TCS Full Form: Tax Collected at Source Rates on LRS, Car, Tours
Independent guide. We are not part of the Income Tax Department, and we never ask for your PAN password, account details or OTP.
TCS stands for Tax Collected at Source. On certain payments, such as large foreign remittances, overseas tour packages and cars costing over ₹10 lakh, the bank or seller collects extra money from you as income tax and deposits it against your PAN. It is not a cost: you claim it back as tax already paid in your return.
- Full form
- Tax Collected at Source
- Law (from 1 Apr 2026)
- Income-tax Act, 2025, section 394
- Who collects
- The seller, or your bank for foreign remittances
- Foreign remittance (LRS)
- Above ₹10 lakh: 2% for education or medical, 20% for other purposes
- Overseas tour package
- 2% on any amount
- Car above ₹10 lakh
- 1%
- Credit shows in
- Form 168 (earlier 26AS) and AIS
- Your certificate
- Form 133 (earlier Form 27D)
What is TCS?
TCS is income tax collected at the moment you pay for certain things. The seller (or bank) adds the tax to your bill, deposits it with the government, and reports it against your PAN. The money is yours: it counts as advance payment of your own income tax for that year. If your actual tax is lower, you get the difference back as a refund.
The tax is collected when the amount is debited to your account or when you pay, whichever happens first.
New law from 1 April 2026. The Income-tax Act, 2025 replaced the 1961 Act. TCS is now in section 394 (earlier section 206C), and years are called "tax years" (Tax Year 2026-27 onwards). Finance Act, 2026 changed several TCS rates from the same date; the old rates are shown in the rates table for comparison.
Not to be confused with Tata Consultancy Services, the software company that shares the same three letters.
TCS vs TDS: the difference
| TCS | TDS | |
|---|---|---|
| Full form | Tax Collected at Source | Tax Deducted at Source |
| When you meet it | When you pay: buying, or sending money abroad | When you are paid: salary, interest, rent, fees |
| Who acts | The seller or bank adds tax to what you pay | The payer cuts tax from what it pays you |
| Section (2025 Act) | 394 | 392 and 393 |
| Your certificate | Form 133 (earlier 27D) | Form 130 or 131 (earlier 16 or 16A) |
| Where you see it | Form 168 (earlier 26AS) and AIS | |
| How you get it back | Claim it as tax paid in your ITR; any excess is refunded | |
More on the deduction side in our TDS guide.
TCS rates for ordinary people (from 1 Apr 2026)
| What you pay for | Who collects | Rate from 1 Apr 2026 | Up to 31 Mar 2026 |
|---|---|---|---|
| Foreign remittance under LRS for education (own funds) | Your bank | 2% when remittances exceed ₹10 lakh | 5% above ₹10 lakh |
| Education remittance paid from an education loan by a financial institution | Your bank | No TCS | No TCS (since 1 Apr 2025) |
| Foreign remittance for medical treatment | Your bank | 2% when remittances exceed ₹10 lakh | 5% above ₹10 lakh |
| Foreign remittance for any other purpose (gifts, family support, investment, travel money) | Your bank | 20% when remittances exceed ₹10 lakh | 20% above ₹10 lakh |
| Overseas tour package (travel, hotel, boarding) | Tour operator | 2% on any amount, no threshold | 5% up to ₹10 lakh; 20% above |
| Motor vehicle priced above ₹10 lakh | Dealer | 1% | 1% |
| Other goods above ₹10 lakh that the government notifies | Seller | 1% | 1% |
- No double collection: if the tour operator has already collected TCS on a package, your bank does not collect it again when that money is remitted.
- ₹10 lakh threshold for remittances: it applies to the remittances you make under LRS. Your bank works out when you cross it and shows the TCS on your remittance advice. If you send money through more than one bank, ask each how it applies the limit.
- Business-side TCS also applies to sellers of liquor, scrap, minerals, tendu leaves and forest produce, and to parking lots and toll plazas. Most of these are now 2%. TCS on general sale of goods above ₹50 lakh was removed from 1 Apr 2025.
Samples (illustrative only): an overseas tour package priced ₹3,00,000 attracts TCS of ₹6,000 (2%), so you pay ₹3,06,000. A car priced ₹12,00,000 attracts TCS of ₹12,000 (1%). Both ₹6,000 and ₹12,000 show against your PAN and come back to you through your return.
