TCS on money sent abroad under LRS: rates, limits and refunds
TCS on foreign remittance is tax your bank collects when you send money abroad under the Liberalised Remittance Scheme. In tax year 2026-27 it applies only to the part above ₹10 lakh: 2% for education or medical treatment, 20% for other purposes. It is not an extra tax, because it counts towards your tax for the year.
In this guide
Key takeaways
- Under the LRS, your bank collects TCS only on the part above ₹10 lakh. Check with your bank how it counts that amount.
- For tax year 2026-27 the rate is 2% for education or medical treatment and 20% for other purposes such as investment or gifts.
- No TCS is collected on money remitted from a loan taken from a financial institution to pursue education.
- TCS is not an extra tax. It counts towards your tax for the year, and any excess is refunded when your return is processed.
- Buying an Indian international mutual fund is not an LRS remittance, because you pay rupees to an Indian fund.
What is the LRS, and when is TCS collected?
The Liberalised Remittance Scheme (LRS) is RBI's route for a resident individual to send money abroad, up to US$2,50,000 in each financial year (April to March). A remittance is money sent out of the country. When you send it under the LRS, the bank that carries out the transfer collects tax from you on the part above ₹10 lakh. That tax is called TCS, tax collected at source.
The bank here is an authorised dealer: a person RBI has authorised under the foreign exchange law to deal in foreign exchange or foreign securities.
Some points about the scheme itself, from RBI's own rules:
- It is for resident individuals, including minors. It is not available to companies, partnership firms, HUFs or trusts.
- You must give your PAN (Permanent Account Number) for the remittance.
- Banks should not lend you money to make a capital account remittance under the scheme. Investing abroad is one such remittance.
The tax rules below come from the Income-tax Act, 2025, which has been in force since 1 April 2026 and replaced the 1961 Act. It also changed the vocabulary: "tax year" now replaces "previous year" and "assessment year". The TCS rule for LRS remittances sits in section 394. For the bigger picture of what the new Act changed, see the Income-tax Act, 2025 explained.
How much TCS is collected on money sent abroad?
The rate depends on why you send the money. The threshold is ₹10 lakh: the bank collects TCS once your remittances pass ₹10 lakh, and only on the part above it. How the bank counts that ₹10 lakh is something to check with your bank.
| Purpose of the remittance | TCS on the amount above ₹10 lakh |
|---|---|
| Education or medical treatment | 2% |
| Education, paid from a loan from a financial institution | Nil |
| Any other purpose, such as investment, gifts or maintenance | 20% |
These rates apply for tax year 2026-27, under the Income-tax Act, 2025 as amended by the Finance Act 2026.
An overseas tour package works differently: the seller of the package, not your bank, collects TCS, at 2%.
Two examples, each for a resident individual with no other LRS remittance that year:
- A gift. You send ₹12,00,000 to a sibling living abroad. Only ₹2,00,000 is above the threshold, and the rate for other purposes is 20%. TCS comes to ₹40,000.
- Medical treatment. You send ₹16,00,000 for a relative's treatment abroad. The part above ₹10 lakh is ₹6,00,000, and 2% of that is ₹12,000.
In both cases the bank collects the TCS from you, on top of the amount you are sending. It does not cut it out of the remittance.
Two more situations switch the bank's collection off. No TCS is collected by the bank on an amount on which a tour package seller has already collected TCS. None is collected either where you have deducted TDS (tax the payer deducts before paying) on the payment under another provision of the Act.
Is TCS different for education and medical treatment?
Yes. Education and medical treatment carry 2% above ₹10 lakh, against 20% for other purposes. The Finance Act 2026 brought the education and medical rate down to 2% from 5%, with effect from 1 April 2026.
Education has a further case. If the money you remit is a loan from a financial institution taken to pursue education, the bank collects no TCS on it. Education paid from your own savings carries the 2% rate above ₹10 lakh.
Can you get TCS back?
In effect, yes. TCS is not an extra tax. The Act treats tax collected at source and paid to the Central Government as tax paid on your behalf. It counts towards your tax for the year, and any excess is refunded to you. A refund is money the tax department returns to you when you have paid more than you owed.
- When you work out the tax still due on your return, the Act lets you subtract any tax deducted or collected at source (section 266(2)(b)).
- The bank gives you a TCS certificate in Form 133.
- A refund claim has to be made by filing a return. The article on why filing tax returns matters covers this, and how to file your return takes you through the steps.
- If you are a salaried employee, you can give your employer details of tax collected at source for the same tax year. The employer then takes it into account when deducting tax on your salary (section 392(4)(a)(v)).
- Interest on a TCS refund runs from 1 April after the tax year, provided your return was filed on time.
Take the gift example again. Suppose your total tax for the year comes to less than the ₹40,000 collected. The excess comes back as a refund when your return is processed.
Does investing abroad count under the LRS?
It depends on how you invest. If you buy foreign shares or funds yourself, you are sending money abroad. That is an LRS remittance, so the ₹10 lakh threshold and the 20% rate for other purposes apply. RBI lists overseas direct investment and overseas portfolio investment among the permitted capital account transactions. The article on investing in US stocks from India compares the direct routes and how US shares are taxed in India.
Buying an Indian international mutual fund is different. You pay rupees to an Indian fund, so you make no LRS remittance and use none of your US$2,50,000. For tax, an international fund is not equity-oriented: an unlisted unit is long-term after 24 months and taxed at 12.5%, a listed ETF unit after 12 months, and shorter-term gains at your slab rate. The international funds category page covers how these funds work.
Koshex distributes international funds as regular plans. As a distributor, Koshex helps you choose a fund that suits your goal and timeline.
What about NRIs?
The LRS is for residents. An NRI sending money abroad from an NRO account uses a separate RBI facility, which allows up to US$1 million a financial year, with documents. Remittances out of an NRE account are also permitted. For the account types, see how NRIs can invest in mutual funds, and for tax on gains, taxation of mutual funds for NRIs.