TCS on LRS remittances for US stocks: refund guide 2025-26

Every time you remit money to invest in US stocks, your bank may be holding back a significant chunk of your capital — and parking it with the government for months. That chunk is TCS: Tax Collected at Source under the Liberalised Remittance Scheme.

At the current rate of 20% on remittances above ₹7 lakh per year, TCS is the single largest hidden cost of investing in US stocks from India. It is not a tax you owe forever. It is — in the language of the Income Tax Act — an advance tax credit. But until you file your ITR and receive a refund, that capital is locked up, earning nothing while your US portfolio generates returns.

This guide explains exactly what TCS on LRS is, how it accumulates, what it actually costs you in opportunity terms, and the precise process to reclaim every rupee — including which forms to download, which ITR to file, and what to do if your bank got the numbers wrong.

What is TCS on LRS — the legal foundation

Section 206C(1G) of the Income Tax Act

TCS on LRS was introduced by the Finance Act 2020, adding sub-section (1G) to Section 206C of the Income Tax Act, 1961. The provision mandates that any "authorised dealer" — meaning a bank authorised under the Foreign Exchange Management Act (FEMA) to deal in foreign exchange — must collect TCS at the time of remitting funds under the Liberalised Remittance Scheme.

The LRS itself, governed by RBI's Master Direction on LRS, allows resident individuals to remit up to USD 250,000 (approximately ₹2.1 crore at current rates) per financial year for a range of permissible capital and current account transactions. This includes:

Investing in foreign stocks, bonds, and mutual funds
Opening and funding foreign bank accounts
Overseas education (where the money goes directly to the institution or student)
Medical treatment abroad
Gifts and donations to non-residents
Travel (for personal travel, TCS applies above ₹7 lakh aggregate with other LRS uses)

When you remit money through a platform like Vested to invest in US stocks, the remittance is classified as LRS under the "capital account" category (purchase of foreign securities). Your bank — the authorised dealer in this chain — is legally required to collect TCS before releasing the funds.

TCS is an advance tax credit — not an additional levy

This distinction matters enormously. TCS collected under Section 206C(1G) is explicitly creditable against your income tax liability for the year. Section 206C(4) states that TCS collected shall be deemed to be a payment of advance tax. If your income tax liability for the year (after all deductions and rebates) is less than the TCS collected, the excess is refunded to you by the Income Tax Department.

The mechanism works identically to advance tax or TDS on salary: the government collects upfront, and you true-up at year end through your ITR. The difference with TCS on LRS is the amounts can be very large — ₹60,000 to ₹8,60,000 or more in a single year — and the lockup period (collection to refund) is often six to nine months.

The current TCS rate structure on LRS

The rates have changed significantly since TCS on LRS was first introduced, and it is important to use the currently applicable rates for FY 2024-25 onwards.

Rate table — LRS remittances (FY 2024-25 onwards, effective 1 October 2023)

Purpose of LRS remittance	Aggregate amount in FY	TCS rate (with PAN)	TCS rate (without PAN)
Any LRS purpose (incl. US stocks, foreign investment)	Up to ₹7,00,000	0%	0%
Any LRS purpose (incl. US stocks, foreign investment)	Above ₹7,00,000	20%	40%
Education (loan from financial institution)	Up to ₹7,00,000	0%	0%
Education (loan from financial institution)	Above ₹7,00,000	0.5%	1%
Education or medical (own funds)	Up to ₹7,00,000	0%	0%
Education or medical (own funds)	Above ₹7,00,000	5%	10%

For the vast majority of Indian retail investors using LRS to invest in US stocks, the applicable rate is 0% up to ₹7 lakh, and 20% on every rupee above ₹7 lakh in aggregate LRS per financial year.

History: how TCS on LRS evolved

Understanding the history helps anticipate future changes:

Finance Act 2020 (effective 1 October 2020): TCS on LRS introduced at 5% above ₹7 lakh. This was during the COVID year and was positioned as a compliance tool to track large foreign remittances.
Finance Act 2023 (Budget 2023, announced February 2023): Rate raised from 5% to 20% above ₹7 lakh. Implementation was originally scheduled for 1 July 2023, but after significant industry pushback, the government delayed it to 1 October 2023.
Current position (FY 2024-25 and FY 2025-26): The 20% rate remains in force. There have been no changes announced in Budget 2024 or Budget 2025 to the LRS TCS rate for foreign investment purposes.

The quadrupling of the rate from 5% to 20% was the single biggest change that made TCS on LRS a material concern for investors sending ₹10–50 lakh per year to US markets.

