Big relief in Budget 2026: TCS rates on these 6 things revised to 2%; full list inside

In an effort to rationalise tax collection at source (TCS) rates for various categories, the government has brought uniformity, revising TCS rates to 2% each for categories such as the sale of alcoholic liquor for human consumption, scrap, minerals and overseas tour programme packages, etc. The move aims to simplify a system that currently has multiple TCS rates and thresholds, replacing them with a largely uniform 2% TCS system. Such a step is expected to reduce complexity and improve compliance.

The proposed changes are also expected to bring relief to taxpayers making foreign remittances for education, medical treatment or travel.

As per Budget highlights from Taxmann, “Under the existing provisions of Section 394(1) of the ITA 2025 (corresponding to Section 206C of the ITA, 1961), multiple rates of tax collection at source are prescribed for different transactions. To simplify the TCS framework, it is proposed to rationalise the rates by prescribing largely uniform rates.”


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Amit Agarwal, partner, Nangia & Co LLP, says, "In Budget 2026, the Finance Minister has proposed a rationalisation of TCS rates on certain foreign payments. While overseas tour packages earlier attracted TCS at 5%—and 20% beyond Rs 10 lakh—and education or medical remittances under LRS were subject to 5%, the new proposal introduces a uniform TCS rate of 2% across these categories. This simplified and significantly lower rate makes overseas transactions more affordable and reflects a far more open and taxpayer-friendly approach.”

Proposed changes in TCS framework at a glance

Sr. No.	Nature of Transaction	Section (ITA 1961)	Corresponding Section (ITA 2025)	Existing TCS Rate	Existing Threshold	Proposed TCS Rate	Proposed Threshold
1	Sale of alcoholic liquor for human consumption	206C(1)(i)	394(1), Table Sl. No. 1	1%	No threshold	2%	No threshold
2	Sale of tendu leaves	206C(1)(ii)	394(1), Table Sl. No. 2	5%	No threshold	2%	No threshold
3	Sale of scrap	206C(1)(vi)	394(1), Table Sl. No. 4	1%	No threshold	2%	No threshold
4	Sale of minerals (coal, lignite or iron ore)	206C(1)(vii)	394(1), Table Sl. No. 5	1%	No threshold	2%	No threshold
5	Remittance outside India under LRS	206C(1G)	394(1), Table Sl. No. 7	(a) 5% – Education loan (other than u/s 80E) or medical treatment	Above ₹10 lakh p.a.	(a) 2% – Education loan or medical treatment	Above ₹10 lakh p.a.
				(b) 20% – Other purposes		(b) 20% – Other purposes
6	Overseas tour programme package (including travel, hotel, boarding or lodging)	206C(1G)	394(1), Table Sl. No. 8	5% up to ₹10 lakh p.a.	₹10 lakh p.a.	2%	No threshold
				20% above ₹10 lakh p.a.

TCS rates table from chartered accountant Dr Suresh Surana