TCS on Foreign Remittances and Overseas Tour Packages – Section 394(1) (206C(1G))

The provisions relating to collection of tax at source on foreign remittances and overseas tour programme packages have been restructured under the Income-tax Act, 2025. The earlier Section 206C(1G) of the Income-tax Act, 1961 is now covered under Section 394(1) [Table: Sl. No. 7.D(a), 7.D(b), 8.D(a) and 8.D(b)], effective from 1st April, 2026.

This restructuring aligns foreign remittance transactions and overseas travel expenditure under a clearer table-based framework while continuing the existing compliance mechanism relating to TCS collection on specified foreign transactions.

Quick Reference – Section Mapping & Reporting

• New Section (IT Act 2025): Section 394(1)
• Table Reference:

1. Sl. No. 7.D(a) – LRS (Education / Medical Treatment)
2. Sl. No. 7.D(b) – LRS (Other Purposes)
3. Sl. No. 8.D(a) & 8.D(b) – Overseas Tour Programme Packages

• Nature of Transaction: Foreign remittances and overseas travel expenditure
• Earlier Section (IT Act 1961): Section 206C(1G)
• Return Form: 27EQ

Applicability of TCS under Section 206C(1G)

TCS is required to be collected on specified foreign transactions. These include remittances made under the Liberalised Remittance Scheme (LRS) as well as payments made towards overseas tour programme packages.

The responsibility to collect tax lies with:

• The authorised dealer in case of remittances under LRS
• The seller of the overseas tour programme package

The provision is transaction-based, meaning each remittance or payment is evaluated independently depending upon its nature and amount.

Scope of Transactions Covered

The section broadly covers two categories of transactions relating to outward foreign expenditure.

Remittances under Liberalised Remittance Scheme (LRS)

The provision applies to foreign remittances made under LRS for purposes such as:

• Education
• Medical treatment
• Investments
• Gifts
• Other foreign remittances

Different TCS rates apply depending upon the nature and amount of remittance.

Overseas Tour Programme Packages

The provision also applies to overseas tour programme packages, including expenditure relating to:

• International travel
• Hotel accommodation
• Boarding and lodging
• Any similar or related expenditure forming part of the package

This ensures reporting and tracking of high-value overseas spending.

Threshold and Applicability Rules

For remittances under LRS, the threshold limit of ₹10 lakh is calculated per financial year per individual. TCS becomes applicable once the remittance exceeds the prescribed threshold under the relevant category.

In case of overseas tour programme packages, TCS applies on the amount collected for the package in accordance with the applicable provisions and rates prescribed under the Act.

Time of Collection

Tax is required to be collected at the earlier of:

• At the time of receipt of payment
• At the time of debiting the account of the buyer or remitter

This ensures timely compliance irrespective of the mode or timing of payment.

Important Considerations

Certain important points should be considered for proper compliance under this section:

• TCS collected is not a final tax and may be claimed as credit by the buyer or remitter
• PAN is mandatory for such transactions and failure to furnish PAN may attract higher rates
• Transactions are required to be reported in Form 27EQ on a quarterly basis
• Non-compliance may result in interest, penalties, and other consequences under applicable provisions

Transactions Not Covered

The provision does not apply to transactions falling outside the prescribed scope or threshold limits under the Act. Certain exemptions and exclusions may also apply in specific cases as notified by the Government.

TCS Rates and Applicability

Use TDSMAN Software to file seamless & error-free TDS / TCS returns, without any professional help.