Finance Minister Nirmala Sitharaman on Sunday proposed reducing the tax collection at source (TCS) rate on remittances for education and medical purposes as well as sale of travel packages abroad under the Liberalized Remittance Scheme (LRS) to two percent. Presenting the Union Budget 2026-27 in the Lok Sabha, the minister also proposed that the TCS rate for sellers of specific commodities – liquor, scrap and minerals – would be rationalized to two per cent and on tendu leaves it would be reduced from five per cent to two per cent.
Reduction in TCS in LRS
Sitharaman said that I propose to reduce the TCS rate for education and medical purposes from five percent to two percent under the Liberalized Remittance Scheme (LRS). According to the proposal, sending amount of more than Rs 10 lakh for education or medical treatment will now attract two percent TCS instead of the existing five percent. Under the LRS, all resident individuals, including minors, are permitted to remit up to US$2,50,000 per financial year. However, for purposes other than education or medical, the TCS rate will remain at 20 percent.
traveling abroad becomes cheaper
The Finance Minister also proposed to reduce the TCS rate on sale of foreign travel packages from the existing five and 20 percent to two percent without any limit. At present, TCS is five percent on foreign travel packages up to Rs 10 lakh and 20 percent on those above. Apart from this, the TCS rate on sale of minerals (coal, lignite or iron ore), liquor and scrap is currently one percent, which is now proposed to be reduced to two percent.
Government’s progressive step
BookMyForex COO Gagan Malhotra said in an ET report that we welcome the government’s decision to reduce the TCS rate on foreign remittances sent for education related expenses from 5 percent to 2 percent in the Union Budget 2026. This is a progressive step that will reduce the financial burden on Indian families wishing to pursue education abroad. He further said that applying the same relief on medical expenses would provide meaningful assistance to families meeting their health needs abroad. Among other schemes for Indians living abroad, Finance Minister Nirmala Sitharaman announced that non-residents will be allowed to invest more freely in equity instruments.
These announcements were made last year
Major changes in income tax rules were announced in the last budget, which will impact both non-resident Indians and resident taxpayers. The main objective was to create easy compliance, revised tax slabs, more exemptions and simplified rules for remittances, rental income and property transactions. The residence rules of non-resident Indians and the global income tax system were also updated in the budget. In the last budget, rules related to rental income were also relaxed. Now taxpayers can treat two houses as self-acquired. Earlier only a house could be considered self-occupied, while other houses were taxed on the basis of notional rent. With this new rule, the tax burden on homeowners owning more than one property has been reduced.