TCS
Tax Collected at Source (TCS) is a mechanism under the Income Tax Act where certain sellers must collect tax from buyers on specified transactions at the time of sale, and deposit it with the government on the buyer's behalf.
Understanding TCS
TCS shifts collection burden to the seller, who must register, collect, and remit the tax. The buyer pays slightly more upfront and adjusts at ITR time. The 20% TCS on foreign LRS remittances (introduced in Budget 2023) was the most controversial — affecting Indian families paying foreign university fees, real estate purchases abroad, and overseas tour packages.
The buyer receives a TCS certificate (Form 27D) from the seller and can verify the credit in Form 26AS. For frequent foreign remitters, the 20% upfront TCS represents a temporary cash flow drag — recovered only when filing the ITR for that year.
Why it matters
For frequent overseas spenders — children studying abroad, foreign property buyers, tourist groups — TCS represents a significant temporary cash outflow. Timing remittances to the start of the financial year (April) means TCS sits as credit for up to 18 months before refund. Plan accordingly, especially for large education or property transactions.
Example
A parent sends ₹15 lakh under LRS to fund their child's university fees in the US in FY 2026-27. Without an education loan, TCS at 20% on the amount above ₹7 lakh = ₹1.6 lakh. Net remitted: ₹13.4 lakh. The ₹1.6 lakh TCS appears in their Form 26AS and can be claimed as credit when filing ITR.
A parent sends ₹15 lakh under LRS to fund their child's university fees in the US in FY 2026-27. Without an education loan, TCS at 20% on the amount above ₹7 lakh = ₹1.6 lakh. Net remitted: ₹13.4 lakh. The ₹1.6 lakh TCS appears in their Form 26AS and can be claimed as credit when filing ITR.