Major reforms in withholding tax provisions bring relief to remitters and simplify compliance for property transactions. Here’s what’s changing:
TCS ON FOREIGN REMITTANCES – MAJOR RELIEF
Reduced Rates Under LRS (Liberalised Remittance Scheme)
Amendments to Section 206C(1G)
| Purpose | Old Rate | New Rate (FY 2026-27) | Savings |
| Overseas Education | 5% (0.5% with loan) | 2% (0.5% with loan) ✅ | 60% reduction |
| Medical Treatment Abroad | 5% | 2% ✅ | 60% reduction |
| Foreign Travel Packages | 5% without threshold / 20% above ₹7L | Flat 2% (no threshold) ✅ | Up to 90% reduction |
| Other LRS Remittances | 5% up to ₹7L, 20% above | 20% (unchanged) | – |
What This Means
BEFORE (FY 2025-26):
Example: ₹10 lakh education fee to US university
- TCS @ 5% = ₹50,000 upfront
- (0.5% if education loan = ₹5,000)
NOW (FY 2026-27):
Same ₹10 lakh education fee
- TCS @ 2% = ₹20,000 upfront ✅
- (0.5% with loan remains same)
You Save: ₹30,000 in cash flow per transaction
Foreign Travel Package – Game Changer
Old Structure:
- First ₹7 lakh: No TCS
- Above ₹7 lakh: 5% TCS only on excess
- Above ₹7 lakh (without PAN): 20%
New Structure (From FY 2026-27):
- Flat 2% from first rupee
- No threshold
- Simpler calculation
Example: ₹15 lakh European tour package
| Scenario | Old TCS | New TCS | Impact |
| With PAN | ₹40,000 (5% on ₹8L excess) | ₹30,000 (2% on ₹15L) | Save ₹10,000 |
| Without PAN | ₹1,60,000 (20% on ₹8L) | ₹30,000 (2% on ₹15L) | Save ₹1,30,000 |
Who Benefits Most?
– Students & Parents:
- Lower upfront TCS on tuition fees
- Better cash flow for education loans
- Applicable to all foreign universities
– Medical Patients:
- Critical illness treatment abroad
- Reduced TCS on hospital payments
- Includes accompanying family expenses
– Business Travelers:
- Conference/training abroad
- Corporate travel packages now cheaper
- Simplified compliance
– Leisure Travelers:
- Family vacations
- Honeymoon packages
- No more ₹7L threshold confusion
TCS Credit Adjustment
Important: TCS collected is adjustable against your tax liability
- Reflects in Form 26AS / AIS
- Claimed in ITR as “Taxes Paid”
- Refundable if tax liability < TCS paid
No loss, just cash flow improvement ✅
TDS ON PROPERTY TRANSACTIONS – STRICTER NRI PROVISIONS
Property Purchase from Non-Resident (Section 195)
Key Changes:
1. No TAN Required for Buyers
BEFORE:
- Individual/HUF buying from NRI: Must obtain TAN (Tax Deduction Account Number)
- Apply online, wait 15-30 days
- Penalty if TDS deducted without TAN
NOW (From FY 2026-27):
- Individual/HUF buyers: TAN not required
- Can deduct TDS using PAN only
- Simplified compliance
Example: Mr. Sharma (resident) buys flat from NRI Mr. Patel for ₹1 crore
- TDS @ 20% (LTCG) or 30% (STCG) = ₹20-30 lakh
- Old: Obtain TAN → Deduct TDS → File Form 27Q
- New: Deduct using PAN → Pay online → File Form 27Q
2. Better PAN-Based Tracking
Enhanced Compliance Mechanism:
– Automated matching:
- TDS credit auto-flows to NRI seller’s Form 26AS
- Real-time verification of TDS payment
- Reduces disputes at time of NRI’s return filing
– Lower deduction certificates:
- NRIs can apply for Section 197 certificate online
- Valid up to 3 years (increased from 1 year)
- Auto-renewal if circumstances unchanged
– Payment simplification:
- Online challan pre-filled with buyer/seller PANs
- Instant confirmation of TDS deposit
- Quarterly consolidated statement instead of monthly
NRI Seller – Tax Rate Clarification
No change in rates, but clearer process:
| Asset Type | Holding Period | TDS Rate |
| Residential Property | <2 years (STCG) | 30% |
| Residential Property | >2 years (LTCG) | 20% (with indexation under old regime) |
| Other Immovable Property | <2 years | 30% |
| Other Immovable Property | >2 years | 20% |
TDS applies on: Sale consideration, not capital gains
Section 194-IA vs. Section 195 – Know the Difference
Resident-to-Resident Property Sale (Section 194-IA):
- Buyer deducts TDS @ 1%
- Threshold: Sale value >₹50 lakh
- PAN mandatory for both parties
NRI-to-Resident Property Sale (Section 195):
- Buyer deducts TDS @ 20-30% (based on capital gains nature)
- No threshold – TDS on full consideration
- TAN no longer required for individual buyers
OTHER TDS/TCS UPDATES
1. Declaration Forms – File Once with Depository
Sections 197A (15G/15H for interest/dividend)
BEFORE:
- Submit Form 15G/15H to each payer separately
- Banks, companies, post office – all need separate forms
- Repeat monthly/quarterly
NOW (From FY 2026-27):
- File once with depository (NSDL/CDSL)
- Depository shares with all payers automatically
- Filing frequency: Quarterly (relaxed from monthly)
Who Benefits:
- Senior citizens (Form 15H for interest)
- Low-income taxpayers (Form 15G)
- Reduces paperwork by 70%
2. Supply of Manpower – TDS Clarity
Amendment to Section 194C
Issue: Was “manpower supply” a contract (1-2% TDS) or professional service (10% TDS)?
