Planning to study or travel abroad? Nirmala Sitharaman's Budget 2026 may have good news for you. The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, includes key changes to the Tax Collected at Source (TCS) on overseas remittances, potentially reducing the upfront costs for education, medical treatment, and travel.
Reduced TCS on Overseas Tour Packages
The budget significantly cuts the TCS on overseas tour packages. Previously, these packages were subject to a TCS of 5% for amounts up to Rs 10 lakh and 20% for higher-value bookings. Now, a flat rate of 2% will be applied, irrespective of the package value. This change aims to make international travel more affordable and reduce the initial tax burden on travelers. The travel and tourism industry, which had previously voiced concerns about the restrictive nature of the earlier TCS framework, is expected to benefit from this revision through improved liquidity and smoother transactions. Tour operators are anticipating a rise in international package bookings as a result of the decreased upfront costs.
Lower TCS for Education and Medical Expenses
The TCS under the Liberalised Remittance Scheme (LRS) for education and medical payments has also been reduced from 5% to 2%. This move provides financial relief for individuals and families sending money abroad for these purposes. This reduction in TCS is expected to ease the financial burden on those seeking education or medical treatment overseas.
What is TCS?
TCS is a tax collected by banks or authorized dealers when money is sent overseas for various purposes. These purposes include higher education, medical treatment, living expenses for family members, international investments, and travel. It's important to note that TCS is not an additional tax but an advance tax that can be adjusted against an individual's total income tax liability during tax filing, with any excess refundable.
Impact and Market Response
The rationalization of TCS aligns with the budget's broader emphasis on ease of living and reducing compliance friction for individuals. The revamped TCS structure is seen as a step toward resolving cash-flow issues faced by travelers and service providers under the previous system. With the demand for travel surging post-pandemic, the new rule is expected to significantly boost outbound tourism. By lowering the TCS rate on overseas tours to 2%, the government is signaling a focus on consumer comfort and global mobility, making foreign travel more accessible.
Broader Implications
These changes reflect the government's effort to simplify the tax structure and provide financial ease for individuals remitting money abroad. The revised rules are expected to benefit not only travelers and students but also the tourism and education sectors. With a substantial Indian diaspora around the world, these measures aim to streamline financial transactions and encourage global engagement.