TCS on money sent abroad (LRS)
The LRS (Liberalised Remittance Scheme) of the RBI lets a resident individual send up to 2,50,000 US dollars abroad in a financial year for permitted purposes such as education, medical treatment, travel, gifts, maintenance of relatives and investment. Your bank, acting as an authorised dealer, collects TCS on these remittances.
- Paid from an education loan taken from a financial institution: no TCS, whatever the amount. Tell the bank the remittance is loan-funded and keep the loan papers ready.
- Paid from your own funds: 2% once your remittances exceed ₹10 lakh (5% until 31 Mar 2026).
- Fees, hostel and living costs sent for study all count as education when declared as such to the bank.
- 2% once your remittances exceed ₹10 lakh (5% until 31 Mar 2026).
- Declare the purpose correctly to the bank. If you choose a general purpose, the 20% rate can apply.
- An overseas tour programme package bought from a tour operator: 2% on the whole amount from the first rupee. There is no ₹10 lakh threshold any more.
- Until 31 Mar 2026 it was 5% up to ₹10 lakh and 20% above.
- The operator collects it and gives you Form 133.
- Gifts or support to family abroad, investment, deposits, buying property abroad and other permitted purposes: 20% once your remittances exceed ₹10 lakh.
- This rate did not change on 1 Apr 2026.
- 20% blocks a lot of cash until you file your return, so plan large transfers with the refund timing in mind.
TCS when you buy a car
When you buy a motor vehicle whose sale price is above ₹10 lakh, the dealer collects 1% TCS and shows it on the invoice. It is collected by sellers that are companies, firms, co-operatives or government bodies, and by individual sellers whose business turnover exceeded ₹1 crore in the previous year (₹50 lakh for a profession). Government buyers, local authorities and public sector passenger-transport companies are not charged.
The dealer needs your PAN. The 1% is your tax credit, not part of the car's price, and it is not refunded by the dealer: you claim it in your ITR.
Higher TCS without a valid PAN
No PAN, higher TCS. Under section 397(2) of the 2025 Act, if you don't give a valid PAN, tax is collected at the higher of twice the normal rate or 5%, capped at 20%. So a 2% education remittance becomes 5%, and 1% on a car becomes 5%.
- Inoperative PAN (for example, not linked with Aadhaar) is treated the same way. Link it and update it with the bank or dealer. See our PAN guide.
- Non-filers: the extra TCS for people who had not filed returns (old section 206CCA) was removed from 1 Apr 2025. Today only a missing or inoperative PAN triggers the higher rate.
- Certain non-residents without a permanent establishment in India are exempt from the higher rate.
How to get your TCS back
First check the credit: log in to incometax.gov.in and open Form 168 (Form 26AS for years up to 2025-26) or the AIS, where TCS entries are in Part B. Compare them with your Form 133 and bank advice. Then use either route below.
- In your income tax return, enter the TCS in the tax-paid section, exactly as shown in Form 168/AIS. Most returns prefill it.
- The department adjusts it, with TDS and advance tax, against your tax for the year.
- If the total paid is more than your tax, the excess is refunded to your pre-validated bank account after you e-verify the return.
- If you are salaried, give your employer the details of TCS collected from you in the same tax year (under section 392(4) of the 2025 Act; earlier Form 12BAA), with the Form 133 or bank advice.
- The employer reduces the TDS on your remaining salary by that amount, so your cash is not blocked until the refund.
- You still report the TCS in your ITR; just don't count it twice.
Lower TCS: if your income clearly doesn't justify the normal rate, you can apply to your Assessing Officer for a certificate to collect TCS at a lower rate (section 395(3)). The collector then follows that rate while the certificate is valid.
TCS missing or wrong? What to do
| Problem | Likely cause | What to do |
|---|---|---|
| Collected, but not in Form 168/AIS | Quarterly TCS statement not filed yet, or wrong PAN quoted | Ask the bank, operator or dealer to file or correct its statement (Form 143) |
| 20% charged on an education fee | Purpose declared as "other", or loan not shown | Ask the bank to correct the purpose; otherwise claim the excess in your ITR |
| 5% or more instead of 2% or 1% | PAN missing or inoperative | Link PAN with Aadhaar, update it with the collector, claim the excess in your ITR |
| No Form 133 received | Collector hasn't downloaded it from TRACES | It is due within 15 days of the quarterly statement's due date; ask for it. Your Form 168 is enough to claim |
| An entry you don't recognise | Error by a collector, or misuse of your PAN | Give feedback on the entry in AIS and contact the collector |
Refund scam alert: the Income Tax Department never asks for your OTP, card details or banking password to release a TCS refund. Don't click "refund" links in an SMS. Lost money? Call 1930 or report on cybercrime.gov.in.
