Tax Collected at Source (TCS) on foreign remittances has become an important consideration for individuals sending money abroad under the Liberalised Remittance Scheme (LRS). Whether you are paying tuition fees, investing in foreign stocks, booking overseas tour packages, or supporting family members abroad, understanding the details of tax collected at source helps you plan your finances better.
In Budget 2025, the government increased the TCS threshold on foreign remittances from ₹7 lakh to ₹10 lakh, providing relief to many resident Indians making smaller overseas payments.
This guide explains:
- What is Tax Collected at Source?
- Latest TCS slab rates for FY 2025-26
- TCS on education, travel, investments, and medical remittances
- How to claim TCS refund
- Exemptions and important rules under LRS
What is TCS? –
What is Tax Collected at Source (TCS)? Tax Collected at Source (TCS) is a tax that is collected by authorized dealers or banks when a resident individual sends money abroad under the Liberalized Remittance Scheme (LRS). The amount collected is deposited with the Income Tax Department and reflected in the taxpayer’s Form 26AS. TCS is not an additional tax, it can be adjusted while filing Income Tax Return (ITR).
Tax Collected at Source (TCS) is a tax collected by the authorized dealers or banks when a resident individual remits money abroad under the Liberalised Remittance Scheme (LRS).
The amount collected is deposited with the Income Tax Department and will be reflected in the taxpayer’s Form 26AS. TCS is not an extra tax, it can be adjusted during filing of Income Tax Return (ITR).
Is TCS applicable on foreign remittances?
Yes, as per Section 206C(1G) of the Income Tax Act, Tax Collected at Source (TCS) is applicable on foreign remittances made under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI).
From FY 2025-26, TCS is generally applicable only when the total remittance amount exceeds ₹10 lakh in a financial year. The applicable TCS rate depends on the purpose of remittance, such as education, medical treatment, overseas tour packages, foreign investments, or other overseas transfers.
In cases where PAN is not furnished, higher TCS rates may apply as per Income Tax provisions.
The revised ₹10 lakh threshold became effective from April 1, 2025, following Budget 2025 updates.
Are different overseas transactions eligible for TCS?
Yes, various overseas remittances under the Liberalised Remittance Scheme (LRS) are eligible for TCS depending on the nature and amount of the transaction.
These include:
- Overseas education payments
- Foreign investments in stocks, mutual funds, or property
- International tour packages
- Medical treatment abroad
- Gifts and maintenance sent to relatives overseas
- Other permitted current and capital account transactions under LRS
For most remittances, TCS applies only when the total remittance exceeds ₹10 lakh in a financial year. However, overseas tour packages may attract TCS from the first rupee depending on the applicable slab rates.
The following section explains the detailed TCS slab rates for different foreign remittances
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Current Account Remittances:
- Money sent for overseas education
- Money sent for Gifts & Donations
- Money sent for medical treatment abroad
- Money sent for family maintenance
- Money loaded & reloaded in travel card (Forex Card)
-
Capital Account Remittances:
- Loan to relatives
- Investment in overseas shares & mutual funds
- Investment in properties abroad
For remittances made for education purposes through an education loan obtained from a financial institution under Section 80E, no TCS is applicable from FY 2025-26.
For example, if a student remits ₹12 lakh abroad using an eligible education loan from a bank or recognised financial institution, NIL TCS will be applicable on the entire amount.
However, for self-funded education remittances, TCS becomes applicable only when the total remittance exceeds ₹10 lakh in a financial year. In such cases, a TCS of 5% is charged only on the amount exceeding ₹10 lakh.
For example, if an individual sends ₹15 lakh abroad for education through self-funding:
- Up to ₹10 lakh → No TCS
- Remaining ₹5 lakh → 5% TCS
- Total TCS applicable = ₹25,000
Please also note that the ₹10 lakh threshold is calculated cumulatively for the entire financial year under the Liberalised Remittance Scheme (LRS).
For example, if a person sends:
- CAD 10,000 (₹6 lakh equivalent) on 05.04.2025, and
- CAD 10,000 (₹6 lakh equivalent) again on 10.10.2025,
Then the total remittance during the financial year becomes ₹12 lakh.
In this case:
- First ₹10 lakh → No TCS
- Remaining ₹2 lakh → 5% TCS
- Total TCS applicable = ₹10,000
The revised threshold and updated TCS provisions were introduced under Budget 2025 effective from April 1, 2025. You can refer to the official Union Budget Tax Reform Document for updated provisions.
Is TCS applicable for import & export of goods and services?
No, TCS under Section 206C(1G) is not applicable on import and export transactions related to goods and services.
The provisions of TCS discussed here apply specifically to foreign remittances made by resident individuals under the Liberalised Remittance Scheme (LRS).
TCS is also generally not applicable on overseas direct investments made by Indian companies, LLPs, partnership firms, or joint ventures outside India under permitted RBI regulations.
Is TCS applicable on overseas tour packages?
