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:
- Sl. No. 7.D(a) – LRS (Education / Medical Treatment)
- Sl. No. 7.D(b) – LRS (Other Purposes)
- 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
| Nature of Transaction | New Section (IT Act 2025) | Rate |
|---|---|---|
| LRS – Education / Medical Treatment exceeding ₹10 lakh | 394(1) [Table: Sl. No. 7.D(a)] | 2% |
| LRS – Other purposes exceeding ₹10 lakh | 394(1) [Table: Sl. No. 7.D(b)] | 20% |
| Overseas Tour Programme Package | 394(1) [Table: Sl. No. 8.D(a) & 8.D(b)] | 2% |
Use TDSMAN Software to file seamless & error-free TDS / TCS returns, without any professional help.
PLEASE GIVE YOUR COMMENTS IN CASE OF A PERSON SENT REMIT OVERSEAS DURING ONE YEAR AS FOLLOWS-
1)REMITTED TO A FOREIGN UNIVERSITY FOR EDUCATION OF HIS SON – 25 LACS &
2)REMITTED TO HIS SONS FOREIGN BANK ACCOUNT, WHO IS STUDYING OVER THERE – 9.9 LACS
PLEASE GIVE THE TCS RATE IN BOTH THE ABOVE CASES
From 1st April ’26, remittance for education is exempt from TCS up to a threshold of Rs. 10 lakhs. For amounts exceeding the same, 2% TDS (earlier it was 5%) is applicable. This implies that TDS on 25L-10L=15L would be Rs. 30,000.
To the 2nd part, we are assuming that the transfer 9.9L is also for his education purpose and the same rule would apply. However, the threshold amount is applicable for one year – by this logic, if the 25L is availed, then the entire 9.9L would be subject to 2% TCS.
However, it is always prudent to consult a tax expert before taking any action.
If the corporate company purchase a overseas tour package from a Tour operator company and Corporate company deduct 2% TDS against tour operator bills so Tour operator will deduct TCS @2% or not.
and if a single overseas tour package tour operator definitely deduct TCS@2% as there has no TDS deduction from byer site right? Kindly clear my concept.
Section 394(5) of the Income-tax Act, 2025 provides that where the buyer is liable to deduct TDS and has actually deducted the tax on the payment, TCS is not required to be collected on the same transaction. Therefore, if the corporate company is liable to deduct 2% TDS on the tour operator’s bill and has deducted the same, the tour operator would generally not be required to collect 2% TCS again.
In case of a single overseas tour package purchased by a buyer where no TDS is required to be deducted, the tour operator would collect TCS at 2% on the overseas tour package as applicable under Section 394(1), Table Sl. No. 8.
The above is based on our best understanding of the applicable provisions. You may also take guidance from a tax professional in this regard.