Clarified:
- “Supply of manpower” = Work contract
- TDS rates:
- Individual/HUF: 1%
- Others: 2%
- No confusion with Section 194J (professional fees @ 10%)
Example:
- Security services contract: 1-2% TDS
- Housekeeping staff supply: 1-2% TDS
- Not 10% anymore
3. Co-operative Society Interest – No TDS
New Exemption
Benefit: No TDS on interest paid to:
- Co-operative societies engaged in banking
- Co-operative land mortgage banks
Simplifies: Rural credit and co-operative lending compliance
4. Electronic Lower/Nil TDS Certificate
Section 197 – Process Digitization
BEFORE:
- Paper application to jurisdictional AO
- Manual verification (30-60 days)
- Physical certificate issuance
NOW:
- 100% online application
- Instant provisional approval for eligible cases
- Certificate validity: 3 years (from 1 year)
- Auto-renewal if circumstances unchanged
Who Should Apply:
- Senior citizens with no tax liability
- Startups in loss-making phase
- Individuals with income below taxable limit
- NRIs with lower treaty rates
TCS RATE SUMMARY TABLE (FY 2026-27)
| Transaction Type | Old TCS Rate | New TCS Rate | Section |
| Overseas Education | 5% (0.5% with loan) | 2% (0.5% with loan) | 206C(1G) |
| Medical Treatment Abroad | 5% | 2% | 206C(1G) |
| Foreign Travel Package | 5% above ₹7L / 20% | Flat 2% | 206C(1G) |
| Other LRS Remittances | 5% up to ₹7L, 20% after | 20% | 206C(1G) |
| Sale of Motor Vehicle >₹10L | 1% | 1% (no change) | 206C(1F) |
| Sale of Goods >₹50L | 0.1% | 0.1% (no change) | 206C(1H) |
| Alcoholic Liquor | 1% | 2% | 206C(1) |
| Scrap | 1% | 2% | 206C(1) |
| Coal/Lignite/Iron Ore | 1% | 2% | 206C(1) |
| Tendu Leaves | 5% | 2% | 206C(1) |
COMPLIANCE CHECKLIST (FY 2026-27)
For Remitters (Education/Travel/Medical):
- Ensure bank has your correct PAN
- Mention purpose code clearly (S0501 for education, S0502 for medical)
- Collect TCS certificate from bank
- Verify TCS credit in Form 26AS before ITR filing
- Claim TCS adjustment in ITR – fully refundable
For Property Buyers (from NRI):
- Obtain NRI seller’s PAN
- Calculate TDS @ 20-30% on sale consideration
- Deduct TDS before payment (no TAN needed if you’re individual/HUF)
- Pay challan online (Form 26QB for property TDS)
- File Form 27Q within 30 days
- Provide TDS certificate to NRI seller
For Form 15G/15H Filers:
- File once with depository (NSDL/CDSL) quarterly
- Update all bank account details
- Ensure PAN-Aadhaar linking done
- Banks will auto-receive your declaration
KEY TAKEAWAYS
For Individuals & Families:
- 60% lower TCS on education/medical remittances
- Better cash flow – pay ₹2 instead of ₹5 per ₹100 remitted
- Simplified travel – flat 2% on all packages, no threshold confusion
- Full TCS credit in ITR – nothing lost, only timing improved
For Property Transactions:
- No TAN headache for individual buyers purchasing from NRIs
- Faster processing with PAN-based tracking
- Lower disputes with automated credit matching
- 3-year validity for lower deduction certificates
For Tax Compliance:
- File 15G/15H once – depository handles distribution
- Manpower supply clarity – 1-2% TDS, not 10%
- Digital certificates – instant approval, auto-renewal
- Quarterly filing – reduced frequency for declarations
The Finance Bill 2026 TDS/TCS changes are about:
- Cash Flow Relief – Lower TCS rates = less money blocked upfront
- Compliance Ease – Digital processes, one-time filings, no TAN for individuals
- Transparency – Better PAN tracking, automated credit matching
- Middle-Class Focus – Education, medical, travel made affordable
