Budget 2026 TCS: When you send money outside India for things like travel, medical treatment or education, you first change your rupees into foreign money. The Reserve Bank of India allows this under a rule called the Liberalised Remittance Scheme or LRS. Under this scheme any Indian resident can send up to $250,000 in one financial year.
When you make this transfer the banks collect something called TCS which means Tax Collected at Source. This is not extra tax, it is like paying a part of your income tax in advance. The bank takes this money and gives it to the tax department in your name. Later when you file your income tax return, this amount is adjusted with your total tax. If you paid more TCS than needed you get the extra money back as a refund.
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For example if your total tax for the year is ₹50,000 and TCS collected during the year is ₹45,000, then you will get ₹5,000 back as a refund.
Does everyone Pay 5% TCS?
No, the TCS rate is not the same for everything. It depends on why you are sending money abroad. For education, there is no TCS if the amount is up to ₹10 lakh. If you send more than ₹10 lakh, then TCS of 5% is charged on the extra amount. From the next financial year, this rate will be reduced to 2%.
If the money for education comes from an education loan, then no TCS is charged at all.
For the medical treatment abroad there is also no TCS up to ₹10 lakh and after that the 5% TCS applies. For overseas tour packages, TCS is charged at 5% up to ₹10 lakh, which has now been reduced to 2%, and 20% on amounts above ₹10 lakh.
Why Adjusting TCS helps
When TCS is adjusted while filing your tax return, it helps because you do not have to block a lot of money upfront. For example, if you send ₹30 lakh abroad, earlier you had to pay 5% on ₹20 lakh, which means ₹1 lakh extra had to be paid first. Now, with a lower rate of 2%, this extra payment comes down to ₹40,000.
Talking about this change, CA Chirag Chauhan, founder of Mumbai-based CA Chauhan & Company, said, “With this, the lower amount stands to get blocked for the taxpayers. This move will be beneficial not only for the taxpayers but also for the income tax department,” he said.
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He also explained why lower TCS makes things easier. “The tax department is supposed to return this money (collected as TCS) anyway, along with the interest on it. When this amount is tiny (2%), it could be adjusted against the overall tax liability at the year-end, but a higher amount (5% or 20%) is usually refunded along with 6% interest to the taxpayers in July or August (after the return is filed),” he adds.
