TCS on Foreign Remittances Cut to 2%: New LRS Rules from 1 April 2026

Budget 2026 cut TCS on remittances for education and medical treatment under the Liberalised Remittance Scheme from 5% to 2% on amounts above ₹10 lakh, and made overseas tour packages a flat 2% with no threshold, effective 1 April 2026 (Business Standard, 2026). For anyone sending money abroad — for a child's tuition, a medical trip, or a business remittance — that is less cash blocked up front.

One thing to be clear about first: TCS is not a tax you lose. It is an advance tax you reclaim in your ITR. So the real story here is cash flow, not liability. This guide covers the new rates, who they apply to, and how to get the money back.

What are the new TCS rates from 1 April 2026?

For education and medical purposes, TCS drops from 5% to 2% on the amount exceeding ₹10 lakh in a financial year; overseas tour packages move to a flat 2% with the earlier 5%/20% two-tier structure and its threshold scrapped (VisaHQ, 2026). Remittances for investment or other purposes stay at 20% above ₹10 lakh. The change flows from the Finance Act 2026 and applies with effect from 1 April 2026, so any remittance made on or before 31 March 2026 still follows the old rates (Standard Chartered India, 2026).

The effect on cash flow is real. On a ₹30 lakh education remittance, the TCS blocked falls from ₹1,00,000 at the old 5% to ₹40,000 at 2% — a ₹60,000 saving that stays in your account until you file (Samco, 2026).

Is TCS a cost, or do I get it back?

You get it back. TCS collected under Section 206C(1G) is an advance tax on your behalf, not an extra levy — it appears in your Form 26AS and Annual Information Statement, and you claim it against your tax liability or as a refund when you file your ITR (Bajaj Finserv, 2025). The only real impact is that the money is parked until you reconcile.

That makes clean reconciliation the whole game. If your ITR does not correctly capture the TCS credit, you leave money with the department. If you would rather not track this yourself, our business ITR filing service reconciles Form 26AS and AIS so every rupee of TCS is claimed.

Does the LRS limit itself change?

No. The LRS cap stays at USD 250,000 per resident individual per financial year for all permitted transactions — Budget 2026 changed the TCS rate on certain purposes, not the ceiling. Outward LRS remittances actually fell 6.85% to USD 29.56 billion in FY25, from an all-time high of USD 31.73 billion in FY24 (Business Standard, 2025).

So plan around the same USD 250,000 window you always had; only the up-front deduction on part of it got lighter.

What is still exempt or outside TCS?

Education funded by a loan from a specified financial institution under Section 80E stays fully exempt from TCS with no threshold; self-funded education above ₹10 lakh now attracts the reduced 2% (indmoney, 2026). International credit-card spends abroad continue to sit outside the LRS, so they attract no TCS.

A quick mental model: loan-funded education is clean, self-funded education and medical are now cheap to remit, tour packages are a flat 2%, and only investment-type outflows carry the heavy 20%. Route your remittances with that in mind.

What should you do before you remit?

Confirm the purpose code your bank applies, because that determines the rate. Keep the remittance advice and the bank's TCS certificate — you will need them at filing. If you are a business remitting for services or software, the rules differ from personal LRS; see our note on cross-border remittance for SaaS exporters for the export side.

Then, at year-end, reconcile all TCS entries against your AIS before filing. If you keep clean books through the year with bookkeeping support, this becomes a five-minute check rather than a scramble.