Finance Minister Nirmala Sitharaman announced a significant reduction in Tax Collected at Source (TCS) rates for several key categories in the Union Budget 2026-27. The changes, effective from April 1, 2026, aim to lower the tax burden on individuals undertaking overseas education, medical treatments, and purchasing international tour packages.
TCS Rate Cuts Announced
The most substantial change involves the Liberalised Remittance Scheme (LRS). For remittances made for pursuing education or undergoing medical treatment abroad, the TCS rate will drop from the current 5 percent to 2 percent. This applies to amounts exceeding Rs 10 lakh under the LRS.
The LRS allows resident individuals to send up to USD 2,50,000 per financial year for various permissible transactions. For expenditures other than education or medical purposes, the TCS rate will remain at 20 percent.
Overseas Travel Packages More Affordable
Purchases of overseas tour program packages will also see a reduced TCS rate. The tax collected at source will be lowered to 2 percent, irrespective of the expenditure amount. Previously, the rate was 5 percent for packages up to Rs 10 lakh and 20 percent for amounts exceeding Rs 10 lakh.
Changes for Specific Goods
The Budget also proposed rationalizing TCS rates for sellers of certain goods. The TCS rate for alcoholic liquor, scrap, and minerals will be adjusted to 2 percent. Additionally, the TCS on tendu leaves will be reduced from 5 percent to 2 percent.
Summary of Key TCS Changes
| Category | Previous TCS Rate | New TCS Rate (Effective April 1, 2026) |
|---|---|---|
| Education/Medical under LRS (above Rs 10 lakh) | 5% | 2% |
| Overseas Tour Packages (all amounts) | 5% (up to Rs 10 lakh), 20% (above Rs 10 lakh) | 2% |
| Alcoholic Liquor, Scrap, Minerals | 1% | 2% |
| Tendu Leaves | 5% | 2% |
| Other LRS purposes | 20% | 20% |
These changes are part of the Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman in the Lok Sabha.