The ₹7 lakh threshold — exactly how it works

The ₹7 lakh exemption is the most misunderstood part of TCS on LRS. Here is the precise mechanism.

Aggregate across the financial year

The ₹7 lakh threshold applies to your total LRS remittances across all purposes in a financial year (1 April to 31 March). It is not a per-remittance or per-bank limit. Every rupee you remit under LRS from any authorised dealer — whether for US stocks, a foreign bank account, education, medical, or travel — counts toward this aggregate.

This means:

If you remit ₹3 lakh for a foreign vacation in April and ₹6 lakh for US stock investment in August, your aggregate LRS by August is ₹9 lakh. TCS at 20% applies to the ₹2 lakh excess (₹9L - ₹7L).
If you remit ₹7 lakh in April and another ₹1 lakh in May, TCS applies to the full ₹1 lakh in May.
If your first remittance is ₹10 lakh in June, TCS is collected only on ₹3 lakh (₹10L - ₹7L threshold).

Each bank tracks its own remittances — the coordination gap

Here is the critical compliance risk that catches many investors off-guard: each authorised dealer (bank) tracks only its own remittances. There is currently no real-time shared registry between banks of an individual's cumulative LRS for the year.

This creates a coordination problem:

You remit ₹5 lakh via HDFC Bank in May → HDFC collects 0% TCS (within ₹7L limit as far as HDFC knows).
You remit ₹4 lakh via ICICI Bank in September → ICICI collects 0% TCS (within ₹7L limit as far as ICICI knows).
Your actual aggregate LRS is ₹9 lakh — ₹2 lakh over the threshold — but neither bank collected TCS.

You are legally responsible for disclosing your cumulative LRS to each bank before a remittance. Most LRS application forms include a self-declaration field asking your total LRS for the year. Providing incorrect information here creates compliance risk for you, not (primarily) for the bank.

Practical rule: if you use multiple banks for LRS, track your own running total and declare it accurately on every LRS application form. The responsibility for accurate aggregate disclosure is yours.

The threshold is per person, not per platform or purpose

The ₹7 lakh limit applies per individual PAN. If you and your spouse each remit ₹10 lakh for US stocks, each of you individually gets the ₹7 lakh exemption — TCS applies on ₹3 lakh per person, not ₹6 lakh combined. Minor children with their own PAN (and LRS eligibility through their guardian) are similarly treated separately.

Worked examples: the real rupee cost of TCS

These examples use FY 2025-26 numbers and assume all LRS is for US stock investment (the 20% rate above ₹7L).

Example 1: ₹5 lakh / year → zero TCS

Aggregate LRS: ₹5,00,000 Threshold: ₹7,00,000 TCS-applicable amount: ₹0

TCS collected: ₹0 Capital deployed to US stocks: ₹5,00,000

For investors remitting under ₹7 lakh per year, TCS has no impact whatsoever.

Example 2: ₹10 lakh / year → ₹60,000 locked up

Component	Amount
Total LRS for the year	₹10,00,000
Exempt threshold	₹7,00,000
TCS-applicable amount	₹3,00,000
TCS at 20%	₹60,000
Capital actually deployed to US stocks	₹9,40,000
Capital blocked in TCS	₹60,000

Opportunity cost calculation: ₹60,000 blocked for approximately 6 months (assuming October remittance, ITR filed July next year, refund by March). US markets (S&P 500) at a 12% annual return = 6% for 6 months. Lost returns: ₹60,000 × 6% = ₹3,600 in foregone returns.

This seems small. Scale it up.

Example 3: ₹25 lakh / year → ₹3,60,000 locked up

Component	Amount
Total LRS for the year	₹25,00,000
Exempt threshold	₹7,00,000
TCS-applicable amount	₹18,00,000
TCS at 20%	₹3,60,000
Capital actually deployed to US stocks	₹21,40,000
Capital blocked in TCS	₹3,60,000

Opportunity cost: ₹3,60,000 blocked for 6–9 months (average 7.5 months). S&P 500 at 12% annualised = 7.5% for 7.5 months. Lost returns: ₹3,60,000 × 7.5% = ₹27,000 in foregone equity returns.

And if you receive the 6% Section 244A interest on your refund (which only applies if the refund is delayed past the due date), you get back ₹3,60,000 × 6% × (7.5/12) = ₹13,500 in interest. The net opportunity cost after interest: approximately ₹13,500 per year in pure drag — from a legitimate investment activity.

