Union Budget 2026 reduces TCS on overseas education remittances

Union Finance Minister Nirmala Sitharaman announced a significant relief for students and families planning education abroad while presenting the Union Budget 2026.

The government has reduced the Tax Collected at Source (TCS) on education-related foreign remittances under the Liberalised Remittance Scheme (LRS) from 5% to 2%.

This move is aimed at easing the financial burden on families sending money abroad for tuition fees, living expenses, or medical education.

“I propose to reduce the TCS rate for pursuing education and medical purposes under the Liberalized Remittance Scheme from 5% to 2%,” Sitharaman said during her Budget speech.

Previously, remittances exceeding ₹10 lakh under the LRS for education attracted a 5% TCS. The new measure extends relief to families funding education through personal savings, not just those using education loans. The Union Budget 2025 had already exempted remittances made via loans from specified financial institutions.

The reduction is expected to improve access to overseas education at a time when outward education-related remittances have been volatile.

Reserve Bank of India data shows remittances for education dropped to $120.94 million in November 2025, a nearly 26% decline from October and over 54% lower than September 2025.

Meanwhile, demand for education loans continues to rise. Government data shows public sector banks disbursed nearly ₹13,000 crore more in education loans in FY 2023–24 than in FY 2019–20, indicating growing financing needs for higher education.

For students going to countries like Germany, where maintaining a blocked account of over ₹12 lakh is mandatory, the reduced TCS rate lowers immediate cash outflow, making it easier to plan for tuition and living costs.

TCS is collected by banks or authorized dealers when money is remitted abroad. It is not an additional tax but can be adjusted against the individual’s final income tax liability, with any excess refunded.

Under the Liberalised Remittance Scheme, Indian residents can remit up to USD 250,000 per financial year for approved purposes, including education, travel, medical treatment, gifts, and investments.

With the TCS reduction, students and families are expected to experience improved liquidity and reduced financial stress while preparing for studies abroad.