TCS (Tax Collected at Source) — Discovery Notes
What is TCS?
TCS is a tax collected by the seller/collector at the time of sale or remittance. Unlike TDS (deducted by payer), TCS is collected by the receiver and deposited with the government on behalf of the buyer/remitter.
TCS on LRS (Liberalised Remittance Scheme) — FY 2025-26
Effective 1 April 2025 (Union Budget 2025 changes):
Threshold
- ₹10,00,000 cumulative per FY (raised from ₹7,00,000 by Budget 2025)
- Applies per individual, across all authorized dealers combined
TCS Rates by Purpose
| Purpose | Up to ₹10L | Above ₹10L | No PAN rate |
|---|
| Education funded via loan (Section 80E) | 0% | 0% (no limit) | 0% |
| Education (self-funded) | 0% (below threshold) | 5% | 10% |
| Medical treatment | 0% (below threshold) | 5% | 10% |
| Overseas tour packages | 5% (from ₹1) | 20% | 5%→10%, 20%→40% |
| All other (investments, gifts, property abroad) | 0% (below threshold) | 20% | 40% |
Key Rules
- International credit cards: Exempt from TCS (MoF notification, implementation deferred)
- LRS annual limit: USD 250,000 per individual per financial year
- Threshold of ₹10L is cumulative across all remittances in a FY (except tour packages which attract TCS from ₹1)
- Tour packages: TCS applies from the first rupee, but at 5% up to ₹10L and 20% above ₹10L
TCS on Motor Vehicles
| Category | TCS Rate | Threshold |
|---|
| Motor vehicle purchase | 1% | Above ₹10,00,000 |
- Applies to purchase price exceeding ₹10 lakh
- Collected by the dealer at the time of sale
- Applicable on all motor vehicles (cars, SUVs, etc.)
Important: TCS is NOT an Additional Tax
- TCS is adjustable against income tax liability when filing ITR
- If TCS collected > tax liability, the difference is refunded
- TCS appears in Form 26AS / AIS (Annual Information Statement)
- Seller issues Form 27D (TCS certificate) to the buyer
- Buyer claims credit in ITR under “TCS” section
How to Claim TCS Refund
- File Income Tax Return (ITR) for the relevant FY
- TCS automatically reflects in Form 26AS/AIS
- Claim TCS credit under “Tax Paid” section
- If total tax paid (including TCS) > tax liability, excess is refunded
- Refund typically processed within 30-45 days of ITR processing
Study Abroad TCS Comparison
- Education loan (Section 80E): 0% TCS — no TCS at any amount
- Self-funded education: 0% up to ₹10L, 5% above ₹10L
- Significant savings for students with education loans
- Example: ₹25L remittance → Loan: ₹0 TCS vs Self-funded: ₹75,000 TCS
Sources
- Income Tax Act, 1961 — Section 206C
- CBDT Circular on TCS rates
- Union Budget 2025 (Finance Bill 2025)
- RBI Master Direction on LRS
- MoF notification on credit card TCS exemption
Verify
- Check for any Budget 2026 changes to TCS rates or thresholds
- Confirm credit card TCS exemption status (was deferred multiple times)
- LRS limit changes (currently USD 250,000)