The Union Budget 2026 brings continued relief for individuals making foreign remittances under the Liberalised Remittance Scheme (LRS), with a clear focus on easing the tax burden on outward remittances rather than introducing new limits
A key highlight of Budget 2026 LRS updates is the reduction in Tax Collected at Source (TCS) rates from 5% to 2% on foreign remittances made for education and medical purposes. This change makes it easier for students, and medical patients to remit higher foreign amounts while significantly reducing upfront tax deductions.
The LRS TCS threshold however remains unchanged at ₹10 lakh, ensuring that outward remittances up to this amount continue to be free from any tax collected at source. It was changed from ₹7 lakhs to 10 lakhs in the Union Budget of 2025. The new TCS rates will come into effect on April 1, 2026.
TCS Rates on Forex Under LRS (2026 vs 2025)
The stability due to an unchanged threshold at ₹10 lakh under the LRS rules in Budget 2026 allows individuals to plan international travel, overseas education, and medical expenses with greater financial clarity and confidence.
You can check the previous TCS rates and the proposed TCS rate in the table below:
| Transaction Type | Previous TCS Rates | New TCS Rates (Union Budget 2026) |
|---|---|---|
| Purchase of Forex (Currency Notes & Forex Card) | 20% (on spends over ₹10 lakhs in a financial year) | 20% (on spends over ₹10 lakhs in a financial year) |
| Outward Remittances (except for education & medical purposes) | 20% (on spends over ₹10 lakhs in a financial year) | 20% (on spends over ₹10 lakhs in a financial year) |
| Outward Remittances (for medical purposes) | 5% (on spends over ₹10 lakhs in a financial year) | 2% (on spends over ₹10 lakhs in a financial year) |
| Outward Remittances for Education (without loan) | 5% (on spends over ₹10 lakhs in a financial year) | 2% (on spends over ₹10 lakhs in a financial year) |
| Outward remittances for education (with education loan) | 0% (no TCS applicable) | 0% (no TCS applicable) |
TCS in forex is not an additional charge and can be adjusted against your total income tax liability & claimed while filing tax returns.
How Tax Collected at Source (TCS) Will Apply to Forex Transactions?
Let’s take a few examples to explain the tax implications of forex transactions on you:
Case 1:
Let’s assume you’re remitting ₹20,00,000 for education fees/medical treatment. The old TCS rate was 5% for remittances over ₹10 lakhs. So, you would have been charged TCS on the amount exceeding ₹10 lakhs, which in this case is ₹10 lakhs.
The TCS would be ₹50,000 (i.e., 5% of ₹10,00,000).
However, with the new proposed rates, since there is 2% TCS applicable for amounts above ₹10 lakhs, the TCS would be ₹20,000 (i.e., 2% of ₹10,00,000). This is a relief for those remitting education fees or paying medical bills.
Case 2:
Let’s assume you are remitting ₹10,00,000 for education fees through an education loan. The new TCS rates allow this entire remittance to be exempt from TCS meaning you pay 0% TCS on the remittance.
Case 3:
Let’s assume you are travelling abroad and purchase forex worth ₹11,00,000 on a forex card. TCS at 20% would apply only on the amount exceeding ₹10 lakhs, meaning ₹20,000 on the extra ₹1 lakh.
By keeping your forex within ₹10 lakh per traveller, you can fully avoid this TCS, making your foreign travel expenses more efficient and cost-effective.
Do check out our articles on New TCS on Foreign Remittance and New TCS on Foreign Travel to understand these concepts better.
You can also watch this video below:
Can you get the TCS amount back?
You can easily get the TCS amount back. This tax is just like TDS (Tax Deducted at Source) that is cut on your salary for which you can claim a tax refund while filing the income tax return. It will be reflected in your Form 26AS.
Also, check out how BookMyForex can help you adjust TCS.
Do read the Frequently Asked Questions (FAQs) on LRS to get answers to the most common questions.
About the Author
Amrita Pritam is the Head of PR and Marketing at BookMyForex and a fintech communications leader with over 15 years of experience. She closely tracks cross-border payments and regulatory developments impacting Indian travellers and students.
