TCS on Foreign Remittances and Tour Packages After April 2026
- What changed
- Who collects, and when
- When no TCS is collected
- Worked examples
- Before you remit or book
- Without a PAN
- Getting the money back
- Year labels
- Where this fits
From 1 April 2026, tax collected at source (TCS) on an overseas tour package is a flat 2% of the amount, whatever its size. TCS on remittances under the Liberalised Remittance Scheme (LRS) for education or medical treatment is 2% where the year’s remittances exceed ₹10 lakh. Remittances for other purposes, such as investment, gifts or maintenance of relatives, still attract 20% above ₹10 lakh. Education remittances funded by a loan from a financial institution attract no TCS. These changes were made by section 85 of the Finance Act, 2026 to section 394 of the Income-tax Act, 2025.
TCS is not an extra tax. It is credited against your income tax for the year and refunded if it exceeds your liability, but the money is locked up until then.
What changed
| Section 394(1) Table | Receipt | FY 2025-26 rate (1961 Act, section 206C) | Rate from 1 April 2026 |
|---|---|---|---|
| Sl. No. 7(a) | LRS remittance for education or medical treatment, above ₹10 lakh | 5% | 2% |
| Sl. No. 7(b) | LRS remittance for other purposes, above ₹10 lakh | 20% | 20% (unchanged) |
| Sl. No. 8 | Sale of an overseas tour programme package | 5% up to ₹10 lakh; 20% above | 2% on the whole amount |
| Sl. No. 1 | Alcoholic liquor | 1% | 2% |
| Sl. No. 2 | Tendu leaves | 5% | 2% |
| Sl. No. 4 | Scrap | 1% | 2% |
| Sl. No. 5 | Coal, lignite, iron ore | 1% | 2% |
The Income-tax Act, 2025 as passed in August 2025 carried the same rates as the 1961 Act. Section 85 of the Finance Act, 2026 changed them with effect from 1 April 2026 (section 1(2)(a)), the day the new Act came into force, so the old rates never applied under it.
Who collects, and when
- Tour packages: the seller of the package, meaning the tour operator or travel agent. A package includes travel, hotel stay, boarding, lodging or similar expenses.
- LRS remittances: the authorised dealer, meaning your bank.
- Timing: section 394(1)(c) requires collection when the amount is debited to your account or received from you, whichever is earlier.
When no TCS is collected
- Education loans. No TCS on an LRS remittance that is a loan from a financial institution for education (section 394(4)(b)).
- No double collection. If the tour operator has already collected TCS on a package, your bank does not collect again on the same amount (section 394(4)(a)).
- Buyer deducts TDS. No TCS under Sl. Nos. 7 and 8 where the buyer is liable to deduct, and has deducted, TDS on the payment (section 394(5)).
Worked examples
| Transaction in tax year 2026-27 | TCS at FY 2025-26 rates | TCS from 1 April 2026 |
|---|---|---|
| Overseas tour package of ₹3,00,000 | ₹15,000 (5%) | ₹6,000 (2%) |
| Overseas tour package of ₹15,00,000 | ₹50,000 + ₹1,00,000 = ₹1,50,000 | ₹30,000 (2%) |
| LRS for a child’s tuition, ₹25,00,000 in the year, self-funded | 5% on the amount above ₹10 lakh: ₹75,000 | 2% on the amount above ₹10 lakh: ₹30,000 |
| Same tuition, fully funded by an education loan from a financial institution | Nil | Nil |
| LRS to buy foreign shares, ₹18,00,000 in the year | 20% on ₹8,00,000: ₹1,60,000 | Unchanged: ₹1,60,000 |
Illustrative. The LRS rows assume TCS applies only to the amount above ₹10 lakh in the year, as section 206C(1G) of the Income-tax Act, 1961 provided. The 2025 Act’s table describes remittances “exceeding ten lakh rupees” without spelling this out, so check how your bank applies it.
Before you remit or book
- Tell the bank the purpose. The 2% rate depends on the remittance being for education or medical treatment, so the purpose code on the LRS form matters.
- Keep the loan route documented. If tuition is paid from an education loan, the loan sanction and disbursement records support the nil-TCS treatment.
- Count the whole year. The ₹10 lakh limit in Sl. No. 7 refers to the aggregate of amounts remitted, so several smaller transfers can cross it.
- Book packages as packages. The flat 2% applies to the seller of an overseas tour programme package; ask the operator to show TCS separately on the invoice.
Without a PAN
Section 397(2)(b)(ii) requires TCS at the higher of twice the normal rate or 5%, capped at 20%. For a tour package that means 5% instead of 2%. Give your PAN when booking.
Getting the money back
- Check the credit. TCS collected shows in your Annual Information Statement against your PAN.
- Use it during the year. For advance tax purposes, section 405 reduces the advance tax payable by tax collected at source, so TCS can reduce your instalments.
- Salaried? You can report TCS to your employer in Form No. 122 so that less TDS is deducted from salary (section 392(4)).
- Claim it in the return. Any excess over your liability is refunded after you file for tax year 2026-27.
Year labels
These rates apply to amounts collected on or after 1 April 2026 under the Income-tax Act, 2025, as amended. TCS on remittances and packages before that date was governed by section 206C(1G) of the Income-tax Act, 1961.
Where this fits
- TDS on payments to residents: TDS rates and thresholds for 2026-27
- Planning instalments: advance tax for tax year 2026-27
- Matching credits: fixing a TDS mismatch
- Estimate the tax: TDS calculator
Sources. Finance Act, 2026, sections 1(2)(a) and 85, Gazette of India, 30 March 2026. Income-tax Act, 2025, sections 392(4), 394, 397(2) and 405, Gazette of India, 21 August 2025. Income-tax Rules, 2026, rule 204 and Form No. 122, notified 20 March 2026.