Complete Guide To TCS Changes (Effective April 1, 2026)

Quick Summary. The Three Changes That Matter Most

• Education (self-funded): TCS reduced to 2%, threshold increased to ₹10L.
• Education (loan-funded): TCS is now 0%. fully exempt, no limit.
• Overseas travel packages: The 20% upper slab has been removed. A flat 2% rate applies in most cases under the updated rules.

If you sent money abroad last year for your child's university fees or booked an international holiday package, you may have quietly absorbed a TCS charge that felt more heavy on your pocket. The 20% rate on travel packages above ₹10 lakh, in particular, caught a lot of families off guard, nobody budgets for a fifth of their holiday spendings upfront.

That changes on April 1, 2026.

The updated TCS rules under the Liberalised Remittance Scheme (LRS) are, without exaggeration, among the more taxpayer-friendly revisions in recent years to this framework since TCS on foreign remittances was introduced. Rates are lower across the board, thresholds are higher, and the loan-funded education category now carries zero TCS altogether.

This article walks through every change relevant to education and travel remittances, what the old rules said, what the new rules say, and what the actual rupee difference looks like for real families making real transfers.

Note: TCS rates and applicability are based on current provisions and may vary based on official notifications and transaction type.

What is TCS, and Why Does It Appear on Your Foreign Remittance?

Before getting into the numbers, one thing worth clarifying upfront: TCS is not an extra fee or a permanent charge. It stands for 'Tax Collected at Source', an advance tax that is collected at the point of a transaction and credited to your account with the Income Tax Department.

When you send money abroad through an authorised forex dealer like LuLu Forex, the dealer is legally required to collect TCS on eligible transactions above the specified threshold. That amount goes against your PAN and shows up in Form 26AS. When you file your ITR, you declare it and it adjusts against whatever tax you owe. If your tax liability is zero or lower than the TCS collected, you get a refund.

So the money isn't lost. But it is blocked, sometimes for several months, until you file and claim it back. That's why the rates matter so much practically. A 20% TCS on a ₹15 lakh travel package means ₹3 lakh with the government until your next ITR cycle. For a family that's actually spending that money on a holiday, that's a meaningful cash flow problem.

Under LRS, you can send up to USD 250,000 per year for things like education, travel, or medical needs. TCS applies only above the set threshold and is collected by banks or authorised forex providers.

Before vs After April 1, 2026, Quick Comparison

Key takeaway: Most categories now follow a simple 2% rate with a higher ₹10 lakh threshold.

Important: The 2% rate does not apply to all LRS transactions. Remittances for investments, gifts, and other non-education/non-medical purposes continue to attract 20% TCS.

TCS on Education Remittances: The Full Picture

Self-Funded Education: Lower Rate, Higher Threshold

Under the old rules, TCS applied at 5% on amounts above ₹10lakh. Now, it applies above ₹10 lakh at 2%, reducing the amount locked upfront.

What counts as self-funded education remittance:

• Tuition fees paid directly to the university abroad
• Hostel and accommodation fees
• Monthly living expenses sent via wire transfer, forex card, or debit card
• Any LRS remittance where the funds come from personal savings rather than a verified education loan

What does not attract TCS:

• Payments made via credit card (these do not fall under LRS)

Practical tip: Each parent has a separate ₹10 lakh LRS threshold. If both parents contribute to a child's education expenses, each can remit up to ₹10 lakh in a financial year before TCS applies, effectively creating a combined ₹20 lakh TCS-free window for one student's annual expenses.

Loan-Funded Education: Now Completely Exempt

This is the most significant change for families with formal education loans.

Previously, loan-funded remittances attracted TCS at 0%, a lower rate than self-funded remittances.

From April 1, 2026, also the loan-funded education remittances carry 0% TCS with no change and no upper limit. A verified education loan of ₹50 lakh sent over two years? No TCS at any point.

The condition that matters: the loan must be from a specified financial institution, a recognised Indian bank, NBFC, or financial institution as defined under the Income Tax Act. Informal borrowings from relatives or unregistered lenders do not qualify. Your authorised forex dealer will ask for loan documentation at the time of remittance to verify eligibility.

TCS on Overseas Travel, The 20% Problem Is Finally Gone

Why the Old System Was Unfair to Premium Travel

Now, a flat 2% applies to all packages. Earlier, it was 5% up to ₹10 lakh and 20% above ₹10 lakh.

For a ₹15 lakh trip:

• 5% on first ₹10 lakh = ₹50,000
• 20% on next ₹5 lakh = ₹1,00,000
• Total TCS: ₹1,50,000

That's ₹1.5 lakh blocked before the family has stepped onto the plane. Refundable, yes, but not before the next ITR cycle.

What Changes from April 1, 2026

A flat 2% TCS now applies to overseas tour packages from the first rupee, with no minimum threshold.

Earlier, it was 5% up to ₹10 lakh and 20% above ₹10 lakh.

