Budget 2026: Lower TCS on overseas tour package, education and medical purposes

The Budget 2026 has proposed to reduce TCS rate on the sale of overseas tour programme package from the current 5% and 20% to 2% without any stipulation of amount. It has proposed to reduce TCS rate for pursuing education and for medical purposes. Under the liberalised remittance scheme, popularly known as NRS, from 5% to 2% supply of manpower services is proposed to be specifically brought within the ambit of payment contractors for the purpose of TDS to avoid ambiguity. Thus TDs on these services will be at the rate of either 1% or 2% only.

The earlier TCS rate of up to 20% on overseas travel under the Liberalised Remittance Scheme (LRS) was seen as unfriendly and had the effect of discouraging foreign travel. Under LRS regulations, overseas remittances exceeding Rs 7 lakh in a financial year attract TCS, which significantly increased the upfront cost for individuals.

"In Budget 2026, the Finance Minister has proposed a rationalisation of TCS rates on certain foreign payments. While overseas tour packages earlier attracted TCS at 5%—and 20% beyond ₹10 lakh—and education or medical remittances under LRS were subject to 5%, the new proposal introduces a uniform TCS rate of 2% across these categories. This simplified and significantly lower rate makes overseas transactions more affordable and reflects a far more open and taxpayer-friendly approach,” said Amit Agarwal, Partner, Nangia & Co LLP.


Mr. Pavan Kavad, Managing Director of Prithvi Exchange said that Budget 2026's decision to reduce TCS down to 2 per cent on student remittance is a welcome and pragmatic reform. It will reduce friction in cross-border spending, support international travel and education planning, and give families greater clarity and predictability in managing large overseas expenses.

Kavad says: "While the rationalisation of TCS is a step in the right direction, completely removing TCS on education loan borrowings would have delivered far deeper relief to students who finance their overseas education through debt. These families already shoulder significant financial pressure in the form of rising tuition costs, living expenses, and interest repayments, and any upfront tax deduction only strains cash flows further."

The government has announced substantial relief through a simplified TCS framework and reduced rates, says Shalini Jain, Tax-Partner, EY India. "Effective 1 April 2026, TCS on overseas tour packages will be levied at a flat 2% without a threshold . For education and medical treatment remittances under LRS, a lower rate of 2% TCS rate is applicable instead of the existing 5%. These measures are designed to help individuals manage their cash flow while making remittances for overseas travel and essential foreign expenses."

Gagan Malhotra, COO, BookMyForex.com, says, "We welcome the government’s decision to rationalize the TCS rate on foreign remittances for education-related expenses from 5% to 2% in the Union Budget 2026. This is a progressive step that will ease the financial burden on Indian families supporting overseas education aspirations. Extending the same relief to medical remittances provides meaningful support to families managing healthcare needs abroad."