Budget 2026 Delivers Taxpayer Relief with TCS Rate Reductions
In a move aimed at easing financial burdens on Indian taxpayers, Finance Minister Nirmala Sitharaman has announced significant reductions in Tax Collected at Source (TCS) rates for overseas expenditures in the Union Budget 2026-27. Building on last year's tax cuts, the government is now focusing on simplifying compliance and improving liquidity for individuals with international financial commitments.
Key Changes to TCS Rates for International Remittances
The Budget proposes to lower the TCS rate from 5% to 2% for two specific categories under the Liberalised Remittance Scheme (LRS). This reduction applies to remittances made for self-funded education abroad and overseas medical treatment. For those utilizing their own funds to support children studying internationally or seeking medical care outside India, this change means less money will be temporarily locked with the government.
Additionally, the Finance Minister has proposed a substantial rationalization of TCS on overseas tour packages. Currently, such expenditures face a tiered structure: 5% TCS for remittances up to ₹10 lakh and 20% for amounts beyond that threshold. The Budget simplifies this to a flat 2% rate across all values, significantly reducing the upfront cash burden for travelers.
Understanding the Liberalised Remittance Scheme
The Liberalised Remittance Scheme allows all resident individuals, including minors, to remit up to $250,000 per financial year without requiring prior approval from the Reserve Bank of India. This facility enables various international activities:
- Sending money to children pursuing education overseas
- Making foreign investments
- Funding international vacations and travel
- Covering medical treatment expenses abroad
It's important to note that while TCS is adjustable against final tax liability, the amount must be paid upfront and remains with the government for several months, directly impacting individual liquidity.
Industry Experts Welcome the Changes
Travel and financial sector experts have largely welcomed these Budget measures, highlighting their potential to boost outbound tourism and ease financial planning.
Jahol Prajapati, Research Analyst at Samco Securities, noted: "The change effectively lowers the entry barrier for high-value travel. Previously, families had to block additional capital with the government for months. Now that capital stays in their pockets, making luxury travel more accessible."
Travel industry leaders echoed this sentiment. Rikant Pittie, Co-founder of EaseMyTrip, called the TCS cut "among the most significant Budget measures for the sector." Rajesh Magow, Co-founder of MakeMyTrip, emphasized that the rationalization "directly addresses the liquidity impact faced by Indian outbound travelers."
Rahul Borude, Co-founder of StampMyVisa, suggested this could "unlock pent-up demand" for international travel, while Alok K Singh, Chairman of SNVA Traveltech, stated the reduction would "enable better financial planning for travelers and tour operators while supporting responsible and transparent spending."
Context and Previous Measures
This move follows last year's exemption of education remittances from TCS when funded through loans from specified financial institutions. The current reduction extends relief to self-funded education expenses. For other purposes under LRS not covered by these specific categories, the TCS rate remains at 20%.
The Budget's focus on taxpayer convenience extends beyond TCS reductions. The Finance Minister has also promised simpler tax return forms and staggered filing timelines while decriminalizing several provisions, continuing the government's efforts to make tax compliance less burdensome for citizens.
