TCS on Foreign Remittance: 206C Now Section 394
- Section 206C mapped to Sections 394 and 400 under the new Act. Rates and triggers unchanged.
- LRS threshold: No TCS on the first Rs 7 lakh per year. Above that, 20% TCS on most foreign remittances.
- Education remittances: 5% TCS above Rs 7 lakh. Funded by education loan from a notified institution: 0.5% (or nil if from public sector banks).
- TCS is claimable back in your ITR as a tax credit. It is not an additional tax.
If you send money abroad - whether for foreign education, overseas investments, or international travel - you have been paying TCS (Tax Collected at Source) since 2020. Section 206C is now Section 394/400 under the Income Tax Act 2025. The rates and thresholds continue, but understanding them correctly can save you significant cash flow.
Section 206C to Section 394: What Changed
TCS Rates on Foreign Remittance
TCS applies on money sent abroad under the Liberalised Remittance Scheme (LRS). The rates depend on the purpose:
- Education (funded by loan from financial institution): 0.5% on amount above Rs 7 lakh
- Education (funded from own sources): 5% on amount above Rs 7 lakh
- Medical treatment: 5% on amount above Rs 7 lakh
- Overseas tour packages: 5% on the entire amount (no Rs 7 lakh threshold for tour packages) up to Rs 7 lakh, 20% above Rs 7 lakh
- All other purposes (investments, gifts, property abroad): 20% on amount above Rs 7 lakh
The first Rs 7 lakh of foreign remittance in a financial year is exempt from TCS for most purposes (except tour packages).
How the LRS Limit Works
Under the Liberalised Remittance Scheme, every resident individual can remit up to USD 250,000 per financial year (approximately Rs 2.1 crore) for permitted purposes. TCS applies on top of this limit - it does not reduce the amount you can send.
The Rs 7 lakh TCS threshold is per person, per financial year, across all purposes combined.
TCS on Overseas Tour Packages
If you book an overseas tour package through a travel agent, TCS is collected by the tour operator:
- 5% TCS on the package cost up to Rs 7 lakh
- 20% TCS on the package cost above Rs 7 lakh
This applies to packages that include travel, accommodation, or any other expenditure for overseas travel.
How to Claim TCS Credit in Your ITR
TCS is not an additional tax - it is an advance payment of your income tax. You can claim full credit for TCS paid when filing your income tax return:
- TCS paid will reflect in your Form 26AS and Annual Information Statement (AIS)
- Claim the credit under the "TCS" section of your ITR form
- If TCS exceeds your total tax liability, you will receive a refund
- Ensure your PAN is correctly linked with the remittance to avoid mismatch
Every rupee of TCS you pay on a foreign remittance is creditable against your income tax in the same year. It shows up in your Form 26AS and AIS. If TCS exceeds your final liability, you get a refund. Plan cash flow accordingly, but do not treat it as a sunk cost.
Frequently Asked Questions
What is the new section number for TCS on foreign remittance?
Section 206C (TCS on foreign remittance) is now Section 394 under the Income Tax Act 2025. The TCS rates and the Rs 7 lakh threshold remain unchanged.
Is TCS applicable on education payments sent abroad?
Yes, but at a lower rate. If funded from an education loan from a notified institution, TCS is 0.5% on the amount above Rs 7 lakh. If paid from own sources, TCS is 5% above Rs 7 lakh. The first Rs 7 lakh in a year is exempt from TCS.
Can I get a refund of TCS paid on foreign remittance?
Yes. TCS is an advance tax payment, not an additional cost. When you file your income tax return, the TCS amount is credited against your tax liability. If TCS exceeds your tax due, you will receive a refund.
What is the TCS rate on overseas tour packages?
TCS on overseas tour packages is 5% up to Rs 7 lakh and 20% above Rs 7 lakh. Unlike other foreign remittances, there is no Rs 7 lakh exemption threshold for tour packages, TCS applies from the first rupee at 5%.
For TDS on the receiving end of foreign payments (export of services), see foreign income in ITR, Schedule FA and Form 67. For NRI taxation rules under the new Act, see NRI taxation under the new Act.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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