TCS on Education Remittance 2026: The New 2% Rate for Indian Students Abroad
TCS on education remittance became cheaper from 1 April 2026. Budget 2026-27 cut the rate on self-funded education payments above ₹10 lakh from 5% to 2%. If you are an Indian parent paying fees for a child studying in the US, UK, Canada or Australia, here is exactly how it works.
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Last checked: 29 September 2026. Sources include the Budget Speech 2026-27, the Reserve Bank of India and bank notices. Confirm details with your bank or tax adviser. This is general information, not tax advice.
What changed on 1 April 2026
The Budget Speech 2026-27 proposed to “reduce TCS rate for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5 percent to 2 percent.” The change took effect on 1 April 2026, the same day the new Income-tax Act, 2025 replaced the 1961 Act.
TCS on education remittance and other purposes from 1 April 2026
| Purpose | Up to ₹10 lakh | Above ₹10 lakh |
|---|---|---|
| Education, self-funded | Nil | 2% |
| Education funded by a loan from a specified financial institution | Nil | Nil |
| Medical treatment | Nil | 2% |
| Overseas tour packages | 2% from the first rupee | 2% |
| Other LRS purposes (investment, gifts) | Nil | 20% |
The ₹10 lakh threshold applies per PAN, per financial year, and bank notices say it counts all LRS remittances by the same person. Confirm how your bank applies it.
Worked example
A parent sends ₹25 lakh of their own money for tuition in FY2026-27 and makes no other LRS payments that year.
- Amount above the threshold: ₹25 lakh minus ₹10 lakh = ₹15 lakh.
- TCS at 2%: ₹30,000.
- Under the old 5% rate, it would have been ₹75,000.
Education loan vs self-funded: TCS on education remittance compared
If the fees are paid from an education loan from a specified financial institution, TCS is nil, whatever the amount. This rule did not change in 2026. Families paying large fees may find the difference useful when planning.
The LRS limit and documents you need
- Resident individuals, including minors, can send up to USD 250,000 per financial year under the LRS. Education abroad is a permitted purpose.
- PAN is mandatory for every LRS transaction.
- A minor’s LRS declaration must be countersigned by a parent or guardian.
- Banks usually ask for the university’s fee invoice or admission letter and Form A2.
Common mistakes to avoid
- Splitting payments across family members’ PANs without understanding how each person’s ₹10 lakh threshold and LRS limit apply.
- Paying fees through informal channels. Always use your bank or an authorised dealer, with the university invoice.
- Forgetting that other LRS payments in the same year, such as travel or gifts, can count towards the ₹10 lakh threshold.
- Not keeping the TCS certificate from your bank, which you need when filing your return.
Can you get TCS back?
TCS is tax collected in advance. It can normally be adjusted against your income tax or refunded when you file your return. Ask your tax adviser how this works under the new Income-tax Act for your situation.
Other Budget 2026 changes for NRIs
Budget 2026-27 also raised the limit for individuals living outside India investing in listed Indian companies through the Portfolio Investment Scheme, from 5% to 10% per individual, and the overall limit from 10% to 24%.
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