Example 4: ₹50 lakh / year → ₹8,60,000 locked up

Component	Amount
Total LRS for the year	₹50,00,000
Exempt threshold	₹7,00,000
TCS-applicable amount	₹43,00,000
TCS at 20%	₹8,60,000
Capital actually deployed to US stocks	₹41,40,000
Capital blocked in TCS	₹8,60,000

Opportunity cost: ₹8,60,000 blocked for 7.5 months average. At 12% annualised US equity returns: ₹8,60,000 × 7.5% = ₹64,500 in foregone returns.

This is not a rounding error. For high-frequency or high-value LRS investors, TCS imposes a real capital efficiency penalty that no amount of ITR interest can fully compensate.

The capital drag summary table

Annual LRS	TCS blocked	Approx. 7.5-month opportunity cost at 12% pa equity return
₹7 lakh	₹0	₹0
₹10 lakh	₹60,000	₹3,600
₹15 lakh	₹1,60,000	₹9,600
₹20 lakh	₹2,60,000	₹15,600
₹25 lakh	₹3,60,000	₹21,600
₹35 lakh	₹5,60,000	₹33,600
₹50 lakh	₹8,60,000	₹51,600
₹1 crore	₹18,60,000	₹1,11,600

The numbers in the right column represent returns you would have earned had that capital been invested instead of sitting with the government. They are not recoverable. The refund gets your principal back; it does not restore the equity return you missed.

How TCS is actually collected at the bank

When you initiate an LRS remittance at your bank — whether online through net banking or in person — the bank's LRS workflow includes:

LRS application form: You fill in the purpose, amount, beneficiary, and declare your total LRS for the year.
Threshold check: The bank's system (or branch officer) checks your declared aggregate LRS against the ₹7 lakh threshold.
TCS calculation: On any amount above ₹7 lakh, TCS at 20% is calculated.
Debit from your account: The TCS amount is debited from your bank account separately from the remittance amount. So if you remit ₹3 lakh above the threshold, ₹60,000 TCS is debited in addition to the ₹3 lakh being remitted.
TCS deposit with government: The bank deposits the TCS with the government under your PAN, typically by the 7th of the following month.
Form 26AS update: Within 30–45 days of the bank depositing TCS, your Form 26AS on the income tax portal is updated to reflect the TCS credit against your PAN.
Form 27D issued: The bank issues Form 27D — the TCS certificate — either automatically (some banks) or on request.

Key point on timing of debit: The TCS is charged at the point of remittance, from your INR account in India. You pay the remittance amount in USD to your US brokerage account, and separately the TCS in INR comes out of your Indian bank account. The cash drag on your US investment portfolio is the dollar equivalent of the rupee TCS.

Why TCS is particularly painful for US stock investors

TCS on LRS hits US stock investors harder than most other LRS use cases for several structural reasons.

1. The 20% rate makes the math brutal above ₹7L

For every ₹100 you want to remit above the ₹7 lakh mark, ₹20 goes to TCS. You are effectively working with ₹80 of investable capital on every additional rupee. If you are trying to dollar-cost average a specific USD amount per month into US markets, TCS forces you to remit more rupees to achieve the same USD investment — amplifying the cash drain further.

2. Equity returns compound — TCS drag does not get reversed

The refund process returns your TCS principal. It does not return the equity returns that capital would have earned. Compound growth makes this worse over multi-year investing horizons. ₹3,60,000 blocked for one year at 12% equity returns is ₹43,200 foregone. Compounded over 5 years, the cumulative foregone returns from that single year's TCS drag become substantially larger.

3. The refund timeline does not match the investing timeline

LRS for US stocks is typically sent as early in the financial year as possible to maximise time in the market. TCS collected in April–June might not be refunded until the following March. That is a 9-month lockup. Investors who remit large amounts early in the year experience the longest lockup — the worst outcome.

4. Interest on refund is capped at 6% — far below equity returns

Even when the Income Tax Department pays interest on delayed refunds under Section 244A, the rate is 6% per annum simple interest. With Indian equity markets returning 12–15% and US equity markets returning 10–14% historically, 6% simple interest on a 6–9 month lockup does not approach the opportunity cost of being out of the market.

The 6% interest does not start from the date of TCS collection by the bank. Under Section 244A(1)(a), interest on refunds starts from 1 April of the assessment year (if you file on time before the due date). So TCS collected in November 2025 earns no interest at all if your refund comes before 31 March 2026 — the interest clock starts April 2026 even if TCS was collected 5 months earlier.

5. Currency risk during the lockup period

If the INR depreciates against USD during the TCS lockup period, your refund in rupees is worth fewer dollars than you would have invested originally. In a year of 3–5% INR depreciation (not unusual), this adds another 1.5–2.5% cost on the blocked capital for a 6-month lockup.

