India TCS After Budget 2026: What Changed for LRS

Key takeaways

Education and medical remittances above ₹10 lakh: TCS cut from 5% to 2% from April 1, 2026
Overseas tour packages: a flat 2% from the first rupee, replacing 5% and 20%
Not changed: 20% above ₹10 lakh for other purposes, such as gifts, family support and emigration money
Not changed: education paid from a loan by a financial institution has no TCS
TCS is not a final tax: you claim it back in your Indian income tax return

What did Budget 2026 change?

Finance Minister Nirmala Sitharaman presented the Budget on February 1, 2026. Paragraph 104 of her speech proposed to "reduce TCS rate for pursuing education and for medical purposes" under the Liberalised Remittance Scheme (LRS) "from 5 percent to 2 percent". Paragraph 103 cut TCS on overseas tour packages to 2% "without any stipulation of amount".

The change is now law. The Income Tax Department publishes the TCS table in section 394 of the Income-tax Act, 2025. Its footnotes show the new rates were substituted by Act No. 4 of 2026, with effect from April 1, 2026.

Purpose	Up to March 31, 2026	From April 1, 2026
Education, paid from a loan from a financial institution	Nil	Nil
Education, other funds (above ₹10 lakh a year)	5%	2%
Medical treatment (above ₹10 lakh a year)	5%	2%
Other LRS purposes (above ₹10 lakh a year)	20%	20% (no change)
Overseas tour package	5% up to ₹10 lakh, 20% above	2% from the first rupee

₹10 lakh is 1,000,000 rupees. The threshold counts the total of your LRS remittances in the financial year (April 1 to March 31).

What did not change?

The ₹10 lakh threshold for education, medical and other LRS purposes. Budget 2026 changed rates, not the threshold.
The 20% rate for other purposes. This covers most money that families send when they move: gifts, maintenance of relatives, emigration money, and money sent to your own account abroad.
Nil TCS on loan-funded education. The Act says the bank does not collect TCS when the amount remitted for education is a loan from a financial institution as defined in section 129(3)(b) of the Act.
The LRS limit of USD 250,000 per person per financial year, set by the Reserve Bank of India (RBI).
TCS is credit, not cost. It is collected against your PAN (Permanent Account Number) and can be claimed in your income tax return.

Who gains and who does not, for moves to Canada

Your situation	Effect of Budget 2026
Parents paying Canadian tuition from savings	Lower TCS: 2% instead of 5% above ₹10 lakh
Student paying tuition from an education loan	No change: still nil
Family sending savings to their own Canadian account before moving	No change: 20% above ₹10 lakh
Parents sending living costs to a child already in Canada	Depends on the purpose your bank records. Ask your bank whether it treats this as education or maintenance.
Family booking a tour package to visit Canada	2% flat, from the first rupee

The purpose you declare on Form A2 decides the rate. Your bank decides which purpose fits. Declaring the wrong purpose to get a lower rate is not allowed.

Worked examples: before and after

These assume no other LRS spending in the financial year.

Tuition of ₹30 lakh from savings

Amount above ₹10 lakh: ₹20 lakh
Before April 1, 2026: 5% × ₹20 lakh = ₹1,00,000 TCS
From April 1, 2026: 2% × ₹20 lakh = ₹40,000 TCS

₹30 lakh sent to your own Canadian account before you move

Amount above ₹10 lakh: ₹20 lakh
Before and after: 20% × ₹20 lakh = ₹4,00,000 TCS, which you claim back in your return

₹2 lakh tour package

Before: 5% = ₹10,000
After: 2% = ₹4,000

Try your own numbers in the India TCS calculator.

What counts toward the ₹10 lakh?

Banks count your LRS spending with them. RBL Bank, for example, says it adds up all forex withdrawals under LRS across its products: outward remittances, forex cards and debit cards used abroad. Banks also ask you to declare LRS amounts you sent through other banks.

Some banks treat certain transfers as LRS even inside India. Standard Chartered India says rupee transfers from a resident account to a non-resident (NRO) account that qualify as LRS attract TCS. If you are helping a family member who has already moved, ask your bank first. See NRE vs NRO accounts.

How to get your TCS back

Ask your bank for the TCS certificate for each remittance.
Check that the TCS shows under your PAN in your annual tax statement on the Income Tax Department e-filing portal.
Claim it in your Indian income tax return for that year. It reduces the tax you owe or is refunded.

If you are moving to Canada, file the Indian return for the year you leave, even if you have little Indian income. Otherwise the TCS stays unclaimed. The basics are in how to bring money from India.

Where the rule sits in Indian law

India replaced its old income tax law with the Income-tax Act, 2025. The Income Tax Department announced that the new Act came into force on April 1, 2026, the same day the new TCS rates started.

Under the old Act, TCS on LRS was in section 206C(1G). Many bank pages and older articles still use that number.
Under the new Act, the Income Tax Department shows the LRS rows in the TCS table of section 394 (serial numbers 7 and 8).
Some banks cite a different section number of the new Act. If a bank page and the Income Tax Department differ, the Income Tax Department's text is the reference.

The rates are what matter for your remittance. Your bank applies them automatically, based on the purpose you declare and your LRS total for the year. If you think the bank applied the wrong rate, raise it with the bank before the remittance goes out. After it is sent, the TCS can only be adjusted through your tax return.

Planning tips

Use each person's threshold. The ₹10 lakh threshold and the LRS limit are per person, each with their own PAN.
Mind the date. The ₹10 lakh resets on April 1 each year.
Pay tuition to the school, not to the student. Banks need an invoice or fee letter to apply the education rate. See paying Canadian tuition from India.
Keep records of each Form A2 and TCS certificate. Your Canadian bank may also ask where the money came from.

Common questions

When did the 2% TCS rate for education start?

For remittances from April 1, 2026. The Income-tax Act, 2025 table shows the rate was changed from 5% to 2% by Act No. 4 of 2026, with effect from that date.

Is TCS still 20% when I send money to my own account in Canada?

Yes, above ₹10 lakh in a financial year, unless the money is for education or medical treatment. Budget 2026 did not change the 20% rate for other purposes.

Did the ₹10 lakh threshold change?

No. Budget 2026 changed the rates for education, medical and tour packages. The ₹10 lakh threshold for LRS remittances stayed the same.

Is there TCS on tuition paid with an education loan?

No, if the loan is from a financial institution as defined in the Income-tax Act. Ask your bank whether your lender qualifies and keep the loan sanction letter.

Can I get TCS refunded?

Yes. TCS is collected against your PAN. Claim it in your Indian income tax return for that year. It reduces your tax, or you get a refund.

Sources

Checked against these sources on October 10, 2026. Spotted something out of date? Tell us.

TCS on money sent abroad from India after Budget 2026: what changed