Old and new names (Income-tax Act, 2025)
| What it is | Up to 31 Mar 2026 (1961 Act) | From 1 Apr 2026 (2025 Act) |
|---|---|---|
| TCS provision | Section 206C | Section 394 |
| TCS certificate | Form 27D | Form 133 |
| Quarterly TCS statement | Form 27EQ | Form 143 |
| Buyer's no-TCS declaration (goods for manufacturing) | Form 27C | Form 127 |
| Annual tax statement | Form 26AS | Form 168 |
| Higher rate without PAN | Section 206CC | Section 397(2) |
Timeline
Finance Act, 2025: LRS threshold raised from ₹7 lakh to ₹10 lakh; no TCS on loan-funded education remittances; higher TCS for non-filers and TCS on sale of goods removed.
Union Budget 2026-27 proposes 2% TCS for education and medical remittances and for overseas tour packages.
Finance Act, 2026 (No. 4 of 2026) receives assent, enacting the new rates.
The Income-tax Act, 2025 and the new rates come into force; TCS moves to section 394.
FAQs
What is the full form of TCS in income tax?
Tax Collected at Source: tax that a seller or bank collects from you when you pay for specified items or send money abroad, deposited against your PAN.
Is TCS an extra tax or a cost?
No. It is an advance payment of your own income tax. You claim it in your return, and if it is more than your tax for the year, it is refunded.
What is the TCS rate on sending money abroad for education in 2026?
From 1 Apr 2026: nil if paid from an education loan from a financial institution; otherwise 2% once your remittances exceed ₹10 lakh. It was 5% until 31 Mar 2026.
Is there TCS on an overseas tour package?
Yes, 2% on the whole package amount from 1 Apr 2026, with no threshold. The tour operator collects it.
Do I pay TCS when buying a car?
Yes, 1% if the car's sale price is above ₹10 lakh, collected by the dealer. Claim it in your ITR.
I don't have to file a return. How do I get TCS back?
You have to file an ITR to claim the refund, even if your income is below the taxable limit.
Can my employer adjust TCS against salary TDS?
Yes. Give your employer the TCS details for the same tax year; it reduces the TDS on your salary accordingly.
Is TCS still higher if I haven't filed past returns?
No. That rule was removed from 1 Apr 2025. A higher rate now applies only if you don't give a valid, operative PAN.
Official sources
- Income Tax Department – Income-tax Act, 2025, as amended by Finance Act, 2026 (sections 392, 394, 395, 397, 402) (accessed 31 Oct 2026)
- Ministry of Finance – Memorandum explaining the Finance Bill, 2026: rationalisation of TCS rates (accessed 31 Oct 2026)
- PIB – Income Tax Act, 2025 from 1 Apr 2026; TCS on LRS reduced to 2% for education and medical (1 Feb 2026) (accessed 31 Oct 2026)
- Ministry of Finance – Budget 2026 Tax Reforms: list and gist (accessed 31 Oct 2026)
- PIB – Budget 2025-26 speech, paras 138–139 (LRS threshold ₹10 lakh; education-loan remittances) (accessed 31 Oct 2026)
- Ministry of Finance – Memorandum to Finance Bill, 2025 (omission of section 206CCA and TCS on sale of goods) (accessed 31 Oct 2026)
- Income Tax Department – Form Nos. 130–133 (Form 133, earlier Form 27D) (accessed 31 Oct 2026)
- Income Tax Department – Form Mapping Guide, Income-tax Act 1961 to 2025 (accessed 31 Oct 2026)
- Income Tax Department – Form 168 (earlier Form 26AS): view annual tax statement (accessed 31 Oct 2026)
- e-Filing portal – AIS (Annual Information Statement) help (accessed 31 Oct 2026)
- RBI – Liberalised Remittance Scheme (LRS) limit FAQs (accessed 31 Oct 2026)
- Ministry of Home Affairs – National Cybercrime Reporting Portal (accessed 31 Oct 2026)
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