TCS on Foreign Remittance 2026: Budget 2026 Cuts the Rate to 2% — What Changed and How to Claim It Back

If you sent money abroad for a child's education, a medical emergency, an overseas tour package, or an investment before April 2026, you paid a different TCS rate than you would today. Budget 2026 cut the Tax Collected at Source on Liberalised Remittance Scheme (LRS) payments for education, medical treatment, and tour packages from 5% down to 2%, effective April 1, 2026 — and changed the tour package rule in a way that actually widens who it applies to. Here is exactly what moved, what stayed the same, and how the money you've already paid comes back to you.

What Budget 2026 Actually Changed

The headline change is the 5%-to-2% cut on education and medical remittances, and an identical cut on tour packages — but the tour package change works differently. Before Budget 2026, a tour package attracted 5% TCS up to ₹7 lakh and 20% beyond it. Now it's a flat 2%, applied from the very first rupee you remit for the package. Investment and gift remittances — the largest category by rupee volume, covering everything from buying US stocks to funding a relative living abroad — were left untouched at 20% above ₹10 lakh, the threshold Budget 2025 had already raised from ₹7 lakh the year before.

The ₹10 Lakh Threshold Is Cumulative, Not Per-Purpose

One detail catches remitters off guard: the ₹10 lakh threshold isn't a separate allowance for each purpose. It's calculated cumulatively across almost all your LRS remittances in a financial year — send ₹6 lakh for a child's tuition in June and ₹5 lakh as a gift to a relative in November, and you've crossed ₹10 lakh combined, triggering TCS on the amount above it, even though neither remittance alone crossed the line on its own. Since April 1, 2025, education-loan-funded remittances (where the loan qualifies under Section 80E) are fully exempt — nil TCS at any amount. Before that date, they attracted 0.5% TCS above ₹7 lakh.

How to Actually Claim TCS Back

TCS collected on your remittance isn't an extra tax you lose — it's an advance payment against your eventual tax liability, exactly like TDS. The bank or authorised dealer that processed your remittance reports it to the Income Tax Department, and it shows up in your Form 26AS and Annual Information Statement (AIS) under your PAN. When you file your ITR for the year, you claim credit for the TCS collected against your total tax liability. If your actual tax liability is lower than the TCS already collected — common for a one-off expense like a wedding trip or a lump-sum tuition payment — the excess comes back to you as a refund. There's no separate application for the credit itself; it's built into the standard ITR filing process for FY 2025-26, the same return covering every other head of income.

Who This Actually Affects

• Parents remitting self-funded tuition fees or living expenses for a child studying abroad — now 2% above ₹10 lakh instead of 5%
• Families paying for medical treatment overseas — same 2% rate above the ₹10 lakh threshold
• Anyone booking an overseas tour package through a travel operator — 2% flat, from the first rupee, no threshold
• Investors remitting funds to buy US stocks or international funds directly — unchanged at 20% above ₹10 lakh
• Anyone gifting money to a relative abroad or funding their maintenance — also unchanged at 20% above ₹10 lakh
• Education loan borrowers remitting loan-funded tuition — nil TCS since April 1, 2025; it was 0.5% above ₹7 lakh before that

Bottom Line

Budget 2026 genuinely reduced the cost of sending money abroad for education, medical treatment, and travel — from 5% to 2%, and from a tiered tour-package structure to a simple flat rate. It left the 20% rate on investment and gift remittances exactly where it was, which is worth knowing before you plan a large remittance for anything other than education, medical care, or travel. Either way, TCS collected is recoverable — check your Form 26AS and AIS after any remittance, and don't leave that credit unclaimed when you file your ITR before the July 31 deadline. TCS is separate from the declaration your bank may also need before releasing the same remittance — Form 15CA and 15CB, now renamed Form 145 and 146 — covered in our guide to that renumbering.