Your bank sent you a notification this week about revised TCS rates on foreign remittances. If you read it quickly, you probably thought: good, things got cheaper. If you read it carefully, you noticed something odd - one row in the table had a very large number that didn’t move at all.
That number is 20%. And if you’re sending money abroad for anything other than education or medical treatment, it still applies in full.
Budget 2026 reduced TCS on LRS selectively. Here’s the full picture, with the parts most notifications leave out.
What changed from April 1, 2026
- LRS for education or medical (self-funded): TCS cut from 5% to 2% on amounts above ₹10 lakh
- LRS for education funded by a financial institution loan: Nil TCS - unchanged
- LRS for overseas investments, gifts, travel, and all other purposes: 20% above ₹10 lakh - unchanged
- Threshold of ₹10 lakh per financial year: unchanged
- Governing provision: Section 394(1) Table Sl. No. 7, IT Act 2025, as amended by Finance Act 2026
The full rate table
| Purpose of remittance | Up to ₹10 lakh | Above ₹10 lakh (from April 1, 2026) |
|---|---|---|
| Education via loan from a financial institution | Nil | Nil |
| Education (self-funded) or medical treatment | Nil | 2% |
| Overseas investments, gifts, family maintenance, travel, others | Nil | 20% |
The ₹10 lakh threshold is cumulative across all LRS remittances in a financial year, tracked per PAN. Once you cross it - regardless of how many transactions or how many purposes - the applicable rate kicks in on the excess.
One exception: the threshold for overseas tour programme packages is tracked separately from other LRS purposes.
Why the education loan exemption exists, and how it works
Section 394(4)(b) of the IT Act 2025 says the authorised dealer shall not collect TCS on an LRS remittance if “the amount being remitted out is a loan obtained from any financial institution as defined in section 129(3)(b), for the purpose of pursuing any education.”
Two things matter here. First, the exemption is on the loan amount being remitted, not on your total LRS usage. Second, the definition of “financial institution” under Section 129(3)(b) covers scheduled commercial banks and similar regulated lenders - not a family loan or an employer advance.
If you’re part-funding through savings and part-funding through a loan, only the loan-funded portion gets the exemption. The self-funded portion crosses the ₹10 lakh threshold and attracts TCS at 2%.
What this actually saves you
A parent remitting ₹25 lakh for a child’s overseas education (self-funded):
- Old position: TCS = ₹15 lakh × 5% = ₹75,000
- New position: TCS = ₹15 lakh × 2% = ₹30,000
- Cash flow relief: ₹45,000, locked up until ITR is filed and refund is processed
That ₹45,000 is not a tax saving - it was always going to come back. What changed is how long it sits with the government instead of with you.
For someone remitting ₹25 lakh for overseas investments:
- TCS = ₹15 lakh × 20% = ₹3,00,000 - exactly as before
This is the part the bank notification table does not make obvious. The headline rate cut only applies to two categories. The high-rate bucket, which applies to the majority of investment and lifestyle remittances, is untouched.
Getting the TCS credit back
TCS collected on LRS appears in your Annual Information Statement (Form 168 under the IT Act 2025). It is available as a credit when you file your return - set off against tax liability first, and any excess comes back as a refund.
There is no separate application. The credit auto-populates. But the refund timeline depends on how quickly your return is processed, which is why the cash flow impact is real even though the TCS itself is recoverable.
One point worth noting for clients who have multiple LRS remittances across the year: the authorised dealer tracks cumulative amounts per PAN. If a client has already remitted ₹8 lakh through one bank and then remits ₹5 lakh through another, the second bank may not automatically know the first remittance happened. The ₹10 lakh threshold can inadvertently get breached without TCS being applied correctly. This is a known compliance grey area - the responsibility to track ultimately sits with the remitter.
The provision that didn’t change but should be on your radar
Section 394(5) says TCS does not apply if the buyer (remitter) is liable to deduct tax under any other TDS provision and has already deducted it. This is relevant for corporate remittances processed under LRS, not for individuals. For individuals, this exemption rarely applies.
What is more relevant: if a seller has already collected TCS on an overseas tour package, the authorised dealer does not collect TCS again on the same amount under Sl. No. 7. The non-double-collection rule under Section 394(4)(a) is often missed when clients book travel through agents and then also remit for the same trip.
Bottom line
The Budget 2026 TCS change on LRS is real relief for families funding overseas education from savings. It is not a structural change to how LRS remittances are taxed. The 20% rate on investment remittances, which is where most of the money moves, is exactly where it was.
If you are sending money abroad for purposes other than education or medical treatment, your TCS exposure is unchanged. Plan accordingly.
Have questions on how the threshold aggregation works across multiple remittances, or on claiming TCS credit against advance tax paid? Share below.