TCS on money sent abroad in FY 2026-27: which rate applies, and how you get it back

Short answer: from 1 April 2026, tax collected at source on money sent abroad under the Liberalised Remittance Scheme is 2% for education and medical treatment above ₹10 lakh a year, 2% from the first rupee on an overseas tour package, and 20% above ₹10 lakh for everything else, including investment abroad. It is not a tax you have lost. It is an advance, credited to your PAN, and there are three ways to get it back. One of them does not involve waiting for a refund.

The rates for FY 2026-27

The charging provision is Section 394(1) of the Income-tax Act 2025, the successor to Section 206C(1G) of the 1961 Act, as amended by the Finance Act 2026 with effect from 1 April 2026.

Two things the table does not say.

The threshold is aggregate. ₹10 lakh is the total of all LRS remittances by the same individual in the financial year, across purposes and across banks. Send ₹6 lakh for a course in June and ₹6 lakh to a foreign brokerage in September, and the September transfer carries 20% on ₹2 lakh. The bank collecting in September cannot see June if it went through a different bank, which is why the LRS declaration form at each remittance asks you to disclose the year's total. A wrong declaration is your problem, not the bank's.

Tour packages lost their threshold. Before April a ₹9 lakh package carried 5%; now it carries 2% on all of it. Above ₹10 lakh the change is the other way: ₹15 lakh used to attract ₹1.5 lakh of collection and now attracts ₹30,000. The rate is lower for everyone; the small remitter who used to be inside the threshold is newly caught.

Why the 20% rate lands on the people reading this site

The rate that did not move is the one that matters to a resident with foreign shares. Every remittance to exercise an ESOP in a foreign parent, to fund a foreign brokerage account, to subscribe to an ESPP where the contribution goes abroad, or to buy property overseas is "investment", and it carries 20% once the year's remittances pass ₹10 lakh.

The same 20% applies to money sent to buy a flat abroad, including each instalment of an off-plan payment plan. How that plays out for a Dubai purchase, year by year against the LRS limit, is in buying property in Dubai as a resident Indian.

A ₹40 lakh remittance to exercise options in a US parent therefore leaves ₹6 lakh with the department in the month of exercise, on top of the perquisite tax the employer withholds on the exercise itself. The two are unrelated: the perquisite is tax on income, the TCS is a collection on the outward remittance, and both are credited against the same year's liability. The exercise mechanics, and the two taxing points, are in ESOP taxation for startup employees.

The asset bought with that remittance goes into Schedule FA of the return for the year, whatever the TCS position. That disclosure carries the heaviest penalty on the form and is covered in Schedule FA from your broker statement, line by line.

What TCS is, and what it is not

It is not a cost. Section 394 collects the amount from you through the bank and credits it to your PAN, where it appears in Form 26AS and the AIS in the quarter the bank files its return. It is set off against your income tax for the year exactly as TDS is, and anything left over is refunded with interest once the return is processed.

The cost is time. Money collected in April on a remittance comes back, at the earliest, when the return filed the following July is processed. For a ₹30 lakh investment remittance that is ₹4 lakh out of reach for twelve to eighteen months.

The three routes to shorten that:

1. The return. The default. Claim the credit in the TDS/TCS schedule against the year's liability; the excess is refunded. This is the only route where the collection exceeds the whole year's tax.

2. Form 122 to your employer. Section 392(4)(a) of the 2025 Act lets a salaried person declare tax collected on other transactions to the employer, who then reduces TDS on salary by that amount over the remaining months. The declaration is Form 122 under the Income-tax Rules 2026, which replaced Forms 12B and 12BAA. Hand it in the month after the remittance and the ₹4 lakh above comes back through payroll by March instead of through a refund next autumn. Most payroll teams will process it; few employees know to ask.

3. Advance tax. If you pay advance tax, the TCS already collected reduces the instalments due, so the money is recovered by paying less in September, December and March rather than by waiting. The instalment mechanics are in advance tax under the 2025 Act.

Getting the rate right at the bank

The bank applies the rate on the purpose code you declare. Three situations where the wrong one is collected:

• Education funded by a loan is nil-rated, but only where the loan is from a financial institution as the section defines it and the bank has the sanction letter on file. Without it the bank collects 2% and the excess sits until you file.
• Fees paid directly to a foreign university are education. A living-expenses transfer to the student's own account is maintenance of a relative, at 20% above the threshold. Split the remittance and code each part correctly.
• A tour package bought from a domestic operator is collected by the operator, not the bank, and the 2% applies to the package price including the operator's margin, not to the forex element alone.

Where the bank has collected at the wrong rate, it can be corrected in the bank's quarterly TCS return if raised in the same quarter; after that, it is recovered through the return.

Who is outside all of this

LRS is a scheme for resident individuals, and Section 394(1) tracks it. A non-resident repatriating sale proceeds or rent from an NRO account is not remitting under LRS and no TCS is collected; that route runs through the bank's Form 145 and the CA certificate in Form 146, which is a different process with a different set of questions, set out in Form 15CA/15CB is now 145/146. Companies and firms cannot use LRS at all.

For the resident who has recently returned and is inside the RNOR window, the TCS applies on remittances out, while the foreign income coming in is largely outside the Indian net for that period. The two run on different tests, and the window is worth planning before the flight, as set out in the RNOR window.

Rates and the threshold above are as enacted for tax year 2026-27 under Section 394(1) of the Income-tax Act 2025 as amended by the Finance Act 2026. The section is amended by most Finance Acts, and the loan-funded education exemption turns on the lender qualifying under it. Confirm the rate for the purpose and the date of remittance before signing the bank's declaration.