Budget 2026 and Overseas Education: Does the 2% TCS Cut Reduce Costs for Indian Students?

The Budget 2026 announced the reduced TCS of 2% on overseas education, while it decreases the upfront tax on remittances, it doesn’t lower the overall education expense. This blog explores the specifics of this reduction, its impact on students’ finances, and how they can strategically plan their overseas education funding.

Understanding the 2% TCS Rate for Overseas Education

The Budget 2026 announcement reduced TCS from 5% to 2% for education and medical remittances under LRS (Liberalised Remittance Scheme), effective next financial year. The 2% TCS rate on overseas education directly lowers the tax imposed when students remit funds exceeding ₹10 Lakh for studies. This applies to self-funded transfers and amounts above the threshold, while education loans from specified institutions remain TCS-exempt.

Also Read - CPC in Income Tax: Full Form, Meaning & Role Explained

How the Change Benefits Students’ Education Planning

The reduction in overseas education remittances can significantly ease the financial burden on Indian families, making it easier to manage education costs abroad.

Reduced Tax Burden When Arranging Proof of Funds

With the new 2% TCS rate, the upfront tax burden is reduced, making it easier for students to meet visa requirements without compromising finances. Many countries, such as Germany, require students to show proof of funds by having a blocked account with a minimum balance of ₹12 Lakh for visa purposes. Previously, any amount above ₹10 Lakh attracted 5% TCS, adding financial strain even before studies began.

Improved Monthly Cash Flow

The reduced tax rate helps retain more capital for important expenses such as tuition instalments, accommodation deposits, and living costs. Families typically rely on a mix of savings, loans, and remittances to fund education abroad, and the 2% TCS rate gives them more flexibility in managing cash flow.

Better Affordability

The 2% TCS directly makes overseas education more affordable by lowering the upfront tax burden on remittances. RBI data from 2025 indicated education remittances fell significantly, reflecting challenges including high costs and tax burdens, among other factors. By reducing the TCS, families will save more money upfront and retain a larger portion of the funds for tuition, living expenses, and other costs.

Also Read - Income Tax High‑Value Transactions in India: Meaning and How to Respond

To Conclude

The 2% TCS cut on overseas education remittances, lowered from the earlier 5%, reduces the upfront tax burden, making it easier to manage education costs. While it doesn’t lower the overall cost of education, it simplifies visa requirements and makes education abroad more affordable.

This change helps families keep more funds for essential expenses and allows students to pursue their studies abroad with less financial strain. Poonawalla Fincorp’s Education Loan can further support this by covering tuition, living costs, and other related expenses.

FAQs

Does TCS apply to education loans?

No, there is no TCS on remittances made against education loans from specified financial institutions, making loans a tax-efficient borrowing option.

Can you remit for education multiple times in a year?

Yes, as long as total remittances across all LRS purposes stay within USD 250,000 per financial year. You can split education, medical, and travel remittances across the year.

What if my education costs are under ₹10 Lakh?

Remittances up to ₹10 Lakh under LRS incur zero TCS, regardless of the rate change. The 2% cut applies only to amounts exceeding this threshold.