TCS Rate Cut: Scrap, Minerals & LRS Remittances From April 2026

Auto-drafted from official sources and under review by CA Rajeev Ranjan. Verify against the original notification before you act.

What Has Changed

The government has announced a rationalization of Tax Collected at Source (TCS) rates in two specific areas:

• Scrap and minerals: The TCS rate has been reduced from 5% to 2%.
• Liberalised Remittance Scheme (LRS), education and medical treatment: The TCS rate on outward remittances for these purposes has been cut from 5% to 2%.

Both changes take effect from 1 April 2026.

Who Is Affected

Scrap and minerals: Buyers and sellers in the scrap and minerals trade, including manufacturers, dealers, and recyclers, will see a lower TCS burden at the point of purchase. The seller is responsible for collecting TCS, so any business currently collecting at 5% will need to update its billing and accounting systems.

LRS remittances for education and medical treatment: Individuals sending money abroad under the LRS for overseas education fees, medical expenses, or related purposes will benefit from the lower rate. Authorised dealer banks (typically your bank's forex desk) are the ones who collect TCS at the time of remittance, so they will apply the new 2% rate from 1 April 2026 onwards.

Note: LRS remittances for purposes other than education and medical treatment are not mentioned in this update, refer to the official notification for the full rate schedule.

Why This Matters

TCS is not a final tax, it is credited against your total tax liability when you file your return. However, a higher TCS rate locks up working capital or personal funds until a refund or adjustment is processed. The reduction to 2% eases this cash-flow pinch for both businesses dealing in scrap and minerals, and for families funding overseas education or medical care.

What You Should Do

Businesses (scrap and minerals):

• Review your invoicing software and ensure TCS is updated to 2% from 1 April 2026.
• Brief your accounts team so the old 5% rate is not applied to transactions on or after that date.
• Verify any contracts or purchase orders that straddle the effective date.

Individuals remitting under LRS:

• No action is needed on your end, your bank will apply the revised rate automatically from 1 April 2026.
• Keep your remittance documentation in order so the TCS credit reflects correctly in your Form 26AS and AIS when you file your return.

All taxpayers: Confirm the exact provisions, any thresholds, and applicable sections in the official notification before updating your compliance processes.

Source: Official notification