How to reclaim TCS — step by step

TCS refund happens entirely through the ITR filing process. There is no separate application or form. Here is the complete process.

Step 1: Verify TCS in Form 26AS

Form 26AS is your annual consolidated tax statement, available on the Income Tax portal at https://www.incometax.gov.in. It records every instance of TDS and TCS credited against your PAN.

How to access Form 26AS:

Log in to https://www.incometax.gov.in with your PAN and password.
Go to "e-File" → "Income Tax Returns" → "View Form 26AS" (or navigate directly to the Annual Information Statement under "AIS").
Download the PDF or view online.
Navigate to Part B of Form 26AS (Tax Collected at Source). Each row shows: the bank (collector), TAN of the bank's branch, date of collection, amount of TCS, and whether it has been deposited with the government.

What to check:

The TCS amounts match what you were charged by your bank.
The TCS entries are marked as "F" (final) not "U" (unmatched) — unmatched entries may not yet be creditable.
The bank's TAN and your PAN are correctly recorded.

Allow 30–45 days after your remittance before checking Form 26AS, as bank deposits take time to reflect.

Step 2: Collect Form 27D from your bank

Form 27D is the TCS certificate issued by the bank (the collector). It is the TCS equivalent of Form 16A (TDS certificate). It contains:

Name and PAN of the collector (bank)
TAN of the collector
Name and PAN of the collectee (you)
Amount remitted under LRS
TCS rate applied
TCS amount collected
Date of collection

How to get Form 27D: Most major banks (HDFC, ICICI, Axis, SBI, Kotak) issue Form 27D on request. Some generate it automatically on their net banking portal under "Tax Certificates" or "TCS Certificates." If it is not available online, contact your bank's Forex/LRS desk or customer service and request it formally in writing. Banks are legally required to issue Form 27D under Rule 37D of the Income Tax Rules.

Form 27D is useful as cross-verification, but your ITR claim is based on Form 26AS — so if the two differ, prioritise chasing the Form 26AS discrepancy with the bank.

Step 3: Determine your applicable ITR form

This is the step most investors get wrong. If you hold foreign assets — including US stocks, a US brokerage account, or a foreign bank account — you cannot file ITR-1 (Sahaj). ITR-1 does not have Schedule FA (Foreign Assets) and is not applicable for foreign asset holders.

Your situation	Correct ITR form
US stocks, no business income	ITR-2
US stocks + business/professional income	ITR-3
US stocks + partnership firm income	ITR-3
No US stocks, no foreign assets (for reference)	ITR-1 or ITR-2

Filing ITR-1 when you hold foreign assets is a compliance error that can attract notices under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Always file ITR-2 or ITR-3.

Step 4: File your ITR and claim TCS

ITR filing due dates (FY 2025-26, AY 2026-27):

31 July 2026 — for individuals without audit requirement (the standard deadline for most retail investors)
31 October 2026 — for individuals requiring tax audit (turnover above specified limits, certain business categories)
31 December 2026 — for transfer pricing cases

Within your ITR, claim TCS as follows:

In ITR-2 (online filing on the income tax portal):

Navigate to Schedule TCS (Tax Collected at Source).
For each TCS entry in Form 26AS, add a row:
- TAN of the collector (your bank's TAN from Form 26AS or Form 27D)
- Name of the collector (bank name)
- Amount on which TCS was collected (the LRS amount above ₹7L)
- TCS rate
- TCS amount
- Financial year of collection
The system automatically aggregates TCS claimed and applies it against your computed tax liability.

In the "Tax Paid" → "Tax Payments" summary page, you will see:

Advance tax paid
Self-assessment tax paid
TDS (from salary/interest/etc.)
TCS claimed (from your Schedule TCS entry)

The total of these reduces your tax payable. If TCS claimed + other tax paid > total tax liability, the difference becomes your refund.

Step 5: Verify bank account for refund

In your ITR, under the "Bank Details" section:

Pre-validate your bank account (this is done once on the income tax portal under "My Profile" → "Bank Account" → "Add/Validate").
Nominate a pre-validated bank account as the refund account in your ITR.

Refunds are sent only to pre-validated, PAN-linked bank accounts via NEFT. Make sure the account is active and the IFSC is correct.

Step 6: E-verify your ITR

Your ITR is not considered "filed" until e-verified. Options:

Aadhaar OTP (instant, most convenient — requires Aadhaar linked to PAN and mobile)
Net banking (EVC — Electronic Verification Code)
Demat account (EVC)
Bank ATM (EVC)
Physical ITR-V (send signed paper copy to CPC Bengaluru within 30 days — least convenient)

E-verify within 30 days of submitting the ITR. Unverified returns are treated as not filed.

