Budget 2026 relief: Lower TCS on foreign education, medical travel

Union Budgeet 2026: Lower TCS rates under LRS aim to ease upfront tax costs for overseas education, medical treatment and travel spending

In the Union Budget 2026, the government announced a reduction in Tax Collected at Source (TCS) for certain overseas remittances made under the Liberalised Remittance Scheme (LRS).

 

“I propose to reduce TCS for pursuing education and for medical purposes under the LRS from 5 per cent to 2 per cent,” Finance Minister Nirmala Sitharaman said on Sunday during the Budget 2026–27 presentation.

 

TCS on overseas tour packages will also be reduced to 2 per cent from the existing rates of 5 per cent and 20 per cent, with the government removing the minimum remittance threshold for such transactions.

 

 

The changes apply to individuals sending money abroad for education, medical treatment and travel, and are expected to lower the upfront tax outgo at the time of remittance.

 

What is TCS on foreign remittance?

 

Tax Collected at Source is collected by banks or authorised dealers when an individual remits money overseas under the Liberalised Remittance Scheme. The tax is deducted at the time of the transaction, before the funds are transferred abroad.

 

TCS applies to several categories of overseas spending, including:

 

• Higher education

• Medical treatment

• Living expenses for family members abroad

• International investments

• Travel and overseas tour packages

 

The amount collected as TCS is not an additional tax. It is adjusted against the individual’s final income tax liability when the annual return is filed, and any excess amount can be claimed as a refund. 

Industry response

 

Commenting on the proposals, Pavan Kavad, Managing Director of Prithvi Exchange, told Business Standard the reduction would ease planning for families managing large overseas expenses.

 

“Budget 2026’s decision to reduce TCS to 2 per cent on student remittances is a welcome and pragmatic reform. It reduces friction in cross-border spending, supports international travel and education planning, and gives families greater clarity and predictability in managing large overseas expenses,” Kavad said.

 

He added that removing TCS altogether on remittances funded through education loans would have offered deeper relief to students dependent on borrowings.

 

“These families already shoulder significant financial pressure through rising tuition fees, living expenses and interest repayments. Any upfront tax deduction further tightens cash flows at a time when costs are already stretched,” he said.

 

Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara Pvt. Ltd, also shared a similar view, saying the lower TCS rate would provide immediate relief on cash outflows.

 

“It will immediately ease the burden of cash outflow at a time when tuition fees and living expenses abroad are already high. While TCS is an adjustable tax liability, the reduced rate will ease the pressure of blocking funds or waiting for refunds,” Maurya said.

 

He added that broader exemptions and simpler processes could have improved the impact.

 

“However, the impact could have been better if education loans from all approved institutions were exempted from TCS, and the processes for compliance and refunds were simplified,” he said.