To ease the financial burden on families and travelers, Finance Minister Nirmala Sitharaman announced a significant reduction in the Tax Collected at Source (TCS) in the Union Budget 2026. The government has lowered the TCS rate from 5% to 2% for foreign remittances made under the Liberalised Remittance Scheme (LRS) for education and medical treatment costs exceeding ₹10 lakh. Additionally, the TCS on overseas tour packages has been reduced from 5% and 20% to 2%, with no minimum threshold. The new TCS rates will come into effect from April 1, 2026
TCS is collected by the authorised dealer or forex service provider at the time of the transaction and is deposited with the Income Tax Department. It was introduced by the Finance Act of 2020 and applies to foreign exchange transactions made by Resident Indians under the LRS. Under this scheme by the Reserve Bank of India (RBI), individuals can remit up to $250,000 in a financial year.
How much TCS will apply on foreign remittances for education after Budget 2026?
For remittances for educational purposes, there will be no TCS on amounts below ₹10 lakh, whether funded personally or through a loan. However, if a remittance exceeds ₹10 lakh and is not obtained through a loan, a TCS of 2% will be applied. Prior to this, the TCS rate was 5%. Additionally, if you fund your foreign education through loans, there is no TCS for remittances above ₹10 lakh.
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Impact: With the reduced TCS rate, families sending money abroad will face a smaller tax deduction at the time of remittance. This change improves cash flow, reduces immediate financial stress, and helps families plan education expenses more effectively.
Keep in mind that any remittances for travel and associated expenses related to education and medical treatment will also attract TCS at the same rate applicable for education. For example, if you send money to your child studying abroad for monthly expenses, even if it’s not directly for tuition or accommodation, it can still be categorized as an educational remittance. TCS will apply at the same rate.
New TCS rates on medical expenses after Budget 2026
Remittances for medical treatment will attract a TCS of 2% if the amount exceeds ₹10 lakh. Previously, the threshold for TCS was set at ₹2 lakh.
Impact: Medical costs abroad can strain a family’s budget, and high taxes add to the burden. Lower TCS rates help families alleviate upfront costs, making it easier for them to afford medical treatments overseas.
How much TCS will apply on overseas tour packages after Budget 2026?
An important relief has been introduced for overseas tour packages. The TCS rate has been lowered from 5% and 20% to a flat 2%, with no minimum limit.
With these changes, international travelers can enjoy better cash flow, making trips more affordable and manageable.
How much TCS will apply on overseas payments for investments such as buying stocks, and cryptos after Budget 2026?
For overseas investments, such as stocks and cryptocurrencies, TCS will apply at a rate of 20% on amounts exceeding ₹10 lakh in a financial year. So, if you invest more than ₹10 lakh in foreign stocks, mutual funds, cryptocurrencies, or property in a financial year, you will need to pay 20% TCS on the amount above ₹10 lakh. There is no change on this after Budget 2026.
However, investing in domestic mutual fund schemes with exposure to foreign stocks will not be considered a remittance under LRS and will not attract TCS.
Remember that the ₹10 lakh threshold for LRS is cumulative for all remittances, regardless of purpose. If total remittances in a financial year are below ₹10 lakh, no TCS will apply. If the threshold is exceeded, different TCS rates will apply based on the purpose of the remittance. However, threshold limit for ₹10 lakh per financial year for purchase of Overseas tour program package is independent of the threshold limit for other foreign remittances.
