
Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025-26 today, Saturday, February 1, announced a significant relief for Indian students aspiring to study abroad. This was stated in a report by the Economic Times.
The revised Tax Collected at Source (TCS) rates on foreign remittances are set to ease the financial strain on students and their families, making overseas education more accessible.
Revised TCS rates on foreign remittances
For students availing educational loans from recognised financial institutions or approved charitable institutions under Section 80E of the Income Tax Act, the following TCS structure applies:
- Remittances up to Rs 7 lakh – No TCS is applicable. - Remittances exceeding Rs 7 lakh – No TCS is applicable.
However, if the educational loan is from an institution not covered under Section 80E or if funds are remitted for other educational purposes, a 5% TCS is applicable to amounts exceeding Rs 7 lakh.
