Mumbai: The government has announced a reduction in the Tax Collected at Source (TCS) on overseas education and medical remittances, a move expected to bring immediate relief to Indian students and families meeting the high costs of studying abroad.
The Finance Minister, Nirmala Sitharaman, said the TCS rate under the Liberalised Remittance Scheme (LRS) would be lowered from five per cent to two per cent for payments made for education and medical treatment. Under the proposal, remittances exceeding Rs 10 lakh in a financial year for these purposes will now attract a two per cent levy, replacing the higher rate that had been in place.
The LRS allows resident individuals, including minors, to remit up to 2,50,000 dollars a year for current or capital account transactions, including tuition fees and living expenses overseas. The change is expected to ease the upfront financial pressure faced by families at a time when global education costs continue to rise. Although TCS can be claimed back while filing income tax returns, students and parents have long argued that the higher deduction reduced liquidity at crucial stages of the admissions process.
Payments for tuition, accommodation, compulsory deposits and proof of funds for visa applications often have to be made within tight deadlines. Education sector experts have broadly welcomed the move. Omar Chihane, Global General Manager for TOEFL at ETS, said the decision reflected an awareness of the economic strain faced by many households. He said the lower TCS would improve cash flow and help families manage essential expenses more efficiently, even if it did not directly influence students’ choice of study destination.
Similar views were expressed by Stephen Roach, Director at OneStep Global, who said the earlier rate created avoidable pressure at a critical point in the studyabroad journey. While the tax was refundable, he noted that families were often required to transfer large sums quickly for tuition and visa-related requirements. Reducing the deduction, he said, would make financial planning more straightforward and the overall process less stressful. Middleclass families, in particular, are expected to benefit from the improved liquidity. The measure will be closely watched by students preparing for the next academic cycle, along with education consultants and banks involved in facilitating overseas remittances.