Sending Money Abroad in 2026? The New 2% TCS Rule You Should Know Before You Transfer

Picture this: your daughter gets into a university in Canada, the first semester's fee of around ₹18 lakh needs to be wired this week, and just as you're about to send it the bank officer mentions, "TCS will apply on this." Suddenly there's a deduction you hadn't budgeted for. If you've been in that spot — or you're about to be — the rules changed on 1 April 2026, and mostly in your favour.

Here's what's new, what stayed the same, and the small mistakes that quietly cost people money.

So what is this TCS on money sent abroad?

Whenever you send money out of India under the RBI's Liberalised Remittance Scheme (LRS) — for education, medical treatment, travel, foreign investments, gifts to relatives abroad, whatever — the bank collects a slice as Tax Collected at Source, or TCS, under Section 206C(1G) of the Income Tax Act. The bank isn't charging you a fee. It's collecting tax on the government's behalf and depositing it against your PAN, and you'll see it later in your Form 26AS.

The LRS itself lets a resident individual remit up to USD 2,50,000 a financial year (roughly ₹2 crore, depending on the rate) without special RBI approval. TCS is simply the tax touchpoint sitting on top of that.

The headline change: a flat 2% from April 2026

For a while the rates were all over the place — 5% here, 20% there, depending on the purpose. The Budget cleaned that up. From 1 April 2026, remittances for education, medical treatment, and overseas tour packages attract a flat 2% TCS on the amount above the threshold. Compared with the older, steeper slabs, that's real relief for families and patients.

One category still stings, though. General remittances that aren't for education or medical — say you're investing in foreign stocks or gifting money abroad — still attract 20% TCS on the portion above ₹10 lakh. So the purpose of your transfer genuinely decides how much gets collected.

The ₹10 lakh line — and why it catches people out

TCS only kicks in once your total LRS remittances cross ₹10 lakh in a financial year. Below that, most transfers attract nil TCS. (Overseas tour packages are the exception — they're taxed from the first rupee.) Sounds simple, but here's what people miss: that ₹10 lakh is a combined limit across every bank and forex dealer you use, for the whole year. Send ₹6 lakh through one bank in April and ₹5 lakh through another in September, and you've crossed the line — even though neither transfer looked large on its own. The responsibility to track it sits with you, not the bank.

Taken an education loan? You might pay zero

This is the bit most families never hear. If your foreign education remittance is funded by a loan from a recognised Indian financial institution that qualifies under Section 80E, the TCS is nil — no matter how large the transfer. So a ₹40 lakh fee paid from an eligible education loan can attract zero TCS, while the same amount from your own savings would attract 2% on everything above ₹10 lakh. If you're borrowing anyway, structuring it right saves money upfront.

Remember: TCS is your money, not a lost cost

The biggest misconception is that TCS is an extra tax you'll never see again. It isn't. It's an advance credit sitting against your PAN. When you file your income tax return, you claim it in the TCS schedule and it either reduces your tax payable or comes back as a refund. If your total tax liability for the year is zero, the entire amount is refundable — but only if you actually file a return. So don't skip filing just because your income is below the taxable limit; that's exactly how people forget to reclaim thousands.

A practical tip before you file: check that the TCS shows up in both your Form 26AS and your AIS. If the bank filed it against the wrong PAN or missed it entirely, it won't reflect — and you can't claim what isn't there. Catch it early and ask them to correct the statement.

How Gadhia Associate can help

Sending a large sum abroad — for a child's education, medical care, or an overseas investment — shouldn't come with tax surprises. At Gadhia Associate we help you plan remittances so you pay the right TCS and not a rupee more, structure education-loan funding to claim the 80E exemption, reconcile your 26AS and AIS, and make sure every rupee of TCS finds its way back when you file. Got a big transfer coming up? Talk to us before you send the money, not after — reach out and we'll walk you through it.