Step 7: Track your refund

After e-verification, your ITR enters processing at the Income Tax Department's Central Processing Centre (CPC) in Bengaluru.

Track refund status:

Go to https://www.incometax.gov.in → "e-File" → "Income Tax Returns" → "View Filed Returns."
Alternatively, visit the NSDL TIN portal: https://tin.tin.nsdl.com/oltas/refundstatuslogin.html and enter your PAN and assessment year.
Track the ITR processing status: "Return Received" → "Return Processed" → "Refund Determined" → "Refund Issued."

Typical timelines (from e-verification date):

Processing: 15–45 days for simple returns
Refund to bank: 3–6 months in most cases, occasionally up to 9 months for complex returns or refunds above ₹5 lakh

The Section 87A interaction — if your income is below ₹7 lakh

Section 87A provides a tax rebate of up to ₹25,000 for resident individuals with total taxable income below ₹7 lakh (under the new tax regime). If your income is below this threshold, your income tax payable is zero — but the TCS collected from your LRS remittances is still refundable in full.

Example: You earn ₹5 lakh in salary (below ₹7L threshold, zero tax under new regime) and remit ₹15 lakh under LRS, paying ₹1,60,000 in TCS. Your income tax liability is ₹0 (Section 87A rebate applies). The entire ₹1,60,000 TCS is refundable. You must still file ITR-2 (not ITR-1) and claim the TCS.

Zero tax liability does not mean zero ITR filing. If you have foreign assets or TCS credit to claim, file anyway.

Schedule FA: foreign asset disclosure in your ITR

When you file ITR-2 or ITR-3 with US stock holdings, you must also complete Schedule FA (Foreign Assets). This is a separate disclosure requirement under Section 139(1) read with the Foreign Exchange Management (Current Account Transactions) Rules and the Black Money Act.

Schedule FA requires disclosure of:

Foreign bank accounts (name, SWIFT code, account number, peak balance, closing balance)
Foreign equity investments (company name, country, number of shares, cost, dividend received)
Foreign trusts, foreign immovable property, and other foreign assets

Failure to disclose foreign assets in Schedule FA, even if all tax is paid, can attract severe penalties under the Black Money Act — ₹10 lakh per undisclosed asset and potential prosecution. This is separate from and additional to the TCS refund claim.

The TCS refund process and the Schedule FA disclosure are part of the same ITR-2 filing. Complete both.

TCS certificate errors — what to do when the bank gets it wrong

Banks are not infallible in their TCS calculations. Common errors include:

Error type 1: TCS collected below the ₹7 lakh threshold

The bank collected TCS on an amount that should have been within the ₹7 lakh exemption — either because the branch did not account for your declared aggregate correctly, or because of a system error.

Resolution: The good news is that even if the bank overcollected TCS, the full amount appears in Form 26AS and is fully creditable in your ITR. You do not need the bank to reverse it before you file. Claim the full TCS in your ITR; the excess will come back as a refund.

However, for large overcollections (say ₹1 lakh or more), raising a formal dispute with the bank's compliance desk ensures the bank corrects its records and does not make the same error next year.

Error type 2: Bank applied wrong rate

The bank applied 20% when you provided PAN (meaning you should have been at 20% above ₹7L, which may be correct) but with a calculation error on the base amount.

Resolution: Same as above — the Form 26AS amount is what the government received, and that is what you can claim. But write to the bank to correct their records.

Error type 3: TCS not reflected in Form 26AS

The bank collected TCS from your account but it does not appear in Form 26AS after 45 days.

This means the bank either deposited under the wrong PAN or has not yet deposited the TCS with the government. This is more serious.

Resolution:

Get Form 27D from the bank — it proves collection happened.
Write formally to the bank's TCS/regulatory compliance desk, citing the remittance date, amount, your PAN, and requesting confirmation of TCS deposit date and challan number.
If the bank has deposited under the wrong PAN, they need to file a TCS correction statement with NSDL/TRACES. This process takes 30–60 days.
If TCS is not in Form 26AS by the time you file your ITR, you technically cannot claim the credit — the system validates against Form 26AS. In this case, file ITR without claiming the TCS, and file a revised return once it appears in 26AS (permitted before December 31 of the assessment year).

Error type 4: Multiple banks, aggregate not coordinated

You used two banks and each collected TCS independently without knowing the other's remittances, resulting in both banks applying TCS from ₹7 lakh (effectively giving you two ₹7 lakh exemptions instead of one shared one) — or conversely, one bank overcollecting because you told them about the other's remittances but they didn't adjust correctly.

