Fact-check notes
Last fact-checked: 2026-05-30
Tax caution: AY 2026-27 covers FY 2025-26 and continues under the Income-tax Act, 1961. New Act, new section and new form references should be verified against official utilities before filing.
Research note: This page uses Batch 15 competitor-gap research and supplied forward-looking 2026 topics. Treat future-dated form or section references as planning notes until official utilities confirm them.
Use this page as preparation guidance. A professional should verify the active law year, notification, portal utility and source records before filing or taking a tax position.
What this covers
Section 394 is treated as the new Act TCS reference for businesses that collect tax at source and need buyer-level records, challans and return reconciliation.
- Covers TCS planning for specified sales, LRS-like cases and collector reporting workflows.
- Buyer PAN, invoice value, rate and collection date must be reliable.
- TCS return and certificate data should reconcile with sales records.
- Refund/adjustment cases need careful documentation.
Who this is for
- Seller collecting TCS on specified goods.
- Dealer or travel business checking TCS controls.
- Finance team reconciling TCS credit complaints.
- CA filing TCS returns.
Documents and data to verify
- Buyer details and invoices.
- TCS rate and section mapping.
- Challans and return acknowledgements.
- Credit notes and cancellations.
Common mistakes to avoid
- No buyer PAN validation.
- Mismatch between sales and TCS returns.
- Late deposit after collection.
- Unclear treatment of refunds or cancellations.
How to proceed
- Confirm the applicable financial year, assessment year, taxpayer type, state and portal status before acting.
- Reconcile portal data with books, AIS/Form 26AS, GST returns, contracts, invoices, bank statements and source documents.
- Prepare a written computation, checklist, filing note or response with assumptions clearly stated.
- Download acknowledgements, challans, workings and evidence after filing or submission.
FAQs
Can WorkIndex help with this?
Yes. Post the facts and documents; relevant experts can quote for filing, advisory, reconciliation, registration, appeal support or ongoing compliance.
Is this page final legal advice?
No. Use it to prepare. A professional should verify the active law year, notification, portal utility and records before filing or taking a tax position.
What should I mention while posting?
Mention the year, state, form, deadline, amount involved, documents available, portal status and whether you need filing, correction, advisory or representation.
Frequently Asked Questions
1. What are the LRS remittance limits and TCS rules for outward transfers involving Section 394 TCS Under New Act?
Foreign remittances for Section 394 TCS Under New Act under the Liberalised Remittance Scheme (LRS) are subject to a USD 250,000 limit. Tax Collected at Source (TCS) applies at rates up to 20% on transactions exceeding ₹7 lakh.
2. What documents are required to execute a foreign remittance for Section 394 TCS Under New Act?
Remitting funds abroad for Section 394 TCS Under New Act requires submitting Form A2 and a valid PAN to the authorized dealer bank, along with supporting invoices, agreements, or foreign institutional details.
3. What is the TCS rate on foreign education remittances?
TCS on education remittances is NIL up to ₹7 lakh per FY. On amounts exceeding ₹7 lakh, the rate is: (1) 0.5% if the remittance is funded by an education loan from a financial institution. (2) 5% if funded by self/other sources.
4. What is the TCS rate on overseas tour packages?
For overseas tour packages, TCS is collected by the tour operator at: (1) 5% on package costs up to ₹7 lakh per financial year. (2) 20% on the portion exceeding ₹7 lakh per financial year.
5. What is the TCS rate on other remittances (investments/gifts) under LRS?
For other remittances like foreign stock investments, bank transfers, or gifts, TCS is NIL up to ₹7 lakh per financial year, and a flat 20% on any amount exceeding the ₹7 lakh threshold.
6. Is the ₹7 lakh TCS threshold limit calculated per bank account?
No. The ₹7 lakh threshold limit is a PAN-level limit calculated across all bank accounts and authorized dealers in a financial year, tracked via the RBI's LRS portal.
7. How do I claim a refund for the TCS collected by the bank?
TCS is not an additional tax; it is a tax credit. The collected TCS reflects in your Form 26AS/AIS. You can claim it against your final tax liability when filing your ITR, or claim a refund if your total tax liability is NIL.
8. Can a partnership firm or company remit money under LRS?
No. The LRS facility is strictly restricted to resident individuals (including minors). Partnership firms, HUFs, LLPs, trusts, and corporate entities are not eligible to remit funds under LRS.
9. What are the prohibited transactions under LRS?
Remittances are prohibited for: margin calls to foreign exchanges, trading in foreign exchange, purchasing lottery tickets, sweepstakes, banned magazines, or making remittances to entities violating FEMA regulations.
10. What is Form A2 and why is it required?
Form A2 is a application-cum-declaration form prescribed by the RBI that must be completed and submitted to the bank for any foreign exchange purchase or outward remittance under LRS.
11. Does TCS apply to international credit card transactions?
International credit card transactions executed while traveling abroad are currently excluded from the LRS limits and do not attract TCS. However, transactions on debit cards or forex cards are counted under LRS and attract TCS.
12. What is the TCS rate on e-commerce transactions under Section 206C(1H)?
Under Section 206C(1H), sellers whose turnover exceeds ₹10 crore must collect TCS at 0.1% on receipts exceeding ₹50 lakh from a buyer in a FY. It is separate from the LRS outward remittance TCS.
13. What happens if I remit money without a PAN?
Outward remittances under LRS are not permitted by banks without a valid PAN. If PAN is inoperative, the bank will refuse the remittance or apply TCS at double the standard rate (minimum 20%).
14. What is Form 27D and when is it issued?
Form 27D is the official TCS certificate issued by the collecting bank/authorized dealer to the remitter within 15 days from the due date of filing the quarterly TCS return, certifying the tax amount collected.
15. Does LRS apply to Non-Resident Indians (NRIs)?
No. LRS is strictly for resident individuals. NRIs remit funds out of India under different guidelines, such as the USD 1 million scheme for NRO accounts, subject to submitting Form 15CA/15CB.