Budget 2026: Finance Minister Nirmala Sitharaman presented the Union Budget 2026 on Sunday and proposed to reduce the tax collection at source (TCS) rate to two per cent for education under Liberalised Remittance Scheme (LRS), offering relief to students and families sending money abroad.
The move is expected to provide significant support to students planning to study overseas by improving financial accessibility for families funding education and medical expenses abroad.
In the Union Budget 2025, the government had exempted TCS on remittances made for education purposes in cases where an education loan was taken from specified financial institutions. Under the 2026 Budget, the TCS rate has been lowered from 5 per cent to 2 per cent for remittances exceeding Rs 10 lakh under the Liberalised Remittance Scheme.
"I propose to reduce the TCS rate for pursuing education and medical purposes under the Liberalised Remittance Scheme from 5 per cent to 2 per cent," Nirmala Sitharaman said.
Union Budget 2026: How Does This Offer Relief to Students?
Reserve Bank of India (RBI) data shows that education-related outward remittances eased in November after a spike in September 2025. Remittances from India for overseas education under the LRS fell to 120.94 million dollars in November 2025, down 25.92 per cent from October and 54.25 per cent from September 2025.
According to the Government of India, the disbursed loan amount for educational purposes by public sector banks has increased by around Rs 13,000 crore in the financial year 2023-24 compared to the financial year 2019-20.
For studying abroad, for example in a country like Germany, students are required to maintain over Rs 12 lakh in funds in a blocked account. Earlier, remittances exceeding Rs 10 lakh attracted TCS. The reduced TCS rate of 2 per cent is expected to provide financial relief to students and families sending funds or loan-based remittances abroad.
Budget 2026: What Is TCS?
Tax Collected at Source (TCS) is a tax collected by banks or authorised dealers from individuals sending money overseas, based on the purpose of the remittance. The applicable threshold and rate are determined under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India.
The TCS collected is not an additional tax. It is adjusted against an individual's total income tax liability at the time of filing income tax returns and any excess amount is refunded.
What Is the Liberalised Remittance Scheme?
The Liberalised Remittance Scheme (LRS) is a Reserve Bank of India facility that allows Indian residents to remit up to USD 250,000 per financial year abroad for permissible personal purposes such as education, travel, healthcare, gifts, and investments in foreign assets.
Under the Union Budget 2026, the TCS rate applicable under the LRS has been reduced from 5 per cent to 2 per cent. Previously, TCS was applicable on remittances exceeding Rs 7 lakh under the scheme.
