Budget 2026 brings welcome news for individuals and families engaged in foreign spending, particularly in the realms of education, medical treatment, and overseas travel. A key highlight of the budget is the reduction of the Tax Collected at Source (TCS) on foreign remittances made under the Liberalized Remittance Scheme (LRS). This move is poised to significantly lower the upfront costs associated with such expenditures, offering immediate financial relief and simplifying the process of managing overseas expenses.

Revised TCS Rates: A Breakdown

The Budget 2026 proposes a considerable rationalization of TCS rates on specific foreign payments. The changes, set to take effect on April 1, 2026, are as follows:

• Overseas Tour Packages: The TCS rate has been slashed to a flat 2% without any threshold, replacing the previous structure of 5% (up to ₹10 lakh) and 20% (above ₹10 lakh).
• Education and Medical Expenses: Remittances for education and medical treatment under the LRS will now attract a TCS of 2% for amounts exceeding ₹10 lakh, a reduction from the earlier 5%. There is no TCS for remittances below ₹10 lakh, whether funded personally or through a loan. Moreover, no TCS will be levied on remittances made via education loans from specified financial institutions.
• Overseas Investments: For investments in foreign stocks, mutual funds, cryptocurrencies, or property, the TCS remains unchanged at 20% on amounts exceeding ₹10 lakh in a financial year.

Impact on Different Sectors

• Education: The reduced TCS rate eases the financial burden on families supporting overseas education, improving cash flow and making it easier to plan educational expenses. The move is particularly beneficial given rising tuition fees and living costs abroad.
• Medical Treatment: Lower TCS rates on medical remittances help alleviate upfront costs, making it more affordable for families to seek medical treatment overseas. Remittances for medical treatment will attract a TCS of 2% if the amount exceeds ₹10 lakh.
• Tourism: The decrease in TCS for overseas tour packages is expected to make international travel more affordable and manageable, boosting the outbound tourism sector. The earlier TCS rate of up to 20% was seen as discouraging foreign travel.

Broader Implications and Expert Opinions

The move to lower TCS rates has been widely welcomed as a pragmatic reform that reduces friction in cross-border spending and provides greater clarity in financial planning. Experts believe that these changes reflect a more taxpayer-friendly approach, simplifying compliance and easing the burden of cash outflow. Some experts suggest that removing TCS altogether on remittances funded through education loans would provide even deeper relief to students.

While TCS is an adjustable tax liability, the reduced rate eases the pressure of blocking funds or waiting for refunds. The TCS is collected by authorized dealers or forex service providers at the time of the transaction and is deposited with the Income Tax Department. The amount collected is adjusted against the individual's final income tax liability, and any excess paid is refunded after filing returns.

In addition to TCS reductions, Budget 2026 includes measures aimed at strengthening India's tourism competitiveness through infrastructure development, skilling, and destination enhancement. These include initiatives such as the National Institute of Hospitality, ecological trek trails, and the upgradation of archaeological sites.