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The Liberalised Remittance Scheme (LRS) is a framework set by the Reserve Bank of India (RBI) that allows Indian residents individuals (as defined under FEMA 1999), including minors, to freely remit up to USD 2,50,000 per financial year (April–March) for any permissible current or capital account transaction or a combination of both.
TCS under Section 394 is a tax collected by authorised dealers on foreign remittances made under the Liberalized Remittance Scheme (LRS) exceeding the set threshold limit per financial year.
TCS on foreign remittance under LRS is effective on any remittance transaction under LRS on or after 1 October 2020.
As per the Union Budget 2026, the applicable Tax Collected at Source (TCS) rate on Liberalised Remittance Scheme (LRS) transactions has been revised from 20% and 5% to 2% for specified remittances.
Below are the revised TCS rates applicable for various types of remittances:
These changes will be effective from 1 April 2026.
Sr. No. |
Type of Remittance |
Earlier Rate before Finance Act, 2026 |
New rate w.e.f. Apr 1, 2026 |
|---|---|---|---|
1 |
Purpose of Remittance: Education / Studies abroad Source of Funds: Education loan obtained from any specified financial institution as defined in Section 129 (earlier Section 80E) |
NIL |
NIL |
2 |
Purpose of Remittance: Education / Studies abroad Source of Funds: Other than no. 1 above |
Up to ₹10 lakh – NIL Above ₹10 lakh – 5% |
Up to ₹10 lakh – NIL Above ₹10 lakh – 2% |
3 |
Purpose of Remittance: Medical Treatment abroad |
Up to ₹10 lakh – NIL Above ₹10 lakh – 5% |
Up to ₹10 lakh – NIL Above ₹10 lakh – 2% |
4 |
Any purpose other than pt 1,2,3 above |
Up to ₹10 lakh – NIL Above ₹10 lakh – 20% |
Up to ₹10 lakh – NIL Above ₹10 lakh – 20% |
5 |
Purchase of overseas tour program package |
Up to ₹10 lakh – 5% Above ₹10 lakh – 20% |
2% on any amount without any threshold limit. |
Yes, TCS will be applied on LRS transactions exceeding ₹10 lakh if foreign exchange facility is availed through FCY Cash withdrawal at Branches / loading Forex cards.
Yes, any overseas spending beyond ₹10 lakh per financial year using a debit card under LRS will attract TCS at the applicable rate.
No, TCS is not applicable for Non-Resident Indians holding NRE/NRO Accounts and Foreign Nationals working in India and who are not permanent residents of India. In case, a Resident Individual has moved abroad and is residing abroad for more than 182 days, it is advisable to convert the account into an NRO Account to avoid any TCS being levied on repatriation proceeds from NRO Accounts.
No, GST will not be applicable on the TCS for remittance under LRS. However, GST will continue to apply on currency conversion, remittance service charge and other applicable charges.
It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS.
Yes, ‘tax credit’ can be claimed by the remitter/customer for the tax collected by the Bank where PAN of the remitter has been provided.
In such a case, the Bank will not refund TCS collected by it and paid to Government. However, tax credit for the same can be claimed by the remitter for the tax collected while filing ITR.
In case, a transaction is processed successfully from Kotak Mahindra Bank and later it is declined/returned by the Intermediary Bank or Beneficiary Bank, TCS will not be refunded. The tax credit can be claimed by the remitter for the tax collected while filing ITR.
TCS will be maintained at PAN level. The PAN should be valid and operative i.e., the Bank will check validity of the PAN in terms of whether Aadhaar is linked to PAN or not. In case PAN is inoperative, TCS will be charged at the rate applicable for a non-PAN case.