Union Budget 2026-27 Provides Major Relief for Overseas Remittances
In a significant move aimed at easing financial burdens for Indians sending money abroad, the Union Budget for 2026-27 has announced substantial reductions in Tax Collected at Source (TCS) rates for specific categories under the Reserve Bank of India's Liberalised Remittance Scheme (LRS). The changes specifically target overseas education, medical treatment, and tour packages, while maintaining existing rates for other remittance categories.
Reduced TCS Rates for Education and Medical Expenses
The budget has slashed the TCS rate for education and medical treatment abroad from 5% to just 2%. This reduction applies only to remittances exceeding Rs 10 lakh in a financial year, a threshold that was recently increased from Rs 7 lakh. This measure is expected to significantly reduce the upfront cash outflow for students pursuing international education and patients seeking specialized medical care overseas.
It's important to note that TCS remains adjustable against the final tax liability when filing income tax returns, meaning taxpayers can claim credit for this amount. This change comes at a crucial time when remitters are facing additional pressure due to the sharp depreciation of the Indian rupee against major global currencies.
Simplified Structure for Overseas Tour Packages
In another welcome development for travelers, the budget has rationalized the TCS structure for overseas tour packages. The previous complex system—which imposed 5% TCS for amounts below Rs 10 lakh and 20% for amounts above—has been replaced with a simplified flat rate of 2%, regardless of the transaction value.
This simplification is designed to ease compliance burdens for both travel agents and consumers, making international travel planning more straightforward and financially predictable. The move recognizes the growing demand for international tourism among Indian middle-class families.
Context and Implications of the Changes
The timing of these adjustments is particularly noteworthy given current economic conditions. The Indian rupee has experienced significant depreciation against major currencies, increasing the effective cost of overseas remittances. Additionally, education-related remittances have seen some decline due to visa restrictions in key destinations like the United States.
Key aspects that remain unchanged include:
- The overall LRS limit of $250,000 per financial year
- The 20% TCS rate applicable to other categories of outward remittances
- The mechanism for claiming TCS credits through income tax returns
- The availability of refunds where no tax liability exists
These targeted adjustments demonstrate a balanced approach—improving liquidity for genuine overseas expenses while maintaining the monitoring framework under the LRS system overseen by the Reserve Bank of India. The changes are expected to provide meaningful relief to students, medical patients, and travelers without compromising regulatory oversight of capital flows.
