Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on Saturday, has proposed a new Tax Collected at Source (TCS) for overseas remittance with a view to providing financial ease for students studying abroad. According to the new Section 80E amendment in the Income Tax Act, educational remittances of Rs 7 lakh and below in a financial year will not have any TCS applicable for it.

Besides, such remittances exceeding ₹7 lakh will not have any TCS applicable in case of funds received under Section 80E through loans. Nevertheless, students using individual savings and unrecognised loans will have a 5% TCS applicable for any over ₹7 lakh in a financial year. Tax Collected at Source, or TCS, is a system in which sellers collect a certain portion of taxes at a seller level at the purchase point. For abroad remittance, it will function under the Liberalised Remittance Scheme (LRS), with approved dealers collecting taxes when money is being sent abroad.

Previously, Section 206C(1G) of the Income Tax Act required financial institutions handling foreign exchange transactions to collect 0.5% TCS on remittances up to ₹7 lakh for education loans from approved institutions under Section 80E, with the same rate applying to amounts above this threshold.

Students have reacted with mixed feelings to the new development. For Akash Surve, studying in Germany, it is a goodwill move by the government. "It makes us feel that we are considered," he said. “Once you leave your country and you are studying outside. Sometimes you feel alienated, and at times it is the feeling that you are also not doing much for a country and how much support you are receiving from your country. I agree that the TCS charges for amounts less than 700,000. It would be in thousands only; it may not matter to certain students. And at least for Germany, the transfers are not so frequent. The parents paid only once for a few times, but still, it is a gesture from the government towards the Indian students studying abroad.”

Rohan Mehta, a prospective cybersecurity student planning to study in the US, is happy with the development. “This is really helpful for students like me who want to study abroad! Not having to pay extra tax on remittances up to ₹7 lakh and for education loans under Section 80E means less financial stress. It makes things a little easier for students and their families.”

Ananya Iyer, prepping to study for an MBA in International Business in Canada or US, sees restrictions; however, "The new tax rules are good, but I wish they helped all students equally. I want to go to Canada or the US, and we’ll definitely need to send more than ₹7 lakh. If you’re using personal savings or a loan that’s not covered under Section 80E, you still have to pay 5% TCS on anything above ₹7 lakh. That’s a lot of extra money, and not everyone gets loans from recognised institutions."  

Industry experts have taken the development in a positive manner. According to Piyush Kumar, Regional Director, South Asia, Canada, Latin America, and Mauritius, IDP Education said, "The 2025 budget mirrors the government's intention to make Indian youth capable and empowered with skills to become a success in a globalised economy. Elimination of TCS on educational-related remittances sponsored through loans is a most heartening development, lessening financial barriers for students who dream to study abroad."

Abhishek Mohan Gupta, Founder and President of the Board of Management at Shrewsbury International School India, perceives larger implications; "The lowering of TCS rates can be a game-changer towards international education becoming accessible for Indian students. This move can make India's position in the overall educational environment even more powerful, attracting direct investments of foreign institutes to commence operations in India—a target in harmony with National Education Policy (NEP) 2020." 

He further added, "The nation will have a larger talent pool with access to high-class education at home, less willing to go abroad, and with an opportunity to retain high-value talent. However, access to international standards and pedagogy will make them competitive for international job markets, and India will become a powerful player in terms of competitiveness at a worldwide level."