Yes, TCS is applicable on overseas tour packages purchased under the Liberalised Remittance Scheme (LRS).
From FY 2025-26:
- 5% TCS is applicable on overseas tour packages up to ₹10 lakh
- 20% TCS is applicable on the amount exceeding ₹10 lakh
Unlike many other foreign remittances, TCS on overseas tour packages may apply from the first rupee depending on the applicable slab.
For example:
- Tour package value = ₹8 lakh
- Applicable TCS = 5%
If the package value exceeds ₹10 lakh, a higher TCS rate may apply on the excess amount.
Can I claim a refund for TCS?
Yes, the TCS amount collected on foreign remittance is reflected in the buyer’s Form 26AS after the authorised dealer or seller files the TCS return.
TCS is not an additional tax. The amount can be adjusted against the taxpayer’s final income tax liability while filing the Income Tax Return (ITR).
If the taxpayer has no tax liability or excess TCS has been collected, the refund can be claimed while filing the ITR.
Latest TCS Changes for FY 2025-26
The Government introduced major updates in TCS provisions on foreign remittances under Budget 2025 effective from April 1, 2025.
Key changes include:
- The TCS threshold for foreign remittances under LRS has been increased from ₹7 lakh to ₹10 lakh
- Education remittances through loans under Section 80E now attract NIL TCS
- Self-funded education and medical remittances above ₹10 lakh attract 5% TCS
- Foreign investments, gifts, maintenance transfers, and other LRS remittances above ₹10 lakh attract 20% TCS
- Overseas tour packages attract 5% TCS up to ₹10 lakh and 20% on the amount exceeding ₹10 lakh
These changes were introduced to provide relief to students, families, and individuals making smaller overseas remittances.
You can refer to the official Union Budget Tax Reform Document for detailed provisions.
Let us understand the latest TCS slab rates on foreign remittances for FY 2025-26 with the help of the table below:
| Nature of Overseas Transaction | Updated TCS Rate (Effective from 1st April 2025) |
|---|---|
| Remittance for education through self-funding | NIL up to ₹10 lakh, 5% on amount exceeding ₹10 lakh |
| Remittance for education through education loan under Section 80E | NIL TCS |
| Remittance for medical treatment abroad | NIL up to ₹10 lakh, 5% on amount exceeding ₹10 lakh |
| Remittance for family maintenance, gifts, foreign investments in shares, property & mutual funds | NIL up to ₹10 lakh, 20% on amount exceeding ₹10 lakh |
| Overseas tour package | 5% up to ₹10 lakh, 20% on amount exceeding ₹10 lakh |
| Other foreign remittances under LRS | NIL up to ₹10 lakh, 20% on amount exceeding ₹10 lakh |
FAQs on Tax Collected at Source (TCS)
1. What is tax collected at source and why is it charged?
Tax collected at source is a tax that the seller or service provider collects from the buyer at the time of receiving payment for certain specified transactions. It is charged to ensure early tax compliance and to track high-value transactions under the Income Tax Act.
2. What is the tax collected at source meaning in simple terms?
The tax collected at source meaning refers to a system where tax is collected upfront when a transaction takes place, instead of waiting until the end of the financial year. The collected amount is deposited with the government and later adjusted against the taxpayer’s final tax liability.
3. Where can I find details of Tax Collected at Source deducted on my payments?
The details of Tax Collected at Source (TCS) deducted on foreign remittances can be viewed in your Form 26AS and Annual Information Statement (AIS) available on the Income Tax Department portal.
These statements display:
- TCS amount collected
- Name of the authorised dealer or collector
- Date of tax deposit
- Transaction details related to foreign remittance
Taxpayers can use these records while filing their Income Tax Return (ITR) to claim TCS credit or refund, wherever applicable.
You can access these details through the Income Tax e-Filing Portal.
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4. How does tax collected at source affect an individual’s income tax return?
Tax collected at source is not an extra tax burden. It is treated as a tax credit and can be adjusted while filing your income tax return. If the total tax collected is more than your actual liability, you may claim a refund.
5. Why is understanding tax collected at source meaning important for taxpayers?
Understanding the tax collected at source meaning helps taxpayers plan their cash flow and avoid confusion during tax filing. It also ensures that the collected amount is correctly reflected in tax records and claimed properly.
6. Are details of tax collected at source mandatory to verify before filing returns?
Yes, verifying the details of tax collected at source is important before filing your return to ensure accuracy. Any mismatch between actual collections and reported figures may delay refunds or trigger notices from the tax department.
7. Is tax collected at source applicable to all transactions?
No, tax collected at source applies only to specific transactions notified under the Income Tax Act, such as certain foreign remittances, sale of goods, or high-value transactions, depending on prevailing rules.
8. How is tax collected at source different from other taxes?
The tax collected at source meaning differs from regular income tax because it is collected at the time of transaction rather than calculated at year-end. It acts as a tracking and compliance mechanism rather than a final tax.
