Finance Minister Nirmala Sitharaman, while presenting Union Budget 2026, proposed to cut tax collected at source (TCS) rate for pursuing education and medical purposes under the liberalised remittance scheme (LRS) from 5% to 2%.
"I propose to reduce TCS rate on the sale of overseas tour program package from the current 5% and 20% to 2% without any stipulation of amount," she said.
"I propose to reduce TCS rate for pursuing education and for medical purposes under the LRS from 5% to 2%," she added.
1 January 2026
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Notably, TCS on foreign tour packages were 5% for packages up to ₹10 lakh and 20% for tours that cost more. Since, the 2% TCS comes with no specification of exemption limit, hence it will cover every single money spent.
Rikant Pittie, co-founder of EaseMyTrip, called it one the most significant measures by easing the upfront financial burden on travellers and encouraging outbound travel. He said that this move is expected to improve booking sentiment and enhance affordability for Indian travellers planning international trips.
The budget also underlined that supply of manpower services brought within the ambit of payment to contractors for the purpose of TDS to avoid ambiguity. Thus, TDS on these services will be at the rate of either 1% or 2%.
This simplification expected to reduces tax friction for companies as well as workers with better compliance.
Last year's budget also removed TCS on education loans taken under the LRS to support overseas education.
During the filing of income tax returns, paid TCS amount can be claimed as credit.
