TCS Rate Changes Announced

Union Budget 2026 introduced significant reductions in Tax Collected at Source (TCS) rates for overseas remittances under the Liberalised Remittance Scheme (LRS). These changes apply from FY 2026-27 (Assessment Year 2026-27).

Revised TCS Rates: Before vs After

Impact Analysis: Specific Scenarios

Overseas Education Remittance (₹25 Lakh)

textPrevious TCS: ₹25 lakh × 5% = ₹1.25 lakh
New TCS: ₹25 lakh × 2% = ₹50,000
Difference: ₹75,000

Overseas Medical Treatment (₹40 Lakh)

textPrevious TCS: ₹40 lakh × 5% = ₹2 lakh
New TCS: ₹40 lakh × 2% = ₹80,000
Difference: ₹1.2 lakh

Overseas Tour Package (₹30 Lakh)

textPrevious TCS: (₹10 lakh × 5%) + (₹20 lakh × 20%) = ₹4.5 lakh
New TCS: ₹30 lakh × 2% = ₹60,000
Difference: ₹3.9 lakh

TCS Application Framework

Liberalised Remittance Scheme (LRS) Limits

• Annual limit per individual: ₹25 lakh
• Applicability: Education, medical, travel, investment, other purposes
• Form requirement: Form A2 + PAN declaration
• Certificate issued: Form 27D (TCS certificate)

TCS Credit Mechanism

text1. TCS deducted by authorized dealer bank
2. TCS appears in Form 26AS
3. Credit claimed in ITR Schedule-TCS
4. Refund processed (typically 90-95% of TCS paid)

Additional TCS Provisions

Motor Accidents Claims Tribunal

Interest income received under Motor Vehicles Act, 1988 compensation awards is fully exempt from income tax effective FY 2026-27.

Manpower Recruitment Services

TCS clarification issued for overseas employment services:

• Rate: 2% on gross amount
• Scope: Recruitment agents, manpower supply agencies

Compliance Timeline

textFY 2026-27: April 1, 2026 - March 31, 2027
Original ITR deadline: July 31, 2027
Revised ITR deadline: March 31, 2028 (extended)
TCS verification: Form 26AS/Form 27D

Rate Structure Comparison

textThreshold-Based (Previous System):
₹0-10 lakh: 5%
Above ₹10 lakh: 20%

Flat Rate (New System):
All amounts: 2%

Technical Specifications

Section References (Income Tax Act 2025)

• TCS provisions: Section 393(4), Table Sl. No. 7
• LRS framework: FEMA regulations + RBI circulars
• Exemption: Schedule III (Motor Vehicles Act interest)

Form Requirements

textForm A2: Application cum declaration for remittance
Form 15CA/CB: For remittances above ₹5 lakh
Form 27D: TCS certificate (issued by bank)
PAN mandatory: For all remittances above ₹50,000

Remittance Categories Breakdown

Procedural Changes

1. Electronic verification enabled for lower/nil TDS certificates
2. No TAN requirement for resident individuals buying property from non-residents (clarified)
3. Form 27D issuance mandatory within 15 days of TCS deduction

Quantitative Impact Summary

textAverage overseas education remittance: ₹25-35 lakh/year
TCS reduction: 60% (5% → 2%)
Annual cash flow benefit: ₹90,000-₹2 lakh/family
Total affected taxpayers: ~25 lakh students + families

Key Numbers Reference

textLRS limit: ₹25 lakh/person/year
New TCS rates: 2% (education/medical/travel)
Previous rates: 5%/20% tiered
Form 26AS verification: Mandatory for TCS credit
Revised ITR deadline: March 31, 2028

Published: February 1, 2026
Related Reading: Budget 2026 Personal Income Tax Rates
Keywords: TCS rates Budget 2026, overseas remittance tax, LRS TCS reduction

CA Ankit Gulgulia (Jain)

FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)

Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.