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Budget 2026 cuts TCS on education and medical remittances under LRS from 5% to 2%.
Overseas tour programme packages to attract a uniform 2% TCS, removing earlier thresholds.
The move aims to ease upfront costs and improve cash flow for students, families and travelers.
Finance Minister Nirmala Sitharaman announced a sharp reduction in the Tax Collected at Source (TCS) under the Liberalised Remittance Scheme (LRS) during the Union Budget 2026 session of Parliament on Sunday, February 1, 2026. The TCS rate has been lowered from 5% to 2% for education and medical remittances, while overseas tour programme packages will also attract a uniform 2% TCS.
The move is expected to ease the financial burden on Indians sending money abroad for education, healthcare and travel, while simplifying foreign remittance rules and improving cash flow for individuals. During her Budget speech, Sitharaman said, “I propose to reduce the TCS rate for pursuing education and medical purposes under the Liberalised Remittance Scheme from 5 per cent to 2 per cent.”
Earlier, a TCS of 5% was applicable on remittances made under LRS for education or medical purposes beyond prescribed thresholds. Similarly, overseas tour packages were subject to a dual rate structure, with 5% for amounts up to ₹10 lakh and 20% beyond that, which significantly increased the cost of foreign travel.
However, the Budget 2026 proposal introduces a uniform 2% TCS rate on overseas tour programme packages, irrespective of the remittance amount, removing the earlier segregation. The reduction addresses long-standing concerns over higher TCS rates that discouraged overseas travel by sharply increasing initial outflows.
The simplified framework has been welcomed by the industry. Amit Agarwal, Partner at Nangia & Co LLP, said the move reflects a “more open and taxpayer-friendly approach”. He said, “The new proposal introduces a uniform TCS rate of 2% across overseas tour packages, education and medical remittances. This significantly lowers costs and simplifies overseas transactions for individuals.”
The move is expected to benefit students planning to study abroad. It has been described as “progressive” by Gagan Malhotra, COO of BookMyForex.com, who said it would ease the financial pressure on families funding overseas education and medical treatment.
Education-related outward remittances have shown fluctuations, according to Reserve Bank of India (RBI) data. Overseas education remittances fell by nearly 26% from October and more than 54% from September 2025, declining to $120.94 million in November 2025.
Meanwhile, education loans have been on the rise. Government data shows that public sector banks disbursed nearly ₹13,000 crore more in education loans in FY 2023–24 compared to FY 2019–20, indicating sustained interest in higher education abroad. The lower TCS rate is expected to significantly reduce upfront cash outflow once remittance thresholds are crossed, especially as countries such as Germany mandate maintaining a blocked account of over ₹12 lakh for students.
Tax Collected at Source (TCS) is collected by banks or authorised dealers at the time of remittance under LRS, depending on the purpose of the transfer. While TCS increases the immediate cost of foreign payments, it is not an additional tax. The amount collected can be adjusted against the individual’s final income tax liability or claimed as a refund while filing returns.
Under the Liberalised Remittance Scheme, Indian residents can remit up to USD 250,000 per financial year for permitted purposes, including education, medical treatment, travel, gifts and investments abroad. With the lowering of TCS rates for education, healthcare and overseas tour packages, students, families and travelers are expected to see improved liquidity and reduced financial strain while planning foreign expenses.
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