Resolution: The legal position is that the ₹7 lakh threshold is aggregate. However, if both banks independently started TCS from ₹7 lakh (each giving you the full exemption), you may have underpaid TCS — not overcollected it. This creates a compliance risk rather than a refund opportunity. Self-declaration of your cumulative LRS on each remittance form is your protection here.

PAN vs. no PAN: the 40% rate

Without a valid PAN, the TCS rate on LRS above ₹7 lakh is 40% — double the standard 20% rate. This is stipulated in the proviso to Section 206C(1G).

If you are remitting under LRS:

Always link PAN before the remittance. The bank will request your PAN as part of standard KYC. Ensure it is on record.
If your PAN is not yet linked to Aadhaar: As of FY 2024-25, unlinked PANs are "inoperative" under CBDT guidelines. An inoperative PAN is treated as "no PAN" for TCS purposes — meaning you could face the 40% rate even though you have a PAN, simply because it is not linked to Aadhaar. Link PAN-Aadhaar at https://www.incometax.gov.in → "Link Aadhaar" → enter PAN and Aadhaar, pay the late fee (₹1,000 if not linked earlier), and allow 4–5 working days for activation.

For NRIs who remit under LRS: NRIs can remit under LRS if they are resident Indians for FEMA purposes (FEMA residential status can differ from Income Tax residential status). The PAN requirement and TCS rules apply the same way. If an NRI remitting under LRS does not have a PAN, the 40% rate applies. Most NRIs with Indian investments and ITR-filing history will have a PAN.

The GIFT City route: structurally bypassing TCS

For investors who consistently remit above ₹7 lakh per year — particularly those in the ₹25L–₹1 crore annual range — the GIFT City IFSC route offers a structural solution.

Why GIFT City transfers are not subject to LRS TCS

GIFT City (Gujarat International Finance Tec-City), located in Gandhinagar, is India's only operational International Financial Services Centre (IFSC). Entities within the GIFT City IFSC operate under a separate regulatory framework — the IFSCA (International Financial Services Centres Authority) — and are treated for many purposes as if they are outside India for financial regulation purposes.

Transfers from a resident Indian's bank account to a GIFT City IFSC entity are classified as domestic transactions between two Indian entities, not as LRS outward remittances. Because LRS TCS under Section 206C(1G) specifically targets remittances made under LRS to foreign jurisdictions, a transfer to a GIFT City account falls outside its scope.

This interpretation is adopted by banks and GIFT City platforms, and is consistent with IFSCA's position that GIFT City IFSC is a domestic financial jurisdiction for most regulatory purposes.

Some platforms now offer US stock access via GIFT City IFSC structures. You can read more about how these structures work and their trade-offs in our guides on GIFT City vs LRS for US stock investing and how to invest in US stocks through Dhan's GIFT City platform.

The TCS savings from GIFT City — in rupees

Annual investment in US stocks	TCS under LRS route	TCS under GIFT City route	Savings
₹10 lakh	₹60,000	₹0	₹60,000
₹25 lakh	₹3,60,000	₹0	₹3,60,000
₹50 lakh	₹8,60,000	₹0	₹8,60,000
₹1 crore	₹18,60,000	₹0	₹18,60,000

These are not permanent savings — TCS under LRS is eventually refunded through ITR. The savings here represent capital that can be deployed for 6–9 months that would otherwise be locked with the government.

Caveats of the GIFT City route

The GIFT City route is not universally better. Consider:

Regulatory framework: GIFT City platforms are regulated by IFSCA, not SEBI. For investors accustomed to SEBI's investor protection norms, this is a meaningful difference.
Product coverage: Not all US stocks are available on every GIFT City platform. The product universe may be narrower than what is available via direct LRS-funded US brokerage accounts (Schwab, Interactive Brokers, etc.).
Insurance coverage: Accounts funded via LRS to US brokers are covered by SIPC (Securities Investor Protection Corporation) up to USD 500,000. GIFT City accounts are covered by the IFSCA's investor protection framework — structurally different from SIPC.
Tax treatment of gains: Gains from US stocks held via GIFT City IFSC structures are taxed under the same capital gains rules as LRS-based holdings — foreign equity capital gains at applicable rates, with DTAA (India-US Double Taxation Avoidance Agreement) benefits available. But the specific platform and structure can affect the nuances; consult your tax advisor.
No explicit CBDT circular endorsing the no-TCS position: While the operational consensus is that GIFT City transfers are not LRS remittances, a definitive CBDT circular specifically addressing TCS non-applicability on GIFT City transfers is not widely available (as of mid-2026). Banks and platforms operate on the reasonable interpretation of the law, not a specific exemption notification for this case.

