Union Budget 2026 Cuts TCS on Foreign Remittances for Education from 5% to 2%: Big Relief for Study Abroad Students
Union Budget 2026 Cuts TCS on Foreign Remittances for Education from 5% to 2%The Union Budget 2026 has reduced the tax on foreign remittances by 3%, which is education-related. This takes a load off for students seeking abroad education. Finance Minister Nirmala Sitharaman announced a sharp cut in Tax Collected at Source (TCS) under the Liberalised Remittance Scheme (LRS). The alleviation of financial pressure drives this decline in numbers.
The results of this development will be observed in the form of lower upfront costs for students who take their higher education step abroad. This news becomes pivotal because many forces are hitting at the same time, eventualizing in the high costs of studying abroad. So in a world where education is positioned as a high-cost product, this measure has been positively received. If you are pursuing MBBS abroad, this becomes equally essential for you.
This policy shift aligns with India’s growing higher education cooperation with Germany
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What Has Changed in Union Budget 2026?
The government has cut TCS on education-related foreign remittances under LRS from 5% to 2%.
Old vs New TCS Rates for Overseas Education
Now, students will pay 2% TCS instead of 5% under LRS:
Category | Earlier Rule | Union Budget 2026 |
Education remittances above ₹10 lakh | 5% TCS | 2% TCS |
Education loans from approved institutions | Nil TCS | Nil TCS (unchanged) |
Family remittances under LRS | Limited exemption | Up to ₹10 lakh tax-free |
Important
- Budget 2025: No tax was charged if families paid for overseas education with an education loan.
- Budget 2026: The benefit now applies to families who are paying from their own savings, not just loans.
Why This Matters for Students Planning to Study Abroad?
RBI data highlights that the demand for education loans is going up among Indian students. However, fluctuations have been experienced in recent months in education-related outward remittances. This makes the TCS cut even more important.
Indicator | Details |
Overseas education remittances (Nov 2025) | $120.94 million |
Change from October 2025 | 26% decline |
Change from September 2025 | Over 54% decline |
Education loan trend | Demand is rising |
Education loan disbursal growth | Public sector banks disbursed ₹13,000 crore more in FY 2023-24 compared to FY 2019-20 |
- Earlier, when students wanted to study in Germany, they needed a block account with ₹12 lakh.
- Crossing ₹10 lakh meant paying more tax immediately when TCS was 5%.
- But with lower TCS, families now have to pay less extra money upfront.
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According to The Times of India, Education-related outward remittances show a sharp decline. Study abroad spending went lower to $121 million in November.
Period | Education-related outward remittances |
November 2024 | $172.4 million |
October 2025 | $163.3 million |
November 2025 | $121.0 million |
What Is TCS and Is It an Extra Tax?
Banks and authorised dealers collect Tax Collected at Source (TCS). This is down at the time of foreign remittance under LRS.
What students should know:
- TCS is not an extra tax.
- It can be adjusted against final income tax liability.
- Any excess amount is refunded if you are filing returns.
- High TCS meant higher upfront cash blockage.
2% TCS in Union Budget 2026 makes liquidity better. Especially for families who go through the most expense-heavy phase of overseas relocation.
Understanding the Liberalised Remittance Scheme (LRS)
Liberalised Remittance Scheme (LRS) lets Indians send up to USD 250,000 each year abroad. The aim should be:
- Overseas education
- Medical treatment abroad
- Foreign travel
- Gifts and family maintenance
- Property purchase and investments
The reduced TCS rate under LRS for education and medical purposes makes study abroad decisions affordable and cheaper than before.
Returned From Studying Abroad? There’s a Tax Rule Waiting
The budget introduces rules for returning Indians after studying abroad.
Disclosure Rule Introduced in Budget 2026
Aspect | Details |
Disclosure window | One-time 6-month period |
Who it applies to | Students who become tax residents of India |
What can be disclosed | Undisclosed abroad income or assets |
Disclosure limit | Up to ₹1 crore or ₹5 crore |
Who Should Pay Attention to This Clause?
- Who studied abroad and returned to India recently
- Who held foreign bank accounts
- Who received stipends or assistantships
- Who earned through internships or part-time jobs abroad
- Granted foreign stock options
- Who is unsure about when their tax residency changed
Why This Budget Matters for Education Loans Too?
If you are a student who studies abroad on an education loan, this budget also has something for you. Data indicate that the loan demand is rapidly rising for study abroad. Lower TCS will keep the friction low when transferring international funds. The affordability of the relocation phase is a major benefit.
What Lies Ahead for Students?
As the TCS go low from 5% to 2%, accessibility of options grows in the abroad education arena.
Worldwide overseas education is financially demanding. But the move:
- Lowers upfront costs
- Improves liquidity
- Supports families
If you are also planning an international education, Budget 2026 brings you the transparency you need. It also contributes to the affordability of a globally recognised career.
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Frequently Asked Questions
Ques: What is the latest announcement of Union Budget 2026 regarding abroad education?
Ans: The central government has reduced the TCS by 3%. Earlier, it used to be 5%. But, presenting the budget, the Finance Minister announced that TCS will now be 2%.
Ques: What is LSR?
Ans: Liberalised Remittance Scheme (LRS) lets Indians send up to USD 250,000 each year abroad. Education, tuition fees, living expenses, and travel are the purposes.