LRS $250K Limit and 20% TCS: Multi-Bank FY Ledger and Form 26AS Credit
You can remit up to USD 250,000 per financial year under RBI's LRS. For most LRS purposes (investment, gifts, maintenance) TCS at 20% applies under s.206C(1G) only when your total remittances exceed ₹7 lakh in the year — measured across every bank combined. Overseas tour packages are a separate case: TCS is 5% up to ₹7 lakh and 20% above.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
The LRS cap is USD 250,000 per financial year, and TCS at 20% applies under s.206C(1G) of the Income Tax Act 1961 only when your total remittances cross ₹7 lakh in the year — measured across every bank combined, not per bank or per transaction. The ₹7 lakh threshold is a single annual aggregate: remit ₹10 lakh through HDFC and ₹8 lakh through Axis in the same FY, and TCS is collected on ₹11 lakh (₹18 lakh − ₹7 lakh). The TCS you pay is not a final tax — it is a credit recoverable in your ITR via Schedule TCS.
TCS Rates by Remittance Purpose (LRS)
These rates follow the Finance Act 2023 amendment to s.206C(1G), effective in two phases: the 20% rates for LRS investment/other purposes and for overseas tour packages took effect 1 July 2023; the education and medical rates (0.5% loan-funded / 5% own funds / Nil for medical) took effect 1 October 2023 after CBDT clarifications.
The ₹7 Lakh Threshold Is a Yearly, All-Bank Aggregate
The single most expensive misunderstanding is that the ₹7 lakh threshold resets per bank. It does not. TCS under s.206C(1G) is computed on the aggregate of your LRS remittances in the financial year, no matter how many banks or how many transactions you use. Each bank collects TCS on the amount by which your cumulative year-to-date remittances (including remittances from other banks) cross the threshold.
If you split remittances to "stay under the limit" at one bank, you are working off a false assumption — the other bank's remittances count toward the same ₹7 lakh.
Worked Example: Deepa's Two-Bank Year
Deepa, an Indian resident, buys US stocks through two banks in FY 2025-26:
- HDFC Bank: ₹10,00,000 (June 2025)
- Axis Bank: ₹8,00,000 (December 2025)
- Total LRS remittances: ₹18,00,000
Since the ₹7 lakh threshold is an annual all-bank aggregate:
- TCS-exempt base = ₹7,00,000
- TCS-chargeable amount = ₹18,00,000 − ₹7,00,000 = ₹11,00,000
- TCS @ 20% = 20% × ₹11,00,000 = ₹2,20,000
How the banks split it: HDFC sees ₹10 lakh of year-to-date remittance. Since Deepa's first ₹7 lakh is exempt, HDFC collects 20% on ₹3 lakh (₹10L − ₹7L) = ₹60,000. Axis sees a cumulative ₹18 lakh, so it collects 20% on the full ₹8 lakh = ₹1,60,000. Total TCS collected = ₹2,20,000. If Deepa had remitted the ₹10 lakh first at Axis instead, the split between banks would differ — but the total TCS would be identical, because the threshold is annual.
Claiming the TCS Back: Schedule TCS and Form 26AS
The ₹2,20,000 is a credit against Deepa's tax liability, not a payment of tax on the remittance itself.
- The TCS appears in her Form 26AS / AIS under the TCS statement (Form 27EQ).
- In the ITR, she claims it in Schedule TCS as tax collected at source.
- It offsets her total tax payable; if the TCS exceeds her tax, the excess is refunded with interest.
Reality check: most LRS investors are salaried employees whose salary TDS already covers their liability. Their LRS TCS becomes a fully refundable amount — but only if it is claimed in the ITR. Every year, a meaningful share of LRS TCS goes unclaimed because the filer never enters it in Schedule TCS.
Changed FY 2025-26: For FY 2025-26 the LRS framework stands as follows — the USD 250,000 RBI cap, the ₹7 lakh annual TCS threshold and the 20% rate on investment-purpose remittances all remain in force; the TCS credit is claimed in Schedule TCS of the ITR and reflects in Form 26AS/AIS. International credit-card spends in India, after the government's earlier decision to keep credit cards out of the LRS net, remain outside this TCS framework — confirm the current position before relying on it.
What the USD 250,000 Cap Really Means
The USD 250,000 per financial year limit is RBI's ceiling under the Liberalised Remittance Scheme (Master Direction on LRS). It covers all permitted purposes combined — investment, gifts, maintenance of relatives, education, medical — for a resident individual in one financial year. Remittances above USD 250,000 need prior RBI approval (via the authorised dealer). The TCS threshold (₹7 lakh) and the RBI cap (USD 250,000) are separate limits that both apply.
Who cannot use LRS: Persons resident outside India (NRIs) and citizens of Pakistan/Bangladesh are generally not eligible for LRS. Only resident individuals remit under LRS.
FAQ
Q1: What is the LRS limit for FY 2025-26?
USD 250,000 per financial year per resident individual, covering all permitted purposes combined. Remittances above this require prior RBI approval through the authorised dealer bank.
Q2: Is TCS charged on every LRS remittance?
No. For investment and other LRS purposes, TCS at 20% applies only to the amount by which your annual total remittances exceed ₹7 lakh. Below ₹7 lakh in the year, no TCS is collected. Education (0.5%/5%) and medical (nil) have their own rates.
Q3: Does the ₹7 lakh threshold apply per bank?
No. It is an annual aggregate across all banks. Remitting ₹10 lakh through one bank and ₹8 lakh through another makes the TCS chargeable amount ₹11 lakh (₹18 lakh − ₹7 lakh). Splitting banks does not reset the threshold.
Q4: I am an NRI. Do I pay TCS on LRS remittances?
LRS is available to resident individuals. NRIs do not remit under LRS; their repatriation happens through NRE/FCNR accounts and NRO repatriation limits instead.
Q5: How do I claim TCS paid on LRS?
Claim it in Schedule TCS of your ITR. The TCS appears in Form 26AS/AIS (Form 27EQ). It offsets your tax liability and any excess is refunded — interest under s.244A only if the refund is delayed beyond the statutory period (broadly, 3 months from the end of the month the return is furnished); a timely refund carries no interest.
Q6: What is the TCS on an overseas tour package?
5% on the package amount up to ₹7 lakh in the financial year, and 20% on the amount above ₹7 lakh. The ₹7 lakh threshold applies to tour packages just as it does to other LRS purposes — the rate splits at the threshold, it does not disappear.
Q7: I remitted ₹6 lakh in one year. Do I owe TCS?
No. ₹6 lakh is below the ₹7 lakh annual threshold, so no TCS is collected. If you remit another ₹2 lakh in the same year (₹8 lakh total), TCS is collected on ₹1 lakh (₹8 lakh − ₹7 lakh) at the applicable rate.
Use our LRS TCS Calculator to compute your exact TCS across all banks and the refund you can claim.
Sources
- RBI Master Direction on Liberalised Remittance Scheme — USD 250,000 per financial year limit.
- Section 206C(1G), Income-tax Act 1961 (as amended by Finance Act 2023, w.e.f. 1 October 2023) — TCS on LRS remittances and tour packages.
- Form 27EQ (TCS statement) and Schedule TCS, ITR — credit claim.
- CBDT clarification on the annual aggregate threshold for LRS TCS.
Your LRS TCS is a refundable credit — claim it in Schedule TCS every year. Book a consultation at harunraaj.com.
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