Budget 2026: ₹10 lakh TCS relief not enough for Indians abroad, say experts

As Budget 2026 approaches, students, travellers and families want simpler TCS rules under LRS and relief from upfront cash-flow pressure

As the Union Budget 2026 approaches, Indians studying, working or travelling abroad are looking for predictability and lower friction in how they move money overseas. While last year’s Budget brought changes to the Tax Collected at Source provisions, especially under the Liberalised Remittance Scheme, households are asking for simpler rules, clearer categories for education and essential expenses, and relief from upfront cash-flow pressure.

 

The Liberalised Remittance Scheme, introduced in 2004, allows resident individuals, including minors, to remit up to $250,000 per financial year for permissible current or capital account transactions, or a mix of both. When the scheme was launched, the annual limit stood at $25,000. The ceiling has been raised in stages, in line with changing economic conditions.

 

 

What is TCS on foreign remittance?

 

Tax Collected at Source is collected by banks or authorised dealers when an individual sends money abroad under the Liberalised Remittance Scheme. It applies to a range of overseas payments, including:

 

• Higher education

• Medical treatment

• Living expenses for family members abroad

• International investments

• Travel and tour packages

 

The tax collected is adjusted against the individual’s final income tax liability or refunded after the tax return is filed.

 

What changes did Budget 2025 bring?

 

Earlier, remittances above ₹7 lakh in a financial year attracted TCS. Budget 2025 raised this threshold to ₹10 lakh, offering some relief to families managing overseas education or living costs. The Budget also exempted education funded through loans from TCS.

 

Budget 2026 expectations

 

Pavan Kavad, managing director at Prithvi Exchange, said TCS under the Liberalised Remittance Scheme has reduced formal outward remittances rather than pushing people towards informal channels.

 

“RBI data indicates a clear moderation in LRS outflows after the sharp increase in TCS, particularly the 20% levy on most non-essential remittances, as the upfront liquidity burden has discouraged or delayed discretionary spending such as travel and overseas investments,” Kavad said.

 

He added that concerns around remittances shifting to informal routes are not backed by data. “There is no credible empirical evidence to suggest any significant shift away from regulated banking channels. The available evidence points more to suppressed or postponed remittances than substitution,” Kavad said, adding that later policy changes showed official acceptance that higher TCS was slowing legitimate flows.

 

Impact on overseas education payments

 

Saurabh Arora, founder and chief executive officer of University Living, said TCS has changed how families plan education payments.

 

“The 16% decline in education-related outward remittances under LRS from $3.48 billion in FY 2024 to about $2.92 billion in FY 2025 reflects multiple factors,” Arora said. “Families spread tuition and settlement payments across the year and became more conscious of limits, timing and documentation.”

 

He also pointed to slower admission cycles in the US, UK and Canada, along with currency movements, as factors that affected household planning.

 

“TCS added to cash-flow requirements for families, but it was not the only driver of the adjustment,” Arora said. He noted that Budget 2025 eased some pressure by raising the threshold to ₹10 lakh and exempting loan-funded education from TCS.

 

“As we look to Budget 2026, placing overseas education under one clear LRS category with a sensible threshold and a single low TCS rate would make planning easier for households and authorised dealers,” Arora said.

 

Education versus travel-related remittances

 

Kavad said the higher TCS rate has affected education and travel-linked forex demand differently.

 

“Travel-related forex demand has softened noticeably, as the 20% TCS on most non-essential remittances has increased the upfront cost and created a liquidity squeeze,” he said. “In contrast, education-linked forex demand has proven more resilient, as study-abroad expenses are largely non-discretionary and benefited from policy relief.”

 

Calls to exclude education and medical remittances from TCS

 

Both Kavad and Arora argued that education and medical remittances should be treated separately under TCS rules.

 

“These payments are made out of necessity rather than choice, and imposing high upfront TCS creates avoidable liquidity stress for families and patients,” Kavad said. “PAN-based reporting, bank checks and income-tax disclosures already provide sufficient audit trails.”

 

He said removing TCS for these categories would reduce friction and keep transactions within formal channels.

 

Operational challenges for the forex industry

 

Kavad said higher TCS has also created operational challenges for forex companies and authorised dealers.

 

“At the transaction level, firms must track remittances customer-wise across banks, manage frequent rate changes and exemptions by purpose, and handle real-time PAN validation, TCS calculation, reporting and reconciliation,” he said. “This has increased processing complexity and turnaround time.”

 

For individuals, the main issue is liquidity. “Customers must block a higher amount upfront even though TCS is adjustable or refundable later,” Kavad said. “Many transactions are deferred, split or downsized to stay within thresholds.”

 

Arora said Budget 2025 had already acknowledged some of these concerns. “As we look to Budget 2026, self-funded education payments above ₹10 lakh still attract 5% TCS. Families pay this upfront and adjust it later during tax filing, which makes these payments more cash-flow sensitive during tuition and settlement periods,” he said.

 

He added that a simpler structure for education and medical remittances would ease planning for households and reduce paperwork for banks and tax authorities.