Budget 2026: TCS cut on LRS education, medical spends to boost remittances

Lowering TCS on overseas education and medical remittances under LRS to 2% is expected to ease cross-border transactions and bring predictability for families managing large foreign expenses

Why has the Budget reduced TCS on overseas education and medical remittances?

 

The Union Budget’s proposal to reduce tax collected at source (TCS) for overseas education and medical expenses under the Liberalised Remittance Scheme (LRS) to 2 per cent from 5 per cent, to reduce friction in cross-border transactions, would support international travel and education planning, and give families greater clarity and predictability in managing large overseas expenses, experts said.

 

“Budget 2026’s decision to reduce TCS to 2 per cent on student remittances will reduce friction in cross-border spending, support international travel and education planning, and give families greater clarity and predictability in managing large overseas expenses,” said Pavan Kavad, managing director of Prithvi Exchange.

 

What do remittance trends show under the LRS?

 

According to Reserve Bank of India (RBI) data, outward remittances under the LRS during the April–November period of FY26 dropped to $19.10 billion from $19.97 billion in the year-ago period due to moderation in overseas travel- and education-related remittances. Remittances for overseas education fell 29.85 per cent year on year to $120.94 million, while medical expenses declined 35.67 per cent year on year to $41.56 million.

 

 

How does the Liberalised Remittance Scheme work?

 

Under the LRS, introduced in 2004, all resident individuals, including minors, are allowed to remit up to $250,000 per financial year for any permissible current or capital account transaction, or a combination of both. The scheme was initially introduced with a limit of $25,000, which has since been revised in stages in line with prevailing macroeconomic and microeconomic conditions.

 

Is further relief needed for students using education loans?

 

“While the rationalisation of TCS is a step in the right direction, completely removing TCS on education loan borrowings would have delivered far deeper relief to students who finance their overseas education through debt. These families already shoulder significant financial pressure in the form of rising tuition costs, living expenses, and interest repayments, and any upfront tax deduction only strains cash flows further,” Kavad added.