How to track TCS on foreign remittance for mutual fund purposes
TCS (Tax Collected at Source) on LRS foreign remittance was introduced to track international transactions and prevent tax evasion. For investment purposes (foreign stocks, mutual funds), 20% TCS applies on remittance above Rs 10 lakh per FY. TCS is a pre-paid tax; claim as ITR credit and recover refund if your total tax is lower.
Conflict-of-interest disclosure. This guide is published by webnotes.in for informational purposes. WebNotes has no commercial relationship with any bank or AMC. No affiliate commission is earned. For substantial international transactions, consult a CA familiar with LRS / cross-border tax.
Step-by-step procedure
See the procedure infobox above.
TCS rate framework
| LRS purpose | TCS rate | Threshold |
|---|---|---|
| Investment and other purposes | 20% | Amount or aggregate exceeding Rs 10 lakh |
| Education or medical treatment | 2% | Amount or aggregate exceeding Rs 10 lakh |
| Education funded by a loan from a financial institution | Nil | Section 394(4)(b) |
| Overseas tour programme package (collected by the seller) | 2% | No threshold |
Source: Income-tax Act 2025, s.394(1) Table, Sl. Nos. 7 and 8, and s.394(4), as amended by Finance Act 2026, s.85, in force from 1 April 2026. The 2% rates replaced 5% (education and medical) and the 5% and 20% tour-package slabs. The table does not itself state whether the rate applies to the whole remittance or only the part above Rs 10 lakh; confirm the computed figure on the bank’s TCS certificate. Correction, 22 October 2026: an earlier version of this table gave 0.5% for education, Rs 7 lakh thresholds and 20% on tour packages, none of which applies from 1 April 2026. See FEMA for the LRS rules behind the remittance.
Why TCS, not TDS
| Aspect | TDS | TCS |
|---|---|---|
| Direction | Income recipient’s tax deducted | Outward payer’s tax collected |
| Triggers on | Income (salary, dividend) | Outward remittance |
| Section | Various (192, 194K, etc.) | Section 394 of the Income-tax Act 2025 (section 206C(1G) of the 1961 Act before 1 April 2026) |
| Reported in | Schedule TDS-1 | Schedule TDS-2 (or relevant TCS line) |
Both are tax-credits in ITR.
Worked example
An investor remits money via LRS to a US broker for foreign stock or fund investment, and the bank’s TCS certificate shows Rs 2 lakh collected at 20%:
ITR:
- Total tax liability (say): Rs 1.5 lakh.
- TCS credit: Rs 2 lakh.
- Refund: Rs 50,000.
When TCS does not apply
| Scenario | TCS |
|---|---|
| LRS for education funded by a loan from a financial institution | Nil (s.394(4)(b)) |
| LRS within first Rs 10 lakh for investment | No TCS |
| LRS via Indian AMC’s FoF | n/a (no LRS; Indian AMC route) |
| NRI investor (different framework) | Not LRS; FEMA NRI provisions apply |
For Indian retail investors, the easiest way to avoid LRS / TCS complexity is to use Indian-domiciled international FoFs (per how-to-set-first-international-fund-investment).
Schedule TDS-2 entry
| Field | Source |
|---|---|
| TAN of collector | Bank’s TAN (authorised dealer) |
| Date of collection | Remittance date |
| Amount of remittance | Pre-TCS amount |
| TCS amount | Calculated |
Pre-filled via AIS for most cases.
Annual reporting
LRS aggregate remittances are reportable in Schedule FA of ITR. Even sub-threshold remittances count for aggregation.
Black Money Act 2015 requires comprehensive disclosure of foreign assets and remittances. Penalty for non-disclosure is severe.
See also
- How to handle foreign MF in ITR
- How to set up your first international fund investment
- How to choose ITR form for MF
- How to report MF capital gains in ITR
- How to claim TDS on MF dividend in ITR
- How to claim TDS 194K in ITR
- How to reconcile Form 26AS with MF transactions
- How to revise ITR (MF)
- Foreign Exchange Management Act (FEMA)
- Liberalised Remittance Scheme
- Tax collected at source
- Form 26AS for mutual fund TDS
- Annual Information Statement (AIS)
- International mutual funds in India
- Fund of funds in India
- Income-tax Act 2025
- Mutual funds in India
- AMFI
- SEBI
External references
References
- Income-tax Act, 2025 (Act No. 30 of 2025), section 394(1) Table, Sl. Nos. 7 and 8, and section 394(4).
- Finance Act, 2026 (Act No. 4 of 2026), section 85, in force from 1 April 2026.
- Income Tax Act, 1961, Section 206C(1G), for remittances before 1 April 2026.
- RBI Master Direction, Liberalised Remittance Scheme, FED Master Direction No. 7/2015-16, updated 6 September 2024.
- Black Money (Undisclosed Foreign Income and Assets) Act, 2015.