 2023, Government postponed inclusion of int'l credit cards in LRS - So credit card spends abroad = NO TCS - HUGE benefit for frequent travelers — use credit cards over forex cards

💡 Pro tip: For ₹3-5L foreign trip, using credit card = 0% TCS vs forex card = 5% TCS = ₹15K-25K savings.

### NRI Remittances: - Section 206C(1G) does NOT apply to NRIs - NRI sending money out of India via NRO → No TCS

### Business/Corporate Remittances: - LRS is for INDIVIDUAL residents - Corporate forex remittances under different FEMA framework - No 206C(1G) on company remittances

### TDS Already Deducted: - If TDS deducted on the underlying transaction, no double TCS

# 🎯 Real Tax Scenarios

### Scenario 1: Son Going to Australia for MS Mr. Sharma sends ₹25 lakh to son's tuition abroad in FY 2025-26.

Without education loan: - TCS: 5% × (₹25L - ₹10L) = ₹75,000 - Refund possible in ITR if total tax < TCS

With education loan u/s 80E: - TCS: 0.5% × (₹25L - ₹10L) = ₹7,500 - HUGE saving via education loan structuring

### Scenario 2: Foreign Stock Investment Ms. Priya invests ₹30 lakh in US stocks via international broker.

• TCS: 20% × (₹30L - ₹10L) = ₹4,00,000
• Money blocked till ITR refund
• Plan: Spread across 2 FYs (₹15L + ₹15L) → TCS = 20% × ₹5L = ₹1L × 2 = ₹2L (vs ₹4L)

### Scenario 3: Family Europe Tour Family of 4 books package ₹6 lakh through Indian tour operator.

• TCS: 5% × ₹6L = ₹30,000 (tour package, on entire amount)
• Reduces from FY 26-27 (post Apr 2026) to 2% = ₹12,000

### Scenario 4: Medical Treatment Abroad Parent's heart surgery in Singapore: ₹40 lakh.

• TCS at 5% on excess above ₹10L = ₹1,50,000 in FY 25-26
• From Apr 2026 onwards: 2% on excess = ₹60,000

# 📝 ITR Reporting & Refund Process

### Step 1: Verify TCS in 26AS - Login to incometax.gov.in - Services → View Form 26AS - Check TCS section for LRS entries

### Step 2: Claim in ITR - ITR-1/2/3 → Schedule TDS/TCS - Enter: - Collector's TAN (bank) - Section: 206C - Amount of TCS claimed

### Step 3: Refund Processing - If TCS > tax liability: refund credited to bank - Typically 30-60 days after ITR processing - Track via 'View Returns / Forms' on portal

### TCS Set-off Order: TCS first set off against: 1. Tax due 2. Then refunded if surplus

# 🚨 Common Mistakes

### 1. Using Forex Card Instead of Credit Card Mistake: Forex card spends → LRS → TCS
Better: International credit card → No LRS → No TCS

### 2. Not Tracking Cumulative LRS Mistake: Multiple bank transactions exceeding ₹10L collectively
Fix: Calculate cumulative across all banks; pre-plan to stay within limit

### 3. Not Claiming TCS Refund Mistake: TCS deducted but ITR not filed (assuming "below taxable limit")
Fix: File ITR even with low income to claim TCS refund

### 4. Wrong Purpose Declaration Mistake: Declaring "investment" for what was actually education
Result: 20% TCS instead of 5%
Fix: Correct A2 form with bank, get amended Form 15CB if needed

### 5. Splitting Across Spouses Without Genuine Use Mistake: ₹20L investment split as ₹10L husband + ₹10L wife to avoid TCS
Caveat: Genuine if both invest in their names; sham if money flows through

# 📜 IT Act 2025 Mapping

• Section 206C(1G) IT Act 1961 → Section 506 IT Act 2025
• Substantive rules unchanged till 31 March 2026
• New rates from 1 April 2026 per Finance Act 2026

# 🚀 Pro Tips

### 1. Time Your Big Remittances - Plan investments/education spends across FYs (₹10L per year tax-free) - For tour packages, lower trip amount or split bookings

### 2. Use Credit Cards Strategically - Up to international credit card limit (often ₹5-10L) - Convert to EMI for cash flow management - ZERO TCS on credit card spend abroad

### 3. Education Loan = Tax Saver - 0.5% TCS vs 5% TCS = 10x lower - Plus interest paid is deductible u/s 80E (old regime, with no upper cap) - Education loan structuring saves massive money

### 4. Document Purpose Clearly - Bank's A2 form is critical - Wrong purpose declaration creates compliance trouble - Get CA review for high-value remittances

### 5. NRI Status Plan for Frequent Senders - If you stay abroad 182+ days, become NRI - NRIs not subject to 206C(1G) - Big savings for frequent remitters

# 🧮 Calculator Reference

Use our Foreign Remittance Tax Calculator (coming soon) or: - Income Tax Calculator — Set off TCS against tax

# 📚 References

• Income Tax Act 1961: Section 206C(1G), 206CC
• Finance Act 2024: Threshold raised to ₹10L
• Finance Act 2026: Rate reductions for travel/medical to 2%
• RBI LRS Master Direction: USD 2,50,000 annual limit
• CBDT Circular: PAN mandatory for LRS

# Author

CA Prabhakar Kumar has advised 200+ families on foreign education and investment remittances at Prabhakar Kumar & Co., Pune. Cumulative TCS refunds processed: ₹2 Cr+.

For LRS planning and TCS refund, WhatsApp +91 72176 34981.

Written by

Prabhakar Kumar

Chartered Accountant (ICAI, Nov 2019)

Founder of VittSphere Technologies. Practicing CA serving 200+ MSME clients across Pune. 86% win-rate at AO and CIT(A) level tax appeals. Writes on Indian taxation, capital gains, and personal finance.