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Finance Minister Nirmala Sitharaman on Sunday proposed reducing the Tax Collected at Source (TCS) rate to two percent on remittances sent abroad for education and medical purposes under the Liberalized Remittance Scheme (LRS), as well as on the sale of overseas travel packages. Presenting the Union Budget 2026-27 in the Lok Sabha, the minister also proposed rationalizing the TCS rate to two percent for sellers of specific goods – liquor, scrap, and minerals – and reducing it from five percent to two percent on tendu leaves.

Reduction in TCS under LRS
Sitharaman said, "I propose to reduce the TCS rate from five percent to two percent for education and medical purposes under the Liberalized Remittance Scheme (LRS)." As per the proposal, remittances exceeding ₹10 lakh for education or medical treatment will now attract a two percent TCS instead of the existing five percent. Under the LRS, all resident individuals, including minors, are allowed to remit up to US$250,000 per financial year. However, the TCS rate for purposes other than education or medical treatment will remain at 20 percent.

Overseas Travel Becomes Cheaper
The Finance Minister also proposed reducing the TCS rate on the sale of overseas travel packages from the existing five percent to 20 percent to a flat two percent without any threshold. Currently, overseas travel packages up to ₹10 lakh attract a five percent TCS, and those above that amount attract a 20 percent TCS. Additionally, the TCS rate on the sale of minerals (coal, lignite, or iron ore), liquor, and scrap, which is currently one percent, is now proposed to be increased to two percent.

Government's Progressive Step
Gagan Malhotra, COO of BookMyForex, was quoted in an ET report as saying, "We welcome the government's decision in the Union Budget 2026 to reduce the TCS rate on foreign remittances for education-related expenses from 5 percent to 2 percent." This is a progressive step that will reduce the financial burden on Indian families aspiring to pursue education abroad. She further added that extending the same relief to medical expenses would provide significant assistance to families meeting their healthcare needs overseas. Among other schemes for Indians living abroad, Finance Minister Nirmala Sitharaman announced that non-residents will be allowed to invest in equity instruments more freely.

Announcements made last year
The previous budget announced major changes to income tax rules, impacting both non-resident Indians and resident taxpayers. The main objectives were to simplify compliance, revise tax slabs, provide more exemptions, and streamline rules for remittances, rental income, and property transactions. The budget also updated the residency rules for non-resident Indians and the global income tax system. The previous budget also relaxed the rules related to rental income. Taxpayers can now treat two houses as self-occupied. Previously, only one house could be considered self-occupied, while other houses were taxed based on notional rent. This new rule has reduced the tax burden on homeowners with more than one property.

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