Section 206C(1G) of the Income Tax Act: TCS on Foreign Remittances & Overseas Tour Packages (FY 2026-27 Guide)

Section 206C(1G) of the Income Tax Act, 1961 requires banks (authorised dealers) and overseas tour operators to collect Tax Collected at Source (TCS) when a resident individual sends money abroad under the RBI’s Liberalised Remittance Scheme (LRS) or buys an overseas tour programme package. From 1 April 2026, this provision has been renumbered as Section 394(1) of the Income-tax Act, 2025, and the rates have been cut sharply. This guide explains everything — who collects the tax, the current rates and thresholds, exemptions, filing rules, worked examples, and how to claim the money back.

What is Section 206C(1G)?

Section 206C(1G) is a provision of the Income Tax Act, 1961 that mandates Tax Collected at Source (TCS) on specified foreign transactions. In simple terms, when you move money out of India for personal reasons, the person receiving your money on the way out — your bank, or the travel company selling you a tour — collects a small percentage as tax and deposits it with the government against your PAN.

It was introduced by the Finance Act, 2020 and became effective on 1 October 2020. The intent is not to raise fresh revenue but to track high-value foreign spending and bring it into the tax net, so that the outflow can be matched against the remitter’s declared income.

The key point to remember: TCS is a pre-paid tax, not a cost. It appears in your Form 26AS and Annual Information Statement (AIS), and you set it off against your total income tax liability — or claim a refund — when you file your return.

Who is liable to collect TCS under Section 206C(1G)?

The responsibility to collect the tax sits with the person receiving the payment, not the individual sending money abroad. Two categories are liable:

• An Authorised Dealer — typically a scheduled bank or authorised money changer — who receives an amount for remittance out of India under the LRS of the Reserve Bank of India.
• A seller of an overseas tour programme package — any travel operator or agent who receives payment from a buyer for such a package.

The collector must deposit the TCS with the government, file quarterly returns in Form 27EQ, and issue a TCS certificate in Form 27D to the remitter.

Which transactions are covered?

Section 206C(1G) covers two distinct types of transactions:

1. Remittances under the LRS: Any outward remittance made by a resident individual under the RBI’s Liberalised Remittance Scheme — for example, funds sent abroad for education, medical treatment, investment in foreign shares or property, gifts to relatives, or maintenance of family living overseas.
2. Purchase of an overseas tour programme package: Payment made to a tour operator for a package that bundles foreign travel with other services (explained in detail below).

Important distinction: LRS remittances enjoy a ₹10 lakh threshold before TCS kicks in, but an overseas tour package has no threshold — TCS applies from the very first rupee.

Current TCS rates for FY 2026-27 (w.e.f. 1 April 2026)

The Finance Act, 2026, read with the Income-tax Act, 2025, rationalised the rates and cut them significantly. The table below shows the position that applies to remittances and tour packages on or after 1 April 2026.

How the rates evolved (2020 to 2026)

Section 206C(1G) has been amended several times. Understanding the timeline helps if you are reconciling older transactions or reading historical Form 26AS entries.

Note: The 20% rate on LRS and tour packages was introduced by the Finance Act, 2023 and originally scheduled for 1 July 2023, but was deferred to 1 October 2023. The ₹7 lakh threshold for tour packages continued even after the general LRS threshold rose to ₹10 lakh in April 2025, and was removed only when the flat 2% rate came in from April 2026.

What counts as an “overseas tour programme package”?

This definition matters, because a tour package attracts TCS from the first rupee, whereas a standalone service may not. Per CBDT clarifications, an overseas tour programme package is any tour package that offers a visit to a country outside India and includes at least two of the following components, sold as a single, composite product:

• A travel ticket (to or from a foreign destination),
• Accommodation (hotel or similar stay),
• Boarding or lodging, or
• Any other expenditure of a similar nature, or in relation to it.

The ₹10 lakh threshold explained

For LRS remittances (other than tour packages), TCS is triggered only once your total remittances in a financial year cross ₹10 lakh. A few key points:

• It is cumulative and per PAN. The ₹10 lakh limit is calculated across all your LRS remittances in the year taken together, not per transaction.
• It resets on 1 April each financial year.
• TCS applies only to the excess over ₹10 lakh, not the entire amount.
• Tour packages are outside this threshold. Their 2% applies separately, from the first rupee.

