It is March, and a Mumbai CA gets a call. A long-standing client wants to send ₹40 lakh abroad before the financial year ends, to invest in US property. The client has read that TCS "went down to 2%" in the Budget and expects to lose very little on the way out.
The CA knows better. The 2% rate applies to education and medical remittances, not investments. On ₹40 lakh sent for investment, the bank will collect ₹6 lakh as TCS. The client will get it back, but only after filing a return, and in the meantime the money is out of reach.
Conversations like this happen in CA offices every week. The rules behind them are simple once they are laid out, and planning around them is where advisors add real value. This guide covers how TCS on foreign remittance works in tax year 2026-27, what changed with the new Income-tax Act, and how to plan client remittances around it.
What TCS on Foreign Remittance Is
TCS, or tax collected at source, is tax a bank collects when a resident sends money abroad under the Reserve Bank of India's Liberalised Remittance Scheme (LRS). The bank adds it to the remittance, deposits it with the government against the client's PAN and issues a certificate.
In tax year 2026-27, the first ₹10 lakh a person remits in the year carries no TCS. Above that, the rate depends on the purpose, according to the TCS rate chart for tax year 2026-27.
| Remittance purpose | Up to ₹10 lakh a year | Above ₹10 lakh a year |
|---|---|---|
| Investment, including overseas property | Nil | 20% of the excess |
| Education (self-funded) | Nil | 2% of the excess |
| Medical treatment | Nil | 2% of the excess |
TCS is not a final cost. It is tax paid in advance, credited against the client's total liability for the year and refunded if it exceeds the tax due.
What Changed on 1 April 2026
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. TCS provisions that sat in Section 206C now sit in Section 394 of the new Act. The "assessment year" has gone; returns now refer to the tax year, which runs from 1 April to 31 March.
Budget 2026 cut TCS on self-funded education and medical remittances above ₹10 lakh to 2%. It left the rate on investment remittances unchanged at 20%. The forms changed too: the TCS certificate that banks issue, formerly Form 27D, is now Form 133 under the Income-tax Rules, 2026.
How the ₹10 Lakh Threshold Works
The threshold trips earlier than most clients expect, for three reasons. It is counted per PAN, not per bank, so using two banks does not create two thresholds. It covers all purposes together, so a child's tuition and a family holiday paid under LRS use up the same ₹10 lakh as an investment. And it resets on 1 April, with no carry-forward of unused room.
The threshold sits inside the LRS limit of USD 250,000 per person per financial year. TCS is collected within that limit but does not change it.
The Real Cost Is Cash Flow
Because TCS comes back as a credit, the question for a client is not how much tax they pay, but how long their money is held.
| Scenario | Investment remitted | Amount above ₹10 lakh | TCS collected |
|---|---|---|---|
| Single remittance, no other LRS spending | ₹40 lakh | ₹30 lakh | ₹6 lakh |
| Same client, ₹8 lakh already sent for tuition | ₹40 lakh | ₹38 lakh | ₹7.6 lakh |
In both cases the money is out of the client's hands from the day of remittance until their refund arrives, which can take many months. For a client with other plans for that cash, the timing matters as much as the amount.
Planning Remittances Across a Family
Each resident individual has their own LRS limit and their own ₹10 lakh threshold. If two adults in a family each invest ₹20 lakh of their own money, each pays TCS on ₹10 lakh: ₹4 lakh in total, against ₹6 lakh if one person remitted ₹40 lakh.
This works only when each person genuinely invests their own money, in their own name. Moving funds between family members first can trigger clubbing of income and gift tax questions, so the source of funds needs checking before any plan is made. And it changes timing, not tax: TCS is credited in full either way.
How Clients Claim TCS Back
The client collects Form 133 from the bank and checks that every TCS entry appears in their annual tax statement against their PAN. They then claim the credit when filing their income tax return. If the TCS exceeds the tax due, the excess is refunded after the return is processed. Keeping the remittance advice, the certificate and the investment documents together supports the claim if questions arise.
Four Checks Before a Client Remits
- Add up the year so far. List every LRS remittance the client has made since 1 April, including tuition and travel.
- Confirm the purpose. Make sure the bank records the remittance under the right purpose, because the rate follows it.
- Check the PAN. A missing or inactive PAN, or one not linked to Aadhaar, triggers a higher rate.
- Look at the calendar. A remittance on 30 March and one on 2 April fall in different tax years, each with its own threshold.
How Raveum Fits
Buying a whole overseas property usually means one large remittance, with most of it above the threshold. Fractional ownership lets a client invest smaller amounts over time, across different properties, giving the advisor more control over when TCS is collected. Through the Raveum US real estate partner program, advisors introduce clients to US commercial real estate. Clients invest directly with Raveum under LRS, and Raveum handles KYC, agreements and US tax forms, while the client's TCS and ITR position stays with the client and their CA.
For the wider picture on global routes, see our guide to GIFT City mutual funds and other global investment routes, and our guide to US commercial real estate investment for advisors.
Frequently Asked Questions
For tax year 2026-27, there is no TCS on the first ₹10 lakh a person remits abroad under LRS. Above ₹10 lakh, TCS on investment remittances, including overseas property, is 20% of the excess. Budget 2026 cut rates only for education and medical remittances, to 2%.
No. TCS on foreign remittance is tax collected in advance by the bank. It is credited against the client's total income tax liability for the year, and any excess is refunded after the return is processed. The real cost is cash flow, because the money is held until the refund arrives.
From 1 April 2026, TCS on foreign remittance falls under Section 394 of the Income-tax Act, 2025. It replaced Section 206C(1G) of the Income-tax Act, 1961. The new Act also replaces "assessment year" with "tax year", which runs from 1 April to 31 March.
TCS applies only to the amount above ₹10 lakh in a tax year, counted across all LRS remittances by the same person. For example, a client who remits ₹40 lakh for investment, with no other LRS spending that year, pays 20% TCS on ₹30 lakh, which is ₹6 lakh.
No. The ₹10 lakh threshold applies per person, per tax year, across every bank and every LRS purpose, including tuition, travel and investment. Banks report remittances against the client's PAN, so splitting payments between banks does not create a second threshold.
No. The LRS limit of USD 250,000 per person per financial year is set by the RBI and is separate from TCS. TCS is collected on remittances within that limit, but it does not raise or lower the amount a client can send abroad.
Form 133 is the TCS certificate that banks issue for tax collected from tax year 2026-27. It replaced Form 27D under the Income-tax Rules, 2026. Clients use it, together with their annual tax statement, to claim TCS credit in their income tax return.
Collect Form 133 from the bank and check that the TCS appears in the annual tax statement against your PAN. Then claim the credit when filing your income tax return. If the TCS is more than the tax due for the year, the excess is refunded after the return is processed.
Yes, when each person invests their own money in their own name. Each resident individual has a separate ₹10 lakh threshold and LRS limit. Moving money between family members first can raise clubbing and gift tax questions, so check the source of funds before planning remittances this way.
Plan the Timing, Not Just the Amount
TCS on foreign remittance rarely changes whether a client should invest abroad. It changes how and when. An advisor who adds up the year's remittances, confirms the purpose and PAN, and watches the 31 March cut-off can keep more of a client's cash working while the refund makes its way back. Clients remember the advisor who saved them a six-month wait. For how fractional US property fits into that planning, see the Raveum partner program.
About the author: Miya Israni is Chief Marketing Officer at Raveum, where she leads marketing for the company's sponsor, partner and investor programs.
This guide is for general education for professional advisors and is not tax, legal or investment advice. Tax rules change and depend on each client's circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.