TCS on Overseas Remittances Cut to 2% for Education, Medical and Tour Packages

Created On: October 6, 2026
India, Newsletter

Modified On: October 6, 2026

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Summary

Effective 1 April 2026, Tax Collected at Source (TCS) on overseas remittances for education, medical care, and tour packages drops to a flat 2%. For self-funded education and medical expenses, this 2% applies only on amounts exceeding ₹10 lakh per financial year, while loan-funded education remains at 0%. Overseas tour packages now attract a flat 2% TCS from the very first rupee with no threshold, replacing the previous tiered system of up to 20%. Remittances for investments and gifts remain unchanged at 20% above ₹10 lakh, and all collected TCS remains adjustable or refundable through annual tax returns.

From 1 April 2026, sending money abroad for education, medical treatment, or a tour package costs less upfront. The government has cut the Tax Collected at Source (TCS) on these remittances to a flat 2%, replacing rates that used to run as high as 20%.

What's Changing in TCS on Overseas Remittances?

Overseas remittances for education, medical treatment, and tour packages now attract TCS at 2%, down from the earlier structure of 5% for education and medical, and a tiered 5% to 20% for tour packages. For self-funded education and medical remittances, the 2% rate applies only to the amount above the existing threshold of ₹10 lakh per PAN each financial year. As before, the first ₹10 lakh carries no TCS. This threshold is shared across all LRS (Liberalised Remittance Schemes) remittances in the year, whether for education, medical treatment, investment or any other purpose. Tour packages work in a somewhat different way. The 2% rate now applies from the very first rupee, with no threshold, replacing the old slab system entirely. This TCS is collected by the tour operator at the time of booking, not by the bank, and applies regardless of any other LRS remittances made during the year. One thing that hasn’t changed is that education funded through a loan from a specified bank or NBFC continues to attract 0% TCS. Remittances for investments, property purchases, gifts, and other LRS purposes remain unchanged, still nil up to ₹10 lakh and 20% above it. Under the Income-tax Act, 2025, which applies from 1 April 2026, these TCS provisions fall under Section 394.

Who Needs to Review This Change?

This change matters most for Indian residents remitting more than ₹10 lakh a year under the LRS for self-funded overseas education or medical treatment. This is where the lower rate makes a real difference.

Those booking an overseas tour package should also take note, given the 2% rate now applies regardless of how much the package costs. Families funding a child’s or dependant’s education abroad, including the student’s living expenses sent as part of education costs, fall into this group too.

Employees on a corporate mobility assignment who personally pay for overseas education, medical treatment or tour packages can also benefit from the lower rate. Other relocation costs sent abroad personally, such as rent deposits or setup expenses, usually fall under “other purposes” and still attract 20% above the ₹10 lakh threshold. This applies even where the employer reimburses the expenses later.

Banks and authorized dealers collecting TCS on education and medical remittances, and tour operators selling overseas packages, will need to apply the revised rates. What stays unchanged: education loan remittances remain at 0%, and LRS remittances for investments, gifts or other purposes keep their existing rates.

What Does the 2% TCS Rate Imply?

The most immediate effect of the 2% TCS rate is that less cash remains tied up during the year. Consider a ₹30 lakh remittance for overseas education, with no other LRS remittances that year. TCS applies only to the ₹20 lakh above the threshold. Under the old 5% rate, ₹1 lakh was collected upfront. Under the new 2% rate, that drops to ₹40,000, freeing up ₹60,000 for the same transaction. Families funding tuition above ₹10 lakh should recalculate the amount that they actually need to set aside for each remittance under this new rate. On the other hand, loan-funded education payments remain unchanged at 0%.

For tour packages, every booking benefits. Packages that earlier attracted 5% now attract 2%, and larger packages that would have fallen into the old 20% slab gain the most. A ₹15 lakh package that earlier attracted about ₹1.5 lakh (5% on ₹10 lakh and 20% on₹5 lakh)in TCS now attracts ₹30,000. Investments and other LRS purposes are not part of this cut and still attract 20% above ₹10 lakh.

It’s worth remembering TCS was never a final tax to begin with. The amount that gets collected shows up in Form 26AS and the Annual Information Statement, and it can generally be claimed as credit against total tax liability, or refunded outright if no tax is payable. International credit card spending abroad continues to remain outside TCS entirely, just like before.

Documentation still matters in this regard. PAN details, remittance purpose declarations, and bank records should be kept on file. If a remittance gets cancelled after TCS was already collected, banks usually don’t refund it directly. The amount has to be reclaimed later through the income tax return instead.

What Should You Do Now?

Approach the change by identifying the purpose behind each planned remittance, which can be education, medical, tour package, investment, or something else. The applicable rate now differs a lot based on the respective category.

For education or medical remittances, keep a running track of cumulative transfers against the ₹10 lakh annual threshold per PAN.
For tour package bookings, it’s worth confirming directly with the authorized dealer that the 2% no-threshold rate is being applied correctly to that specific booking.
In situations where relocation costs might later be reimbursed by an employer, check with HR or finance on how that remittance should be treated for TCS purposes before the funds are actually transferred.
Keep remittance forms, PAN records, and bank certificates handy. Reconcile all the information that shows up in Form 26AS or the AIS against actual remittances made when it’s time to file.

How IMC Can Help

IMC can help individuals, founders and businesses assess the LRS remittances which qualify for the revised 2% rate. The professionals also review corporate mobility and relocation payment structures for TCS exposure, and reconcile TCS credits against income-tax records. Get in touch with the tax advisory team at IMC to review your overseas remittance and relocation payment structures ahead of your next filing.

Author Bio:

With core expertise in direct tax advisory, cross-border structuring, and global mobility, CA Pushpanjali Raina provides comprehensive guidance across ESOP management, social security regulations, tax litigation, and international payroll. Her client-first approach ensures seamless regulatory compliance and strategic oversight for every engagement.

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