LRS TCS relief: Section 206C(1G) threshold raised from Rs 7 lakh to Rs 10 lakh from 1 April 2025

If you send money abroad under the Liberalised Remittance Scheme (LRS), 1 April 2025 brought welcome relief. The Finance Act 2025 raised the Tax Collected at Source (TCS) threshold under Section 206C(1G) of the Income-tax Act, 1961 from Rs 7 lakh to Rs 10 lakh per financial year. In plain terms, you can now remit up to Rs 10 lakh in FY 2025-26 for most purposes before any TCS applies, against Rs 7 lakh in FY 2024-25. For a family funding overseas study, a tour, or an offshore investment, that Rs 3 lakh headroom is a real cash-flow saving of up to Rs 60,000 held back at the bank counter.

TCS is not a new tax and not a penalty. It is an advance collection that the authorised dealer (AD) bank remits to the government against your PAN, and you claim it back in full when you file your return. Understanding the revised Section 206C(1G) matters because the Reserve Bank of India permits resident individuals to remit up to USD 250,000 per financial year under LRS, and large remittances now trip the 20% rate only beyond Rs 10 lakh. Use our TCS calculator to model your own remittance before you visit the bank.

What the Section Says

Section 206C(1G), inserted by the Finance Act 2020 and amended most recently by the Finance Act 2025, requires the AD bank or the seller of an overseas tour program package to collect TCS on two categories of outward payment: money remitted abroad under the RBI's Liberalised Remittance Scheme, and the sale of overseas tour program packages. With effect from 1 April 2025, the sub-section applies TCS only once your aggregate remittance in a financial year crosses Rs 10 lakh, up from the Rs 7 lakh limit that applied through 31 March 2025.

The rate you pay depends entirely on the purpose of the remittance, and the Finance Act 2025 kept the purpose-based structure intact while lifting the threshold. For remittances made for the purpose of education or medical treatment, TCS is 5% on the amount above Rs 10 lakh in the year. For any other purpose, including investment in foreign shares, gifts, maintenance of relatives abroad, and general travel, TCS is 20% on the amount above Rs 10 lakh.

One important carve-out sits inside the section. Where the remittance for education is made out of a loan obtained from a financial institution as defined in Section 80E(3)(b) of the Income-tax Act, 1961, no TCS is collected at all from 1 April 2025. Before this change, education remittances funded by a qualifying loan attracted TCS of 0.5% above the old Rs 7 lakh threshold; that levy has now been removed entirely, so a genuine education loan carries a nil TCS rate whatever the amount.

Overseas tour program packages follow their own two-tier rule under the same sub-section. From 1 April 2025, a tour package attracts TCS at 5% on the amount up to Rs 10 lakh, and at 20% on the portion above Rs 10 lakh in a financial year. This differs from a plain LRS remittance, which carries a genuine nil band up to Rs 10 lakh. The table below sets out the FY 2025-26 position.

The statutory text of Section 206C is published on indiacode.nic.in, and the Income Tax Department's plain-language guidance on TCS sits at incometax.gov.in. Always confirm the purpose code your bank applies, because a misclassified remittance can attract 20% where 5% or nil was due.

Worked Example

Consider Rohan, a Bengaluru software engineer who remits Rs 25 lakh in October 2025 under LRS to buy US-listed shares through an overseas broking account. Because the purpose is investment, the 20% rate applies, but only on the slice above the Rs 10 lakh threshold. TCS is therefore 20% of (Rs 25 lakh minus Rs 10 lakh), which is 20% of Rs 15 lakh, or Rs 3,00,000. Rohan pays Rs 25 lakh to the broker and a further Rs 3 lakh in TCS to his AD bank, which deposits it against his PAN.

Had Rohan made the identical remittance in March 2025 under the old Rs 7 lakh threshold, TCS would have been 20% of Rs 18 lakh, or Rs 3,60,000. The higher threshold from 1 April 2025 therefore leaves Rs 60,000 in his hands instead of being parked with the government until he files his return. The table below compares the two regimes on a larger Rs 30 lakh investment remittance to show how the Rs 3 lakh threshold gap translates into cash flow.

The Rs 60,000 difference is a timing benefit, not a tax saving, because the entire Rs 4 lakh is creditable. When Rohan files his ITR for AY 2026-27, the Rs 3 lakh TCS (in the first example) is set off against his total tax liability. If his liability for the year is, say, Rs 2.4 lakh, the excess Rs 60,000 is refunded with interest under Section 244A. Model your net position first with our income tax calculator and compare regimes using the old vs new regime tool.

