Budget 2026 Slashes TCS Rates for Overseas Education, Medical & Travel to 2%
In a significant move aimed at easing financial burdens for Indians sending money abroad, the Union Budget 2026-27 has proposed a reduction in the tax collected at source (TCS) for specific categories under the liberalised remittance scheme (LRS). The finance minister announced that the TCS rate for self-funded education and medical purposes abroad will be lowered from the existing 5% to a more manageable 2%.
Rationalization of TCS for Overseas Tour Packages
Additionally, the budget brings relief to outbound tourists by proposing to reduce the TCS on overseas tour packages to a flat rate of 2%. Previously, this expenditure attracted a TCS of 5% for remittances up to Rs 10 lakh and a steep 20% for amounts beyond that threshold. This simplification and reduction are expected to significantly boost foreign travel and tourism from India.
It is important to note that the TCS rate for other purposes under the LRS will continue at the higher rate of 20%. The liberalised remittance scheme allows all resident individuals, including minors, to remit up to $250,000 per financial year without prior approval from the Reserve Bank of India (RBI). This facility is commonly used for purposes such as funding a child's overseas education, making foreign investments, or financing international vacations.
Industry Hails Move to Ease Liquidity for Travellers
The government's decision to slash the TCS on tour packages is being widely welcomed by the travel and tourism sector. Industry experts highlight that while TCS is adjustable against a traveller's final income tax liability, the requirement to pay it upfront locks funds with the government for several months, creating a liquidity crunch.
"This change lowers the entry barrier for high-value travel," said Jahol Prajapati, a research analyst at Samco Securities. "Previously, a family had to block an additional amount with the government for months. Now, that capital stays in their pocket, effectively reducing the financial hurdle for luxury travel."
Travel company executives echoed this positive sentiment. Rikant Pittie, co-founder of EaseMyTrip, called the TCS cut one of the most significant budget measures for the sector. Rajesh Magow, co-founder of MakeMyTrip, stated that the rationalization directly addresses the liquidity impact faced by Indian outbound travellers.
Unlocking Demand and Supporting Financial Planning
Rahul Borude, co-founder of StampMyVisa, suggested this move could unlock pent-up demand for international travel. Alok K Singh, chairman of SNVA Traveltech, added that the reduced TCS would "enable better financial planning for travellers and tour operators while supporting responsible and transparent spending."
This budget proposal follows last year's exemption, where remittances for education financed by loans from specified financial institutions were made free from TCS. The latest reductions for self-funded education, medical expenses, and travel packages further refine the policy, aiming to reduce the upfront cash burden on individuals and stimulate specific segments of overseas spending.
