TCS on Foreign Remittances in FY 2026-27: Rates, the ₹7 Lakh Threshold, and How to Claim a Refund

Most people sending money abroad in FY 2026-27 only notice the 20% TCS charge when their bank deducts it, and by then the remittance has already gone through. This article explains when TCS is collected, how the ₹7 lakh threshold works, which remittances attract 5% or 20%, and how to claim the credit back in your return.

What the Law Actually Says

TCS on foreign remittances is governed by Section 206C(1G) of the ITA 1961 and Section 394 of the ITA 2025. The authorised dealer, usually the bank, collects the TCS at the time of remittance. The government does not collect it directly from you at the point of transfer.

The general LRS TCS rate was 5% before 1 October 2023. From 1 October 2023, the Finance Act 2023 raised the general LRS rate to 20% for amounts above the threshold. For FY 2026-27, the same framework continues under the ITA 2025 reference.

If you are sending money under the Liberalised Remittance Scheme, use our LRS TCS calculator to compute the exact amount before you remit.

The ₹7 Lakh Threshold: How It Works

The ₹7,00,000 threshold applies per individual per financial year, from 1 April to 31 March. If you make multiple remittances in the same year, the amounts are added together. TCS applies only on the excess over ₹7,00,000 for the relevant LRS categories.

For example, if you remit ₹4 lakh in May and another ₹5 lakh in September, the total for the year becomes ₹9 lakh. TCS applies on the ₹2 lakh excess in September, not on the full ₹9 lakh.

Overseas tour packages are different. They do not get the ₹7 lakh threshold. TCS applies from the first rupee at 5% on the full amount.

Rates by Purpose

This is why sending ₹10 lakh abroad for a holiday can result in ₹60,000 of TCS on the ₹3 lakh above the threshold.

Who Has a Higher Rate?

Section 206CC applies if the remitter does not have PAN. In that case, the higher of double rate or 5% applies. Section 206CCA applies to specified non-filers, again at the higher of double rate or 5%.

These are not penalties. They are advance tax collected at a higher rate. The credit is still available later when you file your return.

Is TCS a Cost or Just a Cash-Flow Hit?

TCS is not the final tax. It is prepaid tax. The amount appears in Form 26AS and the Annual Information Statement, and you claim it in your income tax return as credit against your tax payable.

If your total tax payable is lower than the TCS collected, the excess comes back as a refund. The people who usually feel the pinch are non-filers and people with no taxable income, because the money sits as a refund until they file the return to claim it.

If you have TCS credits sitting in Form 26AS, file your ITR and claim them. That is the clean way to recover the credit.

How to Check if TCS Was Collected

Log in to incometax.gov.in and open AIS, where you can look for TCS transactions. The bank deposits the TCS with the government using your PAN. Cross-check the entry in Form 26AS Part C as well.

ITA 2025 Note

Section 206C(1G) of the ITA 1961 maps to Section 394 of the ITA 2025. The substance is the same. The section number changes from 1 April 2026, so banks may cite the ITA 2025 reference in their communication for FY 2026-27. The rate, threshold, and credit mechanics remain unchanged.

Frequently Asked Questions

Q1: Is TCS collected on all foreign remittances?
No. TCS applies only to LRS remittances that fall within Section 206C(1G) and cross the ₹7 lakh threshold, except overseas tour packages where TCS applies from the first rupee. Wire transfers for imports of goods or services classified outside LRS are not covered.

Q2: My total FY remittances are ₹6 lakh. Do I pay TCS?
No. For non-tour-package remittances, there is no TCS below ₹7 lakh in the financial year. If your total remittances stay under the threshold, the bank does not collect TCS.

Q3: I sent money for my child's college fees using my own funds. What rate applies?
The rate is 5% on the amount above ₹7 lakh. If the education is funded by a loan from a scheduled bank or a financial institution approved under Section 80E, the rate drops to 0.5% on the amount above ₹7 lakh.

Q4: Can I avoid TCS by splitting remittances across months?
No. The threshold is cumulative for the financial year. Splitting remittances into smaller transfers does not avoid TCS once the total crosses ₹7 lakh.

Q5: Does TCS affect the FEMA LRS annual limit?
No. The USD 2,50,000 annual LRS limit is a FEMA rule set by the RBI and is separate from TCS. TCS is an income tax collection mechanism, not a foreign exchange limit.

The Bottom Line

For most people, the 20% rate is the headline number, but the ₹7 lakh threshold absorbs routine remittances. TCS is fully creditable in your return, so it is usually a cash-flow issue rather than a permanent cost. If you already have TCS credits in Form 26AS from earlier remittances and have not filed yet, claim them in your ITR.

If you have TCS credits in Form 26AS that need to be claimed, or if you're remitting large amounts and want to understand the tax impact, our team can help.

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