TCS on foreign remittance is a tax collected at source by Indian banks and authorised dealers when a resident sends money abroad under the LRS. It was introduced via Section 206C(1G) and has been progressively widened.
The TCS slabs (post-Budget 2023 effective from 1 Oct 2023, unchanged through current AY): on overseas tour packages, 5% up to Rs 7 lakh and 20% above. On education or medical remittance, NIL up to Rs 7 lakh and 5% above (0.5% if the remittance is funded by an education loan). On all OTHER remittances (overseas investment, gifting, maintenance of close relatives), NIL up to Rs 7 lakh and 20% above Rs 7 lakh.
Crucially, TCS is not a final tax. It shows up in the remitter's Form 26AS and can be fully claimed as a credit when filing the income-tax return, or adjusted against advance-tax liability. If the remitter has no tax liability, the TCS is fully refunded.
Example 1: A resident remits Rs 30 lakh in FY 2026-27 to buy US stocks via LRS. The first Rs 7 lakh attracts no TCS; the next Rs 23 lakh attracts 20% TCS = Rs 4.6 lakh deducted at the time of remittance. This Rs 4.6 lakh appears in their 26AS and is claimed back when the ITR is filed.
Example 2: A parent sends Rs 10 lakh for a child's overseas tuition. The first Rs 7 lakh is NIL; the next Rs 3 lakh is taxed at 5% = Rs 15,000 TCS. If a bank-issued education loan funds it, the TCS rate drops to 0.5%.
The TCS does NOT increase the overall tax burden — it is purely a cash-flow event. The discomfort is the upfront withholding.
Disclaimer: Educational content from MintByte (ARN-314872, MFD). Examples are illustrative. SEBI Investment Adviser registration is in process; we do not provide personalized tax or remittance advice. Rates can change; verify with your bank before remitting.