The Union Budget 2026’s proposal to sharply reduce Tax Collected at Source (TCS) on overseas spending is expected to ease cash flow pressures and boost outbound travel, education and medical remittances,
tax experts said.
Under the Budget proposals, TCS under the Liberalised Remittance Scheme (LRS) on overseas education and medical treatment has been reduced from 5 per cent to 2 per cent on remittances exceeding Rs 10 lakh in a financial year. In a major relief for travellers, the TCS rate on overseas tour packages has also been rationalised to a flat 2 per cent, down from the earlier 5 per cent and 20 per cent slabs, with no threshold limit.
Lower TCS Rates Under LRS Announced
According to CA Prashant Thacker, the reduction in TCS will lower the upfront tax burden and improve liquidity for taxpayers. While TCS can be adjusted against final tax liability, higher rates often led to cash flow blockages, particularly for families funding education, medical treatment or foreign travel. The proposed changes, he noted, will make overseas spending more manageable without diluting compliance.
Relief For Students, Patients, And Travellers
Echoing similar views, Anita Basrur said the move is timely and taxpayer-friendly. She highlighted that the earlier TCS rates, though adjustable later, created immediate financial strain, especially for middle-income households. The revised structure addresses liquidity concerns while continuing to maintain a clear audit trail of foreign remittances under LRS.
For students and families sending money abroad for education or medical needs, experts believe the lower TCS will significantly ease upfront costs and improve access to global opportunities. At the same time, the reduction in TCS on overseas tour packages is expected to encourage discretionary spending and provide a boost to the outbound travel, tourism and hospitality sectors, which are still recovering.
Overall, experts see the rationalisation of TCS rates as part of the government’s broader push towards a trust-based, taxpayer-friendly regime. By simplifying cross-border transactions while retaining safeguards against misuse, the measure is expected to improve ease of compliance and support India’s increasingly global citizen base.
