If you are booking an international holiday, paying for education abroad, sending money to family overseas, or making foreign investments, you may be charged TCS (Tax Collected at Source) on these transactions.
The Union Budget 2025–26 has introduced important changes to TCS rules under the Liberalised Remittance Scheme (LRS) and on foreign tour packages. These updates aim to reduce the burden on genuine remittances and make the system simpler.
What is TCS on Foreign Travel?
TCS is a tax that travel operators and banks collect when you spend money on certain foreign transactions.
This includes:
- Booking a foreign tour package
- Sending money abroad under the Liberalised Remittance Scheme (LRS)
- Making international payments for education, medical needs, or other purposes
The collected TCS is not an extra cost — you can claim it back as a credit while filing your Income Tax Return (ITR).
Legal Provision
TCS on foreign travel and remittances is governed by Section 206C(1G) of the Income-tax Act, 1961.
- Clause (a) covers remittances under the Liberalised Remittance Scheme (LRS).
- Clause (b) covers purchase of overseas tour packages.
- Authorised dealers and sellers of tour packages are responsible for collecting TCS.
Changes Announced in Budget 2025–26
The government made three major changes effective 1 April 2025:
- a) Higher Threshold for TCS under LRS
- Earlier: ₹7 lakh per financial year per PAN.
- Now: ₹10 lakh per financial year per PAN.
- No TCS is collected if your total remittance in a year is within ₹10 lakh.
- b) Special Relief for Education Loans
- Payments for education abroad through a loan from an authorised financial institution are fully exempt from TCS, even if they cross the ₹10 lakh limit.
- c) Revised TCS Rates
Different purposes have different TCS rates once the ₹10 lakh threshold is crossed.
Updated TCS Rates from 1 April 2025
| Purpose | Up to ₹10 lakh in a FY | Above ₹10 lakh in a FY |
| Education (Loan-based) | Nil | Nil |
| Education/Medical (non-loan) | Nil | 5% |
| Other LRS Uses (incl. travel, gifts, investments) | Nil | 20% |
| Foreign Tour Packages | 5% | 20% |
Example – Foreign Tour Package
Suppose you book an overseas package worth ₹12 lakh:
- First ₹10 lakh → 5% TCS = ₹50,000
- Remaining ₹2 lakh → 20% TCS = ₹40,000
Total TCS Collected = ₹90,000
This amount will be reflected in Form 26AS and can be adjusted while filing your ITR.
What is Included in a Foreign Tour Package?
As per law, a foreign tour package means any package offering at least two of the following:
- International travel (air/sea/road)
- Accommodation abroad
- Sightseeing or other similar services
Even if you book only part of your trip through a tour operator (e.g., only hotel + travel), it can still be classified as a foreign tour package for TCS purposes.
Latest Notifications & Bank Circulars
- Budget 2025–26: Announced increase in the LRS threshold to ₹10 lakh and special exemption for education loans.
- CBDT Clarifications: TCS applies on total remittances in a year, not per transaction.
- Bank Advisories: HDFC Bank, Standard Chartered, and others have updated their TCS collection process for outward remittances and foreign tour bookings.
- Effective Date: 1 April 2025.
From 1 April 2025, most foreign remittances up to ₹10 lakh are TCS-free. Above this, rates vary from 5% to 20% depending on the purpose. Education loans get full exemption. Always track your total remittances in a year to avoid surprises.