20% TCS on LRS for Overseas Investments: How to Claim It Back in Your ITR
Every Indian resident who remits money abroad to invest in US stocks, overseas mutual funds, or international bonds is having 20% deducted at the bank counter. Most of them believe they have "paid tax." They have not — they have paid TCS, and it can be claimed back.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Every Indian resident who remits money abroad to invest in US stocks, overseas mutual funds, or international bonds is having 20% deducted at the bank counter. Most of them believe they have "paid tax." They have not — they have paid TCS. The 20% is a tax collected at source and sits as a credit in their name with the government. It can be — and should be — offset against their total tax liability in the ITR.
A meaningful number of individuals are not claiming this credit. They are effectively giving the government an interest-free loan through their TCS that they recover, if at all, months later as a refund.
Current TCS Rates Under Section 206C(1G)
Section 206C(1G) of the Income Tax Act, 1961 governs TCS on LRS remittances. Rates following Budget 2026 amendments:
The 20% rate applies to "other remittances" including overseas equity, mutual funds, bonds, property. The ₹10 lakh threshold applies per financial year, per individual, across all LRS remittances.
How TCS Is Not Tax — It Is a Credit
TCS is not the final tax on your LRS remittance. Your actual tax liability is determined when you compute your total income and apply applicable tax rates. The TCS credit reduces your tax payable when you file ITR, or generates a refund if TCS exceeds your total tax liability.
Example: Total income ₹50L, tax payable ₹12L, TCS deducted ₹5L, TDS on salary ₹8L → Refund of ₹1L. Without claiming the TCS credit, the taxpayer would have filed showing ₹4L payable — leaving ₹5L of TCS unrecovered.
Claiming the TCS Credit in ITR
Step 1: Download Form 26AS from incometax.gov.in. TCS details appear under "TCS details" and in the Annual Information Statement (AIS). Verify bank-wise amounts match your records.
Step 2: File ITR-2 (mandatory if you have overseas investments, foreign assets, or capital gains from foreign securities — ITR-1 cannot be used). Within ITR-2: Part B → Schedule TAX → TCS. Enter Collector PAN (bank's TAN), amount, assessment year.
Step 3: Report the overseas investment income: dividends from foreign stocks (Schedule OS), capital gains on sale of foreign stocks (Schedule CG with foreign asset details), interest from foreign bonds (Schedule OS). The TCS credit offsets the total tax computed on all income.
Step 4: Schedule FA is also mandatory for overseas investment holdings — TCS on LRS does not excuse the Schedule FA disclosure.
Common Mistakes
- Not checking Form 26AS before filing — TCS entries must match exactly.
- Treating TCS as final tax and not filing ITR — mandatory if income exceeds the basic exemption limit.
- Claiming TCS credit while omitting dividend income — creates inconsistency that triggers scrutiny.
- Forgetting Schedule FA for overseas investments.
I'm CA Harun Raaj, Visakhapatnam. If you are remitting under LRS for investment purposes and have not been tracking TCS credits in your ITR, this is worth correcting in AY 2026-27 — refunds can be substantial for active investors.
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See Also
Frequently Asked Questions
What is the difference between TCS and actual tax liability on overseas investments?+
According to the article, TCS (Tax Collected at Source) is not the final tax — it is a credit. Your actual tax liability is determined by computing your total income and applying applicable tax rates. The TCS credit reduces your tax payable when you file ITR, or generates a refund if TCS exceeds your total tax liability. As stated in the 'How TCS Is Not Tax — It Is a Credit' section, TCS sits as a credit in your name with the government and should be offset against your total tax liability.
What is the current TCS rate on overseas investments under Section 206C(1G)?+
Per Section 206C(1G) of the Income Tax Act, 1961, as amended in Budget 2026, the TCS rate on 'other remittances' (including overseas equity, mutual funds, bonds, and property) is 20%, applicable on remittances above ₹10 lakh per financial year per individual. This threshold applies across all LRS remittances combined, as detailed in the 'Current TCS Rates Under Section 206C(1G)' section.
Which ITR form should be filed if I have overseas investments and TCS to claim?+
According to the 'Claiming the TCS Credit in ITR' section, you must file ITR-2 if you have overseas investments, foreign assets, or capital gains from foreign securities. ITR-1 cannot be used. Within ITR-2, you navigate to Part B → Schedule TAX → TCS to enter the Collector PAN (bank's TAN), amount, and assessment year.
How do I verify the TCS amount deducted on my LRS remittance?+
Per Step 1 in the 'Claiming the TCS Credit in ITR' section, you should download Form 26AS from incometax.gov.in. TCS details appear under 'TCS details' and in the Annual Information Statement (AIS). You must verify that bank-wise amounts in Form 26AS match your records before claiming the credit in your ITR.
Is there a threshold amount below which TCS is not collected on overseas investments?+
Yes, according to the 'Current TCS Rates Under Section 206C(1G)' section, the ₹10 lakh threshold applies to 'other remittances' including overseas investments. TCS at 20% is collected only on remittances above ₹10 lakh per financial year per individual, computed across all LRS remittances combined in that year.
What happens if TCS collected exceeds my total tax liability for the year?+
As explained in the 'How TCS Is Not Tax — It Is a Credit' section, if TCS exceeds your total tax liability, the excess amount generates a refund. The article emphasizes that individuals not claiming the TCS credit in their ITR are 'effectively giving the government an interest-free loan' through their TCS, recovering it only months later as a refund if at all.
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