Budget reduces tax deduction on remittances for education and travel

MUMBAI: The Union Budget for 2026-27 has eased the tax burden on outward remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), lowering Tax Collected at Source (TCS) rates for education, medical treatment and overseas tour packages, while leaving other remittances unchanged.For education and medical treatment abroad, the TCS rate has been cut to 2% from 5%. The levy will continue to apply only on remittances exceeding Rs 10 lakh in a financial year, a threshold that was raised from Rs 7 lakh earlier. The reduced rate is expected to ease upfront cash outgo for students and patients, with TCS remaining adjustable against final tax liability at the time of filing returns.The easing comes at a time when remitters are facing pressure because of a sharp drop in the value of the rupee. Remittances for education have also dipped because of Visa restrictions in some destinations like the United States.In a significant relief for travellers, the Budget has also rationalised TCS on overseas tour packages. The earlier structure—5% below Rs 10 lakh and 20% above—has been replaced with a flat 2% rate, irrespective of the transaction value. The move is aimed at simplifying compliance for travel agents and buyers.The changes do not affect the overall LRS limit of $250,000 per financial year or the higher 20% TCS applicable to other categories of outward remittances. TCS credits will continue to be available through income tax returns, with refunds applicable where there is no tax liability.The tweaks improve liquidity for genuine overseas expenses without diluting monitoring under the LRS framework overseen by the Reserve Bank of India.