Renumbering under the Income-tax Act, 2025 (Section 394)

The Income-tax Act, 1961 is being replaced by the Income-tax Act, 2025, in force from 1 April 2026. Under the new law, the entire TCS regime that sat in Section 206C has been moved into a table-based structure under Section 394(1).

Specifically, the old Section 206C(1G) now corresponds to Section 394(1), appearing at Serial Nos. 7.D(a), 7.D(b), 8.D(a) and 8.D(b) of the relevant table — covering LRS education/medical, LRS other purposes, and overseas tour packages. The compliance machinery (Form 27EQ, Form 27D, credit in Form 26AS) continues unchanged. Similarly, the “higher rate for no-PAN” rule that was in Section 206CC is now Section 397(2).

Because TRACES records and older certificates still use the 1961 numbering, most practitioners continue to refer to the provision as “Section 206C(1G)” alongside the new Section 394(1).

Exemptions and exclusions

TCS under Section 206C(1G) does not apply in the following situations:

• Education financed by a loan from a notified financial institution — fully exempt (NIL).
• Buyer is a government or specified body — Central/State Government, an embassy, High Commission, consulate, or a trade representation of a foreign state.
• Non-resident individual visiting India — the provision does not apply to a buyer who is a non-resident (as notified by the Central Government).
• Amount already subject to TDS — if tax has already been deducted at source on the same amount under another provision, TCS is not collected again.
• NRO-to-NRE transfers by NRIs — moving funds between an NRI’s own NRO and NRE accounts is not treated as a taxable outward remittance for TCS.
• International credit card spends abroad — spending on an international credit card while overseas is currently kept outside the LRS (postponed by the Ministry of Finance until further notice), so no TCS applies. Note that debit cards and forex cards used abroad remain within the LRS and do attract TCS.

When is TCS collected?

The tax must be collected at the time of debiting the amount payable by the buyer or receiving the payment, whichever is earlier. For LRS remittances, this means the bank collects TCS at the point of processing the outward transfer; for tour packages, the operator collects it when you pay for the package. Ensure your bank account is sufficiently funded to cover the remittance, the TCS, and any service charges — otherwise the transaction may not go through.

No PAN or Aadhaar? Higher TCS applies

PAN is mandatory for all LRS transactions. If the buyer or remitter does not furnish a valid PAN or Aadhaar (or has an inoperative PAN), a higher rate applies under Section 206CC (now Section 397(2) of the Income-tax Act, 2025): TCS is collected at twice the applicable rate, or 5%, whichever is higher. Furnishing your PAN before the transaction is always cheaper — and it also ensures the credit is correctly mapped to you.

Compliance: Form 27EQ, Form 27D and due dates

The collector (bank or tour operator) has to meet the following compliance obligations:

How to claim TCS credit or refund

Because TCS is a pre-paid tax, you get every rupee back — either as a set-off or a refund. Here is how:

1. Check Form 26AS / AIS: The TCS collected against your PAN appears in your Form 26AS and Annual Information Statement on the income tax e-filing portal. Verify the amount and the collector’s details.
2. Claim it in your ITR: While filing your income tax return, report the TCS and adjust it against your total tax liability.
3. Get a refund if there’s no liability: If your TCS exceeds your tax due (or you have no liability), the excess is refunded.
4. Salaried taxpayers: You can declare LRS-related TCS to your employer so it is adjusted against salary TDS, easing the cash-flow impact during the year.

Penalty and interest for non-compliance

Consequences of failing to collect or deposit TCS correctly fall on the collector, not the remitter:

• Interest — Section 206C(7): Interest at 1% per month (or part of a month) on the amount not collected or not deposited on time.
• Penalty — Section 271CA: A penalty equal to the amount of TCS that was not collected.
• Late-filing fee — Section 234E: ₹200 per day for delay in filing Form 27EQ, capped at the TCS amount.
• Penalty for non-filing — Section 271H: May range from ₹10,000 to ₹1,00,000 for failure to file (or incorrect filing of) the TCS return.

