TCS (Tax Collected at Source) FY 2026-27: Rates, LRS Rules & How to Claim Credit
TCS (Tax Collected at Source) is the mechanism where a seller collects tax from the buyer at the time of sale of specified goods or services. Unlike TDS (deducted by payer), TCS is collected by the seller/provider. Understanding TCS rates, applicability, and credit claim is essential for businesses and high-value purchasers in FY 2026-27.
⚡ TCS Key Facts FY 2026-27
- TCS = collected by seller from buyer (opposite of TDS)
- TCS on foreign remittance (LRS): 20% above ₹7 lakh per year (exceptions for education/medical)
- TCS on overseas tour packages: 20% (no threshold)
- TCS on sale of goods above ₹50L: 0.1% (Section 206C(1H))
- TCS credit claimed when filing ITR – reduces your tax liability
What is TCS?
Tax Collected at Source (TCS) is governed by Section 206C of the Income Tax Act. Specified sellers (businesses with turnover > ₹10 crore) must collect a percentage of the sale price as tax and deposit it with the government. The buyer gets a credit for TCS paid when filing their income tax return.
TCS Rates on Key Transactions FY 2026-27
| Transaction | TCS Rate | Threshold |
|---|---|---|
| Sale of scrap | 1% | No threshold |
| Sale of timber from forest lease | 2.5% | No threshold |
| Sale of minerals (coal, lignite, iron ore) | 1% | No threshold |
| Sale of goods by seller with turnover > ₹10 crore | 0.1% | Purchase value > ₹50 lakh |
| Foreign remittance (LRS) – general | 20% | Above ₹7 lakh per year |
| Foreign remittance for education (loan) | 0.5% | Above ₹7 lakh per year |
| Foreign remittance for education (own funds) | 5% | Above ₹7 lakh per year |
| Overseas tour packages | 20% | No threshold (5% up to ₹7L from Budget 2025) |
TCS on Foreign Remittance (LRS) – Updated Rules from Budget 2025
The Liberalised Remittance Scheme (LRS) allows individuals to remit up to $2,50,000 per year for permitted purposes. TCS applies when total LRS remittance in a year exceeds ₹7 lakh:
- For overseas tour packages: TCS of 5% up to ₹7 lakh, 20% above ₹7 lakh (from Budget 2025)
- For other LRS purposes (investments, gifts, travel): 20% above ₹7 lakh
- For education/medical treatment: 5% (own funds) or 0.5% (education loan funds) above ₹7 lakh
- TCS is collected by the bank/authorised dealer at the time of remittance
How to Claim TCS Credit
TCS collected from you is reflected in your Form 26AS under Part B. When you file your ITR, the TCS amount is credited against your total tax liability:
- Download Form 26AS from incometax.gov.in – verify TCS entries in Part B
- In your ITR, go to the “Tax Details” / “Schedule TCS” section
- Enter TCS amounts as shown in Form 26AS
- TCS reduces your final tax payable – if TCS > tax liability, you get a refund
TCS vs TDS – Key Differences
| Feature | TDS | TCS |
|---|---|---|
| Who deducts/collects | Payer (buyer/employer) | Payee (seller) |
| When collected | At time of payment | At time of receipt of sale amount |
| Applies to | Salary, interest, rent, fees, etc. | Specified goods sales, LRS, tour packages |
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