For investors above ₹15–20 lakh annual US stock investment, the TCS capital drag is significant enough that evaluating the GIFT City route is worthwhile, notwithstanding these caveats.

The interest on TCS refund — what Section 244A actually pays you

When the Income Tax Department refunds TCS, it pays interest under Section 244A if the refund is delayed. Understanding the exact terms is important so you know what to expect.

Section 244A(1)(a): Interest at 0.5% per month (or 6% per annum) on the amount of refund. This is simple interest, not compound.

Start date of interest:

If you file ITR on or before the due date (31 July for most individuals): interest runs from 1 April of the assessment year (not from the date of TCS collection).
If you file ITR after the due date: interest runs from the date of ITR filing.

What this means in practice: TCS collected in June 2025 (FY 2025-26, AY 2026-27) — interest starts from 1 April 2026 if you file by 31 July 2026. If the refund comes in September 2026, you earn interest for about 5 months (April to September 2026) at 6% per annum = 2.5% on the refunded amount.

But the TCS was locked up from June 2025 — a full 15 months earlier than when interest starts. The first 10 months (June 2025 to March 2026) earn no interest whatsoever under Section 244A.

This is the structural unfairness of TCS on LRS that industry has repeatedly lobbied against. The government collects TCS at the point of remittance but only pays interest from 1 April of the next year — giving itself an interest-free loan of your capital for up to 9–10 months with no compensation.

Common mistakes to avoid

Mistake 1: Filing ITR-1 when you hold US stocks

As noted earlier, ITR-1 has no Schedule FA. Filing ITR-1 with foreign assets is non-compliant and exposes you to penalties under the Black Money Act. Always file ITR-2 or ITR-3.

Mistake 2: Not claiming TCS in ITR at all

Some investors assume TCS will be automatically adjusted. It is not. You must actively claim TCS in Schedule TCS of your ITR. If you do not claim it, the refund does not happen — the TCS credit sits unclaimed.

Mistake 3: Missing the ITR filing deadline

The 31 July deadline (for individuals without audit) is firm. If you miss it, you can file a belated return until 31 December, but you lose Section 87A rebate eligibility, interest on refund starts from belated filing date (not 1 April), and a late filing fee of ₹5,000 (₹1,000 if income below ₹5 lakh) applies under Section 234F.

Mistake 4: Not pre-validating your bank account for refunds

The income tax portal only sends refunds to pre-validated bank accounts. If your account is not pre-validated, the refund will not be credited. Do this well before filing — it takes 1–2 days for validation to confirm.

Mistake 5: Assuming TCS auto-reconciles with advance tax

If you have also paid advance tax (quarterly installments) for your other income, the TCS, advance tax, and TDS all pool together in the tax credit calculation. Make sure Schedule TCS entries match Form 26AS exactly — any mismatch flags a discrepancy notice from the CPC.

The future of TCS on LRS: what might change

Industry lobbying and the political calculus

Since the rate hike to 20% in Budget 2023, industry bodies — FICCI, CII, and multiple fintech associations representing LRS platforms — have lobbied consistently for a rollback or reduction. The arguments:

TCS at 20% creates a severe working capital penalty on Indian individuals seeking legitimate foreign investment diversification.
It disproportionately impacts middle-class investors who remit ₹10–30 lakh annually — not the ultra-wealthy who have alternative structures.
It creates a compliance burden disproportionate to the revenue generated (since TCS is ultimately refunded, the government's net gain is only the interest-free loan of capital, not permanent tax revenue).

The government's counterargument: TCS improves LRS compliance, expands the tax base by ensuring LRS remitters file ITR, and provides useful data for the tax department to track foreign assets.

Budget 2024 and Budget 2025: no relief

Budget 2024 (July 2024) and Budget 2025 (February 2025) both left LRS TCS rates unchanged. As of mid-2026, there is no publicly signalled rollback. The GIFT City route has partially absorbed the industry's frustration — by providing a structural bypass rather than a rate change, it reduces lobbying pressure from platforms that have pivoted to GIFT City structures.

Possible future scenarios

Scenario 1: Rate reduced to 5% (pre-Budget 2023 level) — This is the most-lobbied outcome. Probability: moderate over a 2–3 year horizon if LRS remittance data shows compliance improvements without the 20% rate.

