In the Union Budget 2026, Union Finance Minister Nirmala Sitharaman revealed a big cut in the Tax Collected at Source (TCS) on some money sent back to India from abroad. This is a big step toward reducing people’s financial load. As part of the Liberalised Remittance Scheme (LRS), the new plans lower the TCS rate to 2% for all foreign tour packages, medical care, and schooling. This move should help families get more money and give the outbound tourism business a much-needed boost.
Understanding TCS on Foreign Remittances
Individuals who send money abroad under the LRS are required to pay a prior tax to an approved dealer, which is usually a bank. You can use it for many things, like paying for medical bills, college, savings, and booking foreign vacation packages. It is important to keep in mind that TCS is not an extra tax. When someone files their yearly tax returns, they can use the money they earned to lower their final income tax bill or ask for a refund. TCS’s main job is to keep track of big deals that happen abroad.
What’s New in the Union Budget 2026 for Travellers
Smt. Nirmala Sitharaman the finance minister presented the Union Budget on 1st February 2026. It involved significant amendments that will become beneficial to Indians who intend to travel to foreign countries. One of the most significant news is the one stating that the Tax Collected at Source (TCS) on the foreign trip packages will be decreased. This tax helped in increasing the cost of making foreign trips.
Individuals believe that the new tax system is a massive stride to ensuring that more people can travel to other countries easier and cheaper for Flight Ticket Booking.
How Travellers Will Benefit
The drop in TCS makes it cheaper to move between countries at first. Many tourists didn’t want to pay the high amount up front, even though they could get the tax back when they filed their income taxes.
Some of the instant benefits are:
- Less cash loss when booking vacations abroad
- More money for families and groups travelling together
- Travel costs that are easier to see and predict
- Travel for fun, family, and groups is now more affordable
Experts believe that this move will make more Indians want to take holidays outside of India, especially to famous Asian and Southeast Asian destinations.
Impact on Outbound Tourism
The travel and Tours And Travel Company Delhi NCR is cheerful with the news and considers it positive indicator of tourists travelling to foreign countries. Expecting the decline in prices, the number of people desiring to travel overseas will greatly increase particularly to popular destinations such as Asia and Southeast Asian.
The budget, together with tax cuts, made it obvious that the government is keen on enhancing tourism through the improvement of roads, making it easier to travel around, and initiating training programs to people willing to know how to become good hosts.
Impact on Students and Families
The move to lower the TCS on students who pay for their own schooling abroad from 5% to 2% is good news for a lot of students. RBI data shows that overseas student loans reached about $2.92 billion in FY 2024-25, showing that Indian families made a sizable financial outflow for this reason. Because the rate has gone down, less capital is stopped when it is sent back to the sender. This makes it easier for families to pay their high school fees and living costs. In the same way, people who want to get medical care abroad will gain from paying less in taxes up front.
“This is a timely relief that lessens the financial burden on students and families seeking treatment or education abroad, especially at a time when global costs are rising,” said Kunal Savani, Partner at Cyril Amarchand Mangaldas.
A Boost for the Travel and Tourism Sector
There is now a flat 2% TCS on all foreign tour packages, with no minimum level. This is the biggest change. This is in place of the old 5% and 20% slabs, which both tourists and Tours And Travel Company Delhi NCR thought were too high and put people off. The high 20% rate took away a lot of a traveler’s money, which hurt their budget and made them less likely to book a deal. The new, lower rate should bring back the outbound tourist business and make it easier for people to journey between countries.
Conclusion
The Union Budget 2026 decided to lower TCS to a flat 2% on all international travel, schooling, and medical care. This is a good change for families and travellers alike. By lowering the initial tax load, the government has increased cash flow, decreased financial worry, and made it easier for people to travel and go to school abroad. Even though TCS was always based on tax liabilities, the higher rates in the past made people less likely to spend because they stopped funds. This will make sense of taxes so that they are more in line with what people actually need for their financial well-being. It will also increase outbound tourism, help students and patients study and recover abroad, and encourage related businesses.
