TCS on Foreign Remittance Under LRS (Section 206C(1G)): Complete Guide
Reviewed by CA Nikhil Gupta · Last reviewed 5 September 2026
If you've sent money abroad for your child's education, an overseas holiday, or to invest in foreign stocks, you may have noticed your bank deducting an extra amount as TCS (Tax Collected at Source). This isn't a fee the bank keeps — it's a tax credit that gets added to your Form 26AS/AIS and can be claimed against your final tax liability. Here's how Section 206C(1G) TCS on foreign remittances actually works.
What Is Section 206C(1G)?
Section 206C(1G) requires authorized dealers (banks) and tour operators to collect tax at source (TCS) on certain remittances made under the Liberalised Remittance Scheme (LRS) of the RBI, and on the sale of overseas tour packages. The LRS allows resident individuals to remit up to USD 2,50,000 per financial year for permitted purposes (education, medical treatment, travel, gifts, investments abroad, etc.).
TCS Rates: A Quick Reference
| Purpose of Remittance | TCS Rate | Threshold for TCS to Apply |
|---|---|---|
| Education (loan-funded, from a financial institution under Section 80E) | Nil (0%) | No TCS — fully exempt from 1 April 2025 |
| Education (self-funded, not via education loan) & Medical treatment | 5% | Above ₹10 lakh in a financial year |
| Overseas tour packages | 5% (up to ₹10 lakh), 20% (above ₹10 lakh) | From the first rupee for the lower rate band |
| All other purposes (investment in foreign stocks/property, gifts, etc.) | 20% | Above ₹10 lakh in a financial year |
How TCS Is Calculated: An Example
Education Loan Remittances: Now Exempt from TCS
If you're remitting money abroad for a child's education AND the remittance is funded by an education loan from a specified financial institution (eligible for Section 80E deduction), no TCS is collected at all — the Budget 2025 change (effective 1 April 2025) made loan-funded education remittances fully exempt, regardless of the amount. This is a meaningful difference from self-funded education remittances: on a ₹20 lakh remittance, the TCS would be ₹0 (loan-funded) vs ₹50,000 (self-funded, 5% on the ₹10 lakh exceeding the ₹10 lakh threshold).
How to Claim TCS Credit
TCS collected under Section 206C(1G) is not a final tax — it's a credit that can be claimed in your Income Tax Return, just like TDS:
- The TCS amount appears in your Form 26AS and AIS (Annual Information Statement) under the relevant section
- While filing your ITR, this TCS credit is claimed against your total tax liability for the year
- If your total tax liability is less than the TCS collected (common for salaried individuals whose TDS already covers most of their liability), the excess TCS is refunded
Salaried Employees: Can TCS Be Adjusted Against TDS on Salary?
Yes — employees can declare anticipated TCS (and other tax credits) to their employer, and the employer can factor this into the monthly TDS computation on salary, reducing the TDS deducted from salary to account for the TCS already paid. This requires submitting proof of the TCS to the employer's payroll/finance team, typically via Form 12BAA or similar declarations as prescribed.
Common Mistakes
- Forgetting that the ₹10 lakh threshold is cumulative across the financial year, not per transaction — leading to surprise TCS deductions on later remittances
- Not informing the employer about TCS paid, missing out on reduced monthly TDS and waiting for a refund instead
- Confusing the exempt (nil) education-loan TCS with the 5% self-funded education rate when planning remittances for a child's education abroad
- Not reconciling TCS entries in Form 26AS/AIS before filing the ITR, leading to credit mismatches
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Primary sources & related provisions
Statutory provisions referenced in this guide: