What is the new TCS rate on LRS remittances after India's Budget 2026?

India's Budget 2026 reduced TCS on LRS remittances above ₹7 lakh from 20% to just 2%, effective 1 April 2025. This means remittances made during FY 2025-26 attract only 2% TCS, significantly reducing the upfront cash burden for NRIs sending money abroad.

Can I get a refund of TCS paid on money I sent to Germany?

Yes. TCS is not a final tax — it is a tax collected at source that counts as advance tax. When you file your Indian ITR for AY 2026-27, any TCS paid is adjusted against your total Indian tax liability. If your Indian income is low or nil, you will receive a full or partial refund of the TCS amount.

Do I still need to file an Indian ITR if I am an NRI living in Germany?

If TCS has been deducted on your LRS remittances and you want that money back, yes — you must file an Indian ITR to claim the refund. Even if your Indian income is below the taxable threshold, filing is the only way to reclaim TCS. The due date for AY 2026-27 is 31 July 2026.

Does TCS paid in India affect my German tax return?

TCS itself is not directly creditable on your German Steuererklärung because it is a tax on the act of remitting money, not an income tax on specific earnings. However, under the India–Germany DTAA, income taxes paid in India (like TDS on FD interest) can be credited in Germany. TCS refunded in India is simply money returned to you and has no German tax implication.

India's Budget 2026 Cuts TCS to 2% on LRS Remittances — How to Reclaim TCS Paid When Filing Your 2025 Indian ITR

India Just Slashed TCS on Remittances — Here's What That Means for Your Wallet

If you've ever sent money from India to Germany — whether to fund your initial move, buy an ETF in your German brokerage, or simply transfer savings — you've probably felt the sting of TCS (Tax Collected at Source) on LRS (Liberalised Remittance Scheme) transactions.

The good news: India's Budget 2026 cut the TCS rate on LRS remittances above ₹7 lakh from a painful 20% down to just 2%, effective 1 April 2025. That's a massive reduction.

The even better news: if you paid TCS at the old 20% rate (or even at the new 2% rate) during FY 2025-26, you can claim that entire amount back when you file your 2025 Indian ITR (Assessment Year 2026-27).

Let's break down exactly how this works, with real numbers.

Quick Refresher: What Is TCS on LRS?

Under India's Liberalised Remittance Scheme, resident individuals can remit up to $250,000 per financial year abroad. The Indian government introduced TCS on these remittances to track foreign transfers and ensure tax compliance.

Here's how the rates evolved:

Key point: The first ₹7 lakh of remittances in a financial year is exempt from TCS entirely (except for certain investment/gift categories before Budget 2026 — now uniformly exempt up to ₹7 lakh).

Why This Matters for Indians in Germany

Most of you reading this are NRIs for Indian tax purposes — meaning your Indian tax liability is limited to Indian-sourced income (NRO interest, rental income, capital gains on Indian assets, etc.). Your German salary is not taxable in India.

So when your bank collected 20% TCS on, say, ₹15 lakh you transferred to your German bank account in early FY 2025-26 — that TCS sits as an advance tax credit with zero or minimal Indian tax liability to absorb it.

Result: You're entitled to a refund of most (or all) of that TCS.

⚠️Don't Leave Money on the Table

Many Indian expats simply forget to file their Indian ITR because they assume "I'm an NRI, I don't need to file." But if TCS was deducted on your remittances, the only way to get that money back is by filing your Indian return. No ITR = no refund.

A Worked Example: Reclaiming TCS Paid in FY 2025-26

Let's say you're Rahul, a software engineer in Munich earning €72,000 per year. In May 2025, before the Budget 2026 announcement's effective date had fully propagated to all banks, Rahul transferred ₹20,00,000 (roughly €22,300 at ₹89.7/EUR) from his Indian savings to his German bank account.

His bank applied TCS at the transitional rates. Here's how the numbers work:

Now imagine Rahul's colleague, Meera, made a similar ₹20 lakh transfer in March 2025 — just before the rate cut took effect. She was hit with the old 20% rate:

📘Real impact: ₹2.6 lakh sitting with the government

Meera transferred money to Germany in March 2025 and lost ₹2,60,000 to TCS at 20%. Her total Indian income for FY 2025-26 is just ₹80,000 in NRO interest — well below the ₹3,00,000 basic exemption. By filing her AY 2026-27 Indian ITR before 31 July 2026, she can claim the entire ₹2,60,000 back. That's almost €2,900 — enough to cover several months of groceries in Germany.

Step-by-Step: How to Claim Your TCS Refund

Step 1: Check Your Form 26AS / AIS

Log into the Indian Income Tax portal (incometax.gov.in). Your Form 26AS and Annual Information Statement (AIS) will show all TCS collected against your PAN during FY 2025-26. Look for entries under Section 206C(1G) — that's the LRS TCS provision.

Step 2: Determine Your Residential Status for Indian Tax

As an Indian living in Germany for the full year, you're almost certainly a Non-Resident (NR) for Indian tax purposes under the new 120-day rule introduced by the Income Tax Act 2025. This means only your Indian-sourced income is taxable in India.

Step 3: File ITR-2 (or ITR-3 if you have business income)

NRIs with Indian income and TCS credits typically file ITR-2. Report:

Indian-sourced income: NRO FD interest, rental income, capital gains
TCS credit: This auto-populates from Form 26AS, but verify the amounts
Tax payable: For most NRIs in Germany, this will be ₹0 or very low
Refund claimed: The excess TCS becomes your refund

Step 4: File Before the Deadline

The due date for AY 2026-27 (FY 2025-26) Indian ITR is 31 July 2026 — the same date as your German self-filing deadline. Yes, it's a busy July!

💡Pro tip: File your Indian ITR early

The Indian IT department processes refunds faster for returns filed early. If you file in June 2026, you might see your TCS refund credited to your bank account within 30–60 days. Wait until July end, and it could take 3–6 months.

Step 5: Ensure Your Indian Bank Account Is Active

TCS refunds are credited directly to the bank account linked to your PAN. Make sure your Indian NRO account is active and correctly mapped on the income tax portal.

Does TCS Affect Your German Tax Return?

This is a question we get constantly. The short answer: no, not directly.

TCS is a tax on the act of remitting money — it's not an income tax on specific earnings like TDS on FD interest. The India–Germany DTAA allows you to credit income taxes paid in India against German tax on the same income. TCS doesn't fit that category.

However, here's the nuance:

TDS on NRO FD interest (typically 10% for NRIs claiming DTAA benefits with the new Form 41) is creditable against German tax via Anlage AUS on your 2025 Steuererklärung.
TCS refunded to you is simply your own money coming back — it's not taxable income in Germany.

🧮The two-country filing formula for Indian expats

Indian ITR (AY 2026-27): Report Indian income → claim TCS + TDS credits → get refund of excess.

German Steuererklärung (2025): Report worldwide income (including Indian FD interest, rental income) → claim DTAA credit for Indian TDS paid → reduce German tax liability.

Net effect: You pay tax at the higher of the two countries' rates on Indian income, never double tax. TCS is fully refundable and doesn't enter the DTAA equation.

Before vs After: The Budget 2026 Impact on a Typical Remittance

The rate cut doesn't change the refund math — you still get it all back if your Indian tax liability is nil. But it dramatically reduces the cash flow hit. Having ₹2.6 lakh locked up for 6–12 months versus ₹26,000 is a world of difference.

Common Mistakes to Avoid

Not filing at all: If you don't file your Indian ITR, the TCS just stays with the government. Forever.
Wrong ITR form: NRIs should file ITR-2 or ITR-3. Filing ITR-1 (which is for residents only) can lead to a defective return notice.
Forgetting to update residential status: Mark yourself as "Non-Resident" on the Indian ITR. This affects your basic exemption and applicable tax slabs.
Missing the deadline: Filing after 31 July 2026 means a belated return — you lose the ability to carry forward certain losses and may face a ₹5,000 late fee.
Not verifying the return: After filing, you must e-verify (via Aadhaar OTP, net banking, or DSC) within 30 days. Unverified returns are treated as never filed.

The July 2026 Double Deadline Challenge

Here's a coincidence that affects every Indian expat in Germany: both your 2025 Indian ITR (AY 2026-27) and your 2025 German Steuererklärung are due by 31 July 2026.

That's two countries, two tax systems, two returns — one deadline.

This is exactly where TaxDost comes in. We understand both systems because we built our platform specifically for Indians in Germany. Whether it's claiming your TCS refund on your Indian return or maximising deductions like the Pendlerpauschale, Doppelte Haushaltsführung, and DTAA credits on your German return — we've got you covered.

Get Your Money Back — On Both Sides

Don't let ₹26,000 (or ₹2,60,000 if you remitted before April 2025) sit with the Indian government when it belongs in your bank account. And don't leave €1,000–€3,000 in potential German refunds on the table either.

Start your 2025 German tax return on TaxDost → — our platform walks you through every deduction relevant to Indian expats, flags DTAA credits, and helps you file before the 31 July 2026 deadline. For your Indian ITR, we recommend consulting a qualified CA — but understanding the TCS refund process above puts you ahead of 90% of expats who simply let the money go.

Your money. Both countries. Get it back. 🇮🇳🇩🇪