Scenario 2: Threshold increased from ₹7L to ₹15L — A politically easier change than reducing the rate, this would exempt more investors while maintaining the compliance function of TCS on large remittances. Probability: moderate.

Scenario 3: TCS retained at 20% indefinitely — The government has revenue incentives (interest-free loans from TCS float) and compliance incentives (forcing ITR filing). If GIFT City provides a bypass for platforms, the lobbying coalition weakens. Probability: meaningful.

Scenario 4: GIFT City loses its TCS exemption — A CBDT circular could clarify that transfers to GIFT City for LRS-like purposes are subject to TCS. This is the tail risk for GIFT City platforms. Probability: low near-term, but not zero over a 3–5 year horizon.

Regardless of which scenario plays out, the fundamental mechanism — TCS as advance tax credit, recoverable through ITR — does not change. The only variables are the rate and threshold.

Quick reference: TCS on LRS at a glance

Question	Answer
Governing provision	Section 206C(1G), Income Tax Act, 1961
Who collects TCS	Authorised dealer bank (at time of remittance)
Rate for US stock investment	0% up to ₹7L aggregate LRS in FY; 20% above
Rate without PAN	40% above ₹7L
Threshold type	Per-person, per-FY, aggregate across all LRS purposes
TCS certificate	Form 27D (from bank)
TCS credit verification	Form 26AS (income tax portal)
ITR form for claimants with US stocks	ITR-2 or ITR-3
Where to claim in ITR	Schedule TCS under Tax Payments
ITR filing deadline (no audit)	31 July of the assessment year
Refund timeline	3–6 months after e-verification (typically)
Interest on delayed refund	6% p.a. simple interest under Section 244A
Interest start date (filed on time)	1 April of the assessment year
Income tax portal URL	https://www.incometax.gov.in

Frequently asked questions

Q: If I invest via Vested and the platform remits on my behalf through its banking partner, does TCS still apply?

Yes. TCS applies at the bank (authorised dealer) level when the LRS remittance is made from your Indian bank account. The platform is just the interface — the remittance is still classified as your LRS under your PAN. Your bank will collect TCS based on your declared cumulative LRS.

Q: Does TCS apply if I buy US stocks through Indian mutual funds (US-focused fund of funds)?

No. Investing in Indian mutual funds that have US exposure is not an LRS remittance. You are investing in an Indian mutual fund in rupees — no foreign exchange transaction under LRS occurs. TCS under Section 206C(1G) does not apply. The US equity exposure comes from the fund's portfolio, not your direct remittance.

Q: Can I get Form 26AS in the middle of the financial year to check my TCS credits?

Yes. Form 26AS is updated on a rolling basis throughout the year as TCS deposits are made. You can check it any time. However, TCS collected in a given month typically appears in 26AS 30–45 days later.

Q: Is TCS applicable on dividends received from US stocks?

No. TCS is collected at the time of remittance (outward), not on dividends received (inward). Dividends from US stocks received in your US brokerage account and then remitted back to India may be subject to withholding tax in the US (at 25% or 15% under DTAA, depending on your W-8BEN filing) but not TCS.

Q: If I'm filing ITR-2 for the first time because I now hold US stocks, do I need to declare my cost of acquisition?

Yes. Schedule FA requires disclosure of the cost price of foreign assets in INR at the time of acquisition. The income tax portal's Schedule FA wizard asks for this. Keep records of your purchase price in USD and the INR/USD exchange rate on the date of purchase.

Q: What if TCS refund pushes me into a higher effective refund amount — will the IT department scrutinise my return?

Large refunds (typically above ₹1–2 lakh) are more likely to be processed with additional scrutiny by the CPC, which may request supporting documents. Keep Form 26AS, Form 27D, your LRS application forms, and bank statements for at least 7 years. If selected for scrutiny assessment, respond promptly through the e-proceedings portal on the income tax portal.

Q: Is there any way to pay TCS in advance so it doesn't affect my remittance cash flow?

No. TCS is structurally collected at the time of remittance by the bank — you cannot pre-deposit it or opt out. The only way to avoid TCS is to stay within the ₹7 lakh aggregate, use the GIFT City route, or spread remittances across a married couple's individual LRS limits (each getting their own ₹7 lakh threshold).

Disclaimer: This article is for informational and educational purposes only and does not constitute tax or legal advice. Tax laws are subject to change; rates and provisions described in this article reflect the law as understood by the author as of the date of publication (19 July 2026). Individual tax situations vary — consult a qualified chartered accountant or tax advisor for advice specific to your circumstances before making remittance or ITR filing decisions. Vested / Rovia is a US stock investing platform, not a tax advisory firm.