Now take Meera, whose daughter studies in Canada. Meera remits Rs 12 lakh in August 2025 for tuition and living costs from the family's own savings. Because the purpose is education, TCS is 5% on Rs 2 lakh (the amount above Rs 10 lakh), or Rs 10,000. Had she instead funded the same Rs 12 lakh from a sanctioned education loan qualifying under Section 80E(3)(b), the TCS would have been nil, saving her the Rs 10,000 upfront collection entirely from 1 April 2025.

Common Mistakes

The most costly misconception is treating TCS as a sunk cost. It is a prepaid tax that appears against your PAN and is fully adjustable against your final liability, or refundable if you have overpaid. Every rupee of the Rs 3,00,000 in Rohan's example is recoverable, so never let a bank quote of "20% TCS" scare you out of a legitimate remittance in FY 2025-26.

A second frequent error is assuming the Rs 10 lakh threshold resets with each bank or each transaction. It does not. The threshold is applied per remitter per financial year on an aggregate basis across all AD banks, so three remittances of Rs 4 lakh each through different banks in FY 2025-26 total Rs 12 lakh and attract TCS on Rs 2 lakh. Banks are required to track your cumulative LRS drawals, but you should keep your own running total to avoid a surprise 20% deduction on the transaction that tips you over Rs 10 lakh.

Third, many taxpayers still believe education remittances funded by a loan attract 0.5% TCS. That was the position until 31 March 2025; from 1 April 2025 a qualifying Section 80E(3)(b) education loan carries nil TCS, so insist your bank apply the correct rate and retain the loan sanction letter as proof. Fourth, salaried remitters often forget that since 1 October 2024, Section 192 permits an employer to factor TCS collected on your behalf into the TDS computed on your salary, which prevents cash being blocked twice; declare your TCS to your payroll team and use our TDS calculator to check the adjusted deduction.

Finally, do not file your return without reconciling the Form 26AS and the Annual Information Statement. The TCS collected under Section 206C(1G) reflects there, and the bank issues a Form 27D certificate. A mismatch between the TCS shown by the bank and the credit you claim is a common trigger for processing delays under Section 143(1), so verify the figures before you submit for AY 2026-27.

FAQ

What is the new TCS threshold on foreign remittances from FY 2025-26?

The Finance Act 2025 raised the Section 206C(1G) threshold from Rs 7 lakh to Rs 10 lakh with effect from 1 April 2025. You can now remit up to Rs 10 lakh in a financial year for most LRS purposes before any TCS applies, within the RBI's overall LRS ceiling of USD 250,000 per year.

Is TCS an extra tax that I lose permanently?

No. TCS under Section 206C(1G) is an advance tax collected against your PAN and is fully creditable against your total tax liability. If it exceeds your liability for AY 2026-27, the surplus is refunded, typically with interest under Section 244A, once your return is processed.

Do I pay TCS on money sent for my child's overseas education?

It depends on the funding source. From own funds, TCS is 5% on the amount above Rs 10 lakh in the year. Where the remittance is made out of an education loan qualifying under Section 80E(3)(b) of the Income-tax Act, 1961, no TCS is collected at all from 1 April 2025.

Does the Rs 10 lakh limit apply per transaction or per year?

It applies per remitter per financial year on an aggregate basis, not per transaction or per bank. All your LRS remittances in FY 2025-26 are added together, and TCS is triggered on the cumulative amount that crosses Rs 10 lakh.

Can my employer adjust the TCS against my salary TDS?

Yes. Since 1 October 2024, Section 192 allows your employer to take into account the TCS collected from you when computing TDS on your salary. Declare the TCS to your payroll team so the same amount is not blocked twice during the year.

Where can I see the TCS that was collected from me?

The TCS reflects in your Form 26AS and Annual Information Statement on the Income Tax portal, and your AD bank issues a Form 27D certificate for the collection. Reconcile these before filing your return for AY 2026-27 to ensure you claim the full credit.

Is there any TCS on overseas tour packages below Rs 10 lakh?

Yes. Unlike a plain LRS remittance, an overseas tour program package attracts TCS at 5% on the amount up to Rs 10 lakh from 1 April 2025, and 20% on the portion above Rs 10 lakh in the financial year.