Worked examples (FY 2026-27)

The following illustrations apply the current rates. Assume the remitter has furnished a valid PAN unless stated otherwise.

In each case, the TCS is credited to the remitter’s PAN and is fully recoverable when the income tax return is filed.

Frequently Asked Questions

What is Section 206C(1G) of the Income Tax Act?

Section 206C(1G) requires banks (authorised dealers) and overseas tour operators to collect Tax Collected at Source (TCS) when a resident individual remits money abroad under the Liberalised Remittance Scheme (LRS) or buys an overseas tour programme package. It was introduced by the Finance Act, 2020 with effect from 1 October 2020, and from 1 April 2026 it is renumbered as Section 394(1) of the Income-tax Act, 2025.

What is the TCS rate on foreign remittance for FY 2026-27?

For FY 2026-27, LRS remittances for education (self-funded) or medical treatment attract 2% TCS above ₹10 lakh; LRS remittances for other purposes such as investment or gifting attract 20% above ₹10 lakh; education funded by a loan is exempt (NIL); and overseas tour packages attract a flat 2% with no threshold.

What is the TCS rate on overseas tour packages in 2026?

From 1 April 2026, overseas tour programme packages attract a flat 2% TCS from the first rupee, with no minimum threshold. This replaced the earlier structure of 5% up to ₹7 lakh and 20% above ₹7 lakh.

Is there a threshold before TCS applies?

Yes, for LRS remittances the threshold is ₹10 lakh per PAN per financial year, and TCS applies only to the amount exceeding it. However, overseas tour packages have no threshold — TCS applies on the entire package amount.

Is TCS on foreign remittance an extra tax?

No. TCS is a pre-paid tax, not an additional cost. It is credited against your PAN, shown in Form 26AS and the AIS, and can be adjusted against your total income tax liability or claimed as a refund when you file your ITR.

How can I claim a refund of TCS collected on foreign remittance?

Verify the TCS entry in your Form 26AS/AIS, report it in your income tax return, and adjust it against your tax due. If your TCS exceeds your liability, the excess is refunded after your return is processed.

Is TCS applicable on money sent abroad for education?

If the education is financed by a loan from a financial institution, it is fully exempt (NIL). If it is self-funded, TCS of 2% applies on the amount exceeding ₹10 lakh in the financial year (FY 2026-27 rate).

Does TCS apply to international credit card spending abroad?

No. Spending on an international credit card while overseas is currently kept outside the LRS (postponed by the Ministry of Finance until further notice), so no TCS applies. However, debit cards and forex cards used abroad are within the LRS and do attract TCS.

Who collects the TCS — the sender or the receiver?

The collector is the receiver of the payment: the authorised dealer (bank) for LRS remittances, or the seller of the overseas tour package. They deposit the TCS with the government and issue you a Form 27D certificate.

What happens if I do not provide my PAN?

If PAN or Aadhaar is not furnished (or the PAN is inoperative), TCS is collected at a higher rate — twice the applicable rate or 5%, whichever is higher — under Section 206CC (now Section 397(2) of the Income-tax Act, 2025).

Is Section 206C(1G) still valid, or has it been replaced?

The substance continues, but the numbering has changed. From 1 April 2026, Section 206C(1G) of the Income-tax Act, 1961 corresponds to Section 394(1) of the Income-tax Act, 2025. Practitioners often refer to both, since TRACES records and older certificates still use the 1961 numbering.

Does TCS apply to NRIs sending money from India?

Section 206C(1G) targets resident individuals remitting abroad under the LRS. Transfers by NRIs between their own NRO and NRE accounts are not treated as taxable outward remittances for TCS, and remittances by non-residents are outside the scope of the provision.

Conclusion

Section 206C(1G) — now Section 394(1) of the Income-tax Act, 2025 — is far less punishing from FY 2026-27 than it was in earlier years. Overseas tour packages and essential remittances for education and medical treatment now attract just 2%, while the steep 20% rate is reserved for discretionary outflows like foreign investments and gifts above ₹10 lakh. Whatever the rate, remember that TCS is only a temporary cash-flow hit: furnish your PAN, keep your Form 27D, verify Form 26AS, and claim the full credit in your return.