New Delhi: The Union Budget 2026 has offered targeted relief to Indian students aspiring to study abroad by reducing the Tax Collected at Source (TCS) on overseas education remittances under the Liberalised Remittance Scheme (LRS). Finance Minister Nirmala Sitharaman announced that the TCS rate on education and medical remittances exceeding ₹10 lakh has been lowered from 5 per cent to 2 per cent.
While TCS can be adjusted against the final income tax liability, the higher rate had often resulted in significant upfront cash outflows, with refunds taking months to process. The reduction is expected to improve liquidity for families at a time when tuition fees, living expenses and proof-of-funds requirements for foreign universities are steadily rising.
Under the LRS framework, Indian residents are permitted to remit up to USD 250,000 annually for approved purposes, including education, healthcare, travel and investments. Previously, education-related transfers above ₹10 lakh attracted a 5 per cent TCS, a burden that many families found difficult to manage during peak admission cycles. The revised rate applies to both self-funded remittances and those backed by education loans, extending the relief introduced in earlier budgets.
The timing of the measure is seen as significant. Data from the Reserve Bank of India indicates a moderation in outward education remittances towards the end of 2025, suggesting rising cost sensitivity among households. At the same time, increased education loan disbursals point to sustained demand for overseas studies despite mounting financial pressures.
Industry stakeholders have described the move as a practical intervention rather than a structural overhaul. Zubin Karkaria, Founder and CEO of VFS Global, said the budget sends a clear signal in support of global mobility and long-term human capital development. He noted that lowering TCS under LRS would ease financial stress for students and families, enabling smoother access to international education opportunities aligned with India’s Vision 2047 goals.
Karkaria added that the government’s broader focus on capacity building and ease of doing business complements the measure, strengthening India’s engagement with global education, travel and services ecosystems.
Although the revised TCS rate does not reduce the overall tax liability, it significantly lowers the initial financial barrier at the point of remittance—often the most stressful stage for families arranging overseas education funding. For many middle-income households, the change could make the difference between postponing plans and proceeding with confidence.
As the cost of international education continues to rise, the Budget 2026 announcement provides timely breathing space. While incremental, the move reinforces the government’s intent to support outward mobility and invest in India’s expanding global human capital footprint.
