TCS on Foreign Remittance & Overseas Tour 2026: Section 394 Rates, ₹10 Lakh Limit & Examples

For TY 2026-27, TCS on Liberalised Remittance Scheme (LRS) remittances and overseas tour programme packages is governed by Section 394 of the Income-tax Act, 2025. Older articles refer to Section 206C(1G) of the Income-tax Act, 1961. From 1 April 2026, the new Act and Finance Act 2026 changes must be used for current transactions.

Old Section 206C(1G) vs current Section 394

Current TCS rates under Section 394

What counts as an LRS remittance?

The Liberalised Remittance Scheme is an RBI framework under which resident individuals may remit permitted amounts abroad for specified current or capital account transactions, subject to FEMA/RBI conditions. Common purposes include overseas education, medical treatment, travel, maintenance of relatives, gifts, investments and acquisition of permitted foreign assets.

The TCS rule does not determine whether an outward remittance is permitted under FEMA. The authorised dealer must first classify and process the remittance under RBI/FEMA requirements and then apply the income-tax collection rule to the relevant remittance.

Education remittance: loan-funded cases need separate treatment

Section 394 contains a specific exception for an amount remitted out of a loan obtained from a qualifying financial institution for the purpose of pursuing education. This is important because many older guides still discuss the historic 0.5% TCS structure. For TY 2026-27, the bank and taxpayer should apply the current Section 394 wording rather than mechanically following an old rate table.

Keep the education-loan sanction letter, remittance purpose documents, university invoice/fee demand and bank remittance advice. These records help the authorised dealer classify the transaction correctly.

Example 1: education remittance not covered by the loan exception

Suppose a resident remits ₹16 lakh under LRS for education from personal funds during the tax year. The amount exceeding ₹10 lakh is ₹6 lakh. At 2%, the illustrative TCS is ₹12,000, subject to aggregation and the precise statutory facts handled by the authorised dealer.

Example 2: overseas investment

Suppose a resident remits ₹18 lakh under LRS for an overseas investment, which is not an education or medical purpose. The amount above ₹10 lakh is ₹8 lakh. At 20%, the illustrative TCS is ₹1.60 lakh.

Example 3: medical treatment abroad

If a resident remits ₹14 lakh for qualifying medical treatment abroad, the excess over ₹10 lakh is ₹4 lakh. At 2%, the illustrative TCS would be ₹8,000, subject to correct purpose classification and aggregation by the authorised dealer.

Example 4: overseas tour programme package

If a seller receives ₹3 lakh for a qualifying overseas tour programme package, the current Section 394 rate is 2% on the relevant sale consideration. The seller, not the traveller's bank merely because a card/payment is involved, should identify its TCS obligation on the package transaction.

What is an overseas tour programme package?

The statutory definition covers a package offering a visit to a country or territory outside India and includes expenditure for travel, hotel stay, boarding, lodging or similar or related expenditure. A standalone transaction may require analysis to determine whether it is actually a “package” rather than simply one isolated travel service.

Avoid double collection in overlapping situations

Section 394 includes coordination rules where the same amount may otherwise interact with LRS and overseas tour package collection. Finance teams, travel sellers and authorised dealers should avoid collecting twice on the same underlying amount where the statutory exception applies.

Can TCS be claimed back?

TCS is a tax credit. It should normally appear in the taxpayer's tax information records and can be adjusted against final income-tax liability when the return is filed. If total prepaid taxes, including TDS/TCS and advance tax, exceed final liability, a refund may arise after return processing and reconciliation.

This is why a 20% TCS rate on an investment remittance can create a major cash-flow impact even though it is not necessarily a permanent tax cost.

What should taxpayers check before remitting?

1. Confirm the remittance purpose code/classification with the authorised dealer.
2. Track aggregate LRS remittances during the tax year.
3. For education, identify whether the payment is funded by a qualifying financial-institution loan.
4. Ask the bank/seller to show the TCS computation before processing a material transaction.
5. Preserve Form A2/remittance advice, invoices, university or hospital documents and TCS evidence.
6. Reconcile TCS with AIS/Form 26AS or the applicable tax statement before filing the return.

Finance and travel-business checklist

• Use the current Section 394 rate table for transactions from 1 April 2026.
• Do not continue using the old ₹7 lakh threshold for current LRS transactions.
• Do not apply the old overseas-tour 5%/20% slab structure to TY 2026-27 without checking the current provision.
• Maintain buyer PAN and transaction classification records.
• Review whether another TDS provision already applies where Section 394 provides an exception.
• Reconcile collections and statements before filing.

Common mistakes

• Using an old ₹7 lakh LRS threshold article in 2026.
• Applying the education/medical rate to investments, gifts or other remittance purposes.
• Missing the special education-loan exception.
• Applying the old overseas-tour slab rates after the 1 April 2026 amendment.
• Treating TCS as an additional permanent tax rather than a tax credit.
• Ignoring aggregation of LRS remittances through the year.
• Failing to reconcile TCS before ITR filing.

Frequently asked questions

Related guide

Before filing your return, reconcile the tax credit using our AIS vs Form 26AS vs TIS guide.

Official references

• Income Tax Department — Section 394
• RBI — Liberalised Remittance Scheme FAQs