Studying abroad has long been a dream for Indian students—but rising tuition fees, living costs, and regulatory requirements often make it financially challenging. Union Budget 2026 brings timely relief, significantly easing the cash burden for families funding overseas education.
Budget 2026: A Game-Changer for Overseas Education
In a major move, Finance Minister Nirmala Sitharaman reduced the Tax Collected at Source (TCS) on overseas education remittances from 5% to 2% for amounts exceeding ₹10 lakh.
This change means less money is blocked upfront when families send funds abroad—improving liquidity at a time when expenses are at their peak.
How TCS Works on Foreign Education Remittances
Under the Liberalised Remittance Scheme (LRS), banks collect TCS when money is sent abroad.
Important points to understand:
- TCS is not an extra tax
- It is adjusted against your final income tax liability
- Any excess TCS is refunded after filing returns
However, refunds can take several months. Earlier, this meant families had large sums locked away precisely when they needed funds for tuition, accommodation, and visas. Budget 2026 directly addresses this pain point.
Relief for Blocked Account Requirements
Countries such as Germany require students to maintain blocked accounts—often exceeding ₹12 lakh—to prove financial capacity.
Previously:
- Families paid high TCS upfront
- Additional cash remained locked until refunds arrived
Now, with a 2% TCS rate, the upfront cash requirement drops sharply, making it easier to meet visa and university conditions without financial strain.
Why the Timing of This TCS Cut Matters
Recent data highlights growing financial caution among families:
- Education remittances fell 26% month-on-month in November 2025
- They dropped 54% compared to September 2025
At the same time, education loan disbursals by public sector banks increased by ₹13,000 crore between 2019–20 and 2023–24, showing that demand for overseas education remains strong.
Budget 2026 steps in at a critical moment—supporting affordability without dampening aspiration.
Builds on Last Year’s Education Loan Relief
Budget 2025 had already:
- Exempted education loans from TCS when taken from approved financial institutions
Budget 2026 goes a step further by:
- Extending relief to self-funded students and families
- Supporting those who do not rely on education loans
Together, these measures create a more inclusive and student-friendly policy framework.
What the Liberalised Remittance Scheme (LRS) Allows
Under LRS:
- Indian residents can remit up to USD 250,000 (≈ ₹2.1 crore) per financial year
- Permitted uses include education, medical treatment, travel, and investments
- The scheme applies to all resident individuals, including minors
TCS Rules Under Budget 2026
- Education remittances above ₹10 lakh → 2% TCS
- Remittances to family members up to ₹10 lakh → No TCS
- Amounts beyond ₹10 lakh for family remittances → 20% TCS
What This Means for Students and Parents
Budget 2026 makes overseas education:
- More affordable upfront
- Easier to plan without liquidity stress
- Accessible even for families choosing self-funding
With lower TCS and continued education-loan support, students can now focus more on choosing the right course and country, rather than worrying about blocked funds.