Now, it is 2% on the full amount, regardless of value.

Note: Tour packages are taxed at 2% from ₹1 with no threshold. Education and medical remittances attract TCS only above ₹10 lakh.

Important Clarifications for Travellers

What counts as an "overseas tour package" under TCS rules: A bundled booking where at least two components, typically transport, accommodation, and sometimes meals or sightseeing, are purchased together as a package through a travel operator.

• What does not count: Booking your flights and your hotel separately. If you buy a Vistara ticket to London on one booking and reserve a hotel directly on another, those are not a "tour package" and do not attract TCS regardless of the amount.
• Credit card payments: TCS does not apply to international credit card spending. This hasn't changed and continues under the new rules. If you pay for a ₹20 lakh holiday entirely on a credit card, no TCS is collected at source.
• Applies to: Debit card payments from the first rupee, forex card loadings, and wire transfers made through authorised dealers for tour packages.

How to Claim Your TCS Back: A Step-by-Step Guide

For all categories except 0% TCS loan-funded education remittances, here is the standard refund process:

• Step 1, Get Form 133 (formerly Form 27D): Request your TCS certificate from your authorised dealer. This confirms TCS collected and your PAN details.
• Step 2, Check Form 26AS: Log in, download, and verify TCS against your PAN.
• Step 3, File ITR: Report it under Schedule TCS in your return.
• Step 4, Claim credit: TCS is adjusted against your total tax.Step 5, Get a refund: Any extra amount is refunded to your
• bank after ITR processing.

Note: If your education remittance qualified for 0% TCS under the loan-funded category, there is nothing to claim, no TCS was collected in the first place.

What These Changes Mean for You

• For students and parents funding education abroad: The combination of the higher ₹10 lakh threshold and the lower 2% rate means most families will see little to no TCS. Those with verified education loans benefit the most, zero TCS on any amount.
• For international travellers: The removal of the 20% slab means a flat 2% TCS, making travel easier to plan and reducing upfront cost pressure.
• For general LRS remitters: Education and medical remittances benefit from the new structure, but other purposes like investments and gifts continue to attract 20% TCS.

How LuLu Forex Helps You Navigate These Changes

LuLu Forex is an RBI-authorised dealer, which means we are legally approved to process LRS remittances and collect TCS correctly on your behalf. When you remit through LuLu Forex:

• TCS is calculated and collected at the correct updated rate from April 1, 2026 onwards
• Form 133 (formerly Form 27D) is issued for every eligible transaction, required for your ITR refund claim.
• Loan documentation for education remittances is verified at the branch level to ensure you benefit from the 0% rate where eligible
• Forex rates are transparent with no hidden markups applied to recover TCS amounts
• For education fees, forex cards, or transfers, the team helps you get everything done correctly.

Visit a LuLu Forex branch to start your transfer and check TCS rates.

Frequently Asked Questions

1. Is TCS a permanent tax or can I get it back? 

TCS is an advance tax, not a permanent charge. It is collected upfront and credited to your PAN. When you file your ITR, it adjusts against your tax liability. If you owe less tax than the TCS collected, or no tax at all, the difference is refunded to your bank account.

2. What if I pay my travel booking or university fees with a credit card?

transactions are outside the scope of LRS and do not attract TCS. This applies to both education and travel payments. Only debit cards, forex cards, and bank wire transfers through authorised dealers fall under LRS and are subject to TCS.

3. How do I know if my education loan qualifies for 0% TCS?

The loan must come from a specified financial institution, a scheduled bank, recognised NBFC, or institution defined under Section 80E of the Income Tax Act. Your lender should be able to confirm this. At the time of transfer, LuLu Forex will ask for your loan documents to confirm eligibility.

4. Does the ₹10 lakh threshold reset each year?

Yes. It resets every April 1. Previous transfers don’t carry forward.

5. Do new rates apply before April 1, 2026?

No. Old rates apply before April 1, 2026. New rates apply after.

6. Do both parents get separate ₹10 lakh limits?

In most cases, the ₹10 lakh threshold applies per individual under LRS, so each parent can typically utilise their own limit.

7. How to track TCS?

Log in to the Income Tax portal and open your Form 26AS. All TCS deductions made against your PAN by authorised dealers, including LuLu Forex, appear here in real time after processing.

In Summary

The April 1, 2026 TCS revisions are straightforward in what they do: they reduce the advance tax burden on families sending money abroad for education and travel, raise the threshold before TCS kicks in, and eliminate the penalising 20% upper slab on tour packages that cost families lakhs in blocked funds every year.

The loan-funded education exemption, in particular, is a meaningful relief for families who took on formal debt to fund a child's studies abroad. There is no longer any TCS eating into each disbursement.

If you're planning remittances for education fees, university living expenses, or an international holiday package this financial year, start the process early. The ₹10 lakh TCS-free window resets on April 1, remitting in the first quarter of the financial year gives you the full benefit of the new exemption threshold before any accumulation builds up.