Union Budget 2026 Provides Major Relief for Overseas Education and Medical Treatment
In a significant move that will benefit thousands of Indian students, travelers and medical patients, the Union Budget 2026 has announced a substantial reduction in Tax Collected at Source (TCS) rates under the Liberalised Remittances Scheme (LRS). The TCS on remittances for foreign education, international travel packages and medical expenses abroad has been slashed from 5 per cent to just 2 per cent, providing immediate financial relief to residents planning overseas expenditures.
Financial Pressure Eased for Students and Families
The reduced TCS rate is expected to significantly lower the upfront tax burden on individuals and families funding overseas education, international travel and medical treatment outside India. This move comes as a welcome relief after remittances under LRS witnessed a noticeable decline over the past year following the introduction of higher TCS rates.
According to industry experts, the reduction will boost outbound tourism, facilitate overseas education plans and make medical treatment abroad more accessible. The lower upfront tax requirement improves cash flow for families at a time when global costs remain elevated, allowing more Indians to pursue international opportunities without excessive financial strain.
Industry Leaders Welcome the Move
Zubin Karkaria, Founder and CEO of VFS Global, commented on the development, stating: "The Budget charts a strong roadmap to Vision 2047, positioning tourism, mobility and human capital as engines of long-term growth. By recognising tourism as a catalyst for jobs, foreign exchange and regional development, the government is building a more competitive and resilient travel ecosystem."
He further added: "Reductions in TCS on overseas tour packages and TDS under LRS for education will ease financial pressure on Indian travellers and students, boosting global mobility and connectivity."
Amit Maheshwari, Managing Partner at AKM Global, echoed similar sentiments: "Cutting TCS on education and medical remittances under the LRS offers meaningful relief to families funding overseas education and critical medical needs, improving cash flows at a time when global costs remain elevated."
Impact on LRS Remittances and Future Outlook
The higher TCS rates implemented previously had led to a noticeable decline in remittances for overseas education, foreign travel and medical treatment over the past year. The increased upfront tax requirement had placed immediate financial pressure on individuals and families, causing many to:
- Defer their foreign expenditure plans
- Scale down their overseas ambitions
- Reconsider international opportunities altogether
This impact was particularly visible in overseas education and leisure travel sectors. Official data shows that remittances by resident Indians under the LRS declined by 6.84 per cent to $29.563 billion in FY2025, down from $31.735 billion in the previous year.
Under the LRS framework established by the Reserve Bank of India, resident individuals (including minors) can freely remit up to $250,000 per financial year for various current or capital account transactions. These include:
- Education and studies abroad
- International travel
- Medical treatment overseas
- Purchase of property in foreign countries
- Investments in foreign stocks and securities
The Budget 2026 announcement represents a strategic move to reverse the declining trend in LRS remittances while supporting India's growing global aspirations. By making international education, travel and healthcare more financially accessible, the government aims to strengthen India's human capital development and global connectivity.
The reduced TCS rate is expected to have a multiplier effect on various sectors, including education consultancies, travel agencies, healthcare facilitators and financial services that support international transactions. As more Indians pursue opportunities abroad with reduced financial barriers, the move aligns with broader economic objectives of skill development, knowledge exchange and global integration.
