Budget 2026: Tax collected at source rates on overseas travel, education and medical remittances cut

The Union Budget 2026 has proposed a sharp reduction in Tax Collected at Source (TCS) on certain overseas payments under the Liberalised Remittance Scheme (LRS), directly lowering upfront cash outflows for individuals.

Under the proposal, TCS on overseas tour packages will be reduced to 2%, from the earlier slab-based rates of 5% and 20%, with no minimum threshold. This change applies to all international travel bookings, making payments simpler and reducing immediate tax burden at the time of purchase.

Similarly, TCS on education and medical remittances under the LRS route has been cut from 5% to 2%, lowering upfront deductions for families sending money abroad for studies or medical treatment.

Anita Basrur, Partner, Sudit K. Parekh & Co. LLP, said the move would improve liquidity for taxpayers:

“The reduction of TCS to 2% on overseas tour packages and on education and medical remittances under LRS significantly eases cash-flow pressure for individuals, making foreign travel, education and healthcare more affordable.”

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Supreme Kothari, Partner, Economic Laws Practice, noted that the earlier higher TCS rates had created cash-flow stress for taxpayers despite being adjustable against final tax liability. He said the cut to 2% would meaningfully reduce this burden while maintaining compliance reporting.

Impact on travellers

The Budget stated that lowering TCS on overseas tour packages to 2%—without any floor limit—would make international bookings cheaper and less complicated for Indian travellers.

Travel industry players expect this to support outbound tourism demand.

Related cross-border tax measures

Alongside TCS rationalisation, the Budget has proposed a review of FEMA rules governing non-debt instruments to streamline foreign investment regulations.

Srikrishna Narasimhan, Whole-Time Director & CEO, GlobalPay, said these steps would improve cross-border payments and compliance:

“The rationalisation of TCS under the LRS for education, medical expenses, and overseas travel will directly reduce friction for students, young professionals, NRIs, and families who engage in legitimate cross-border transactions.”

He also pointed to greater clarity on TDS for manpower services and a one-time foreign asset disclosure scheme as measures aimed at simplifying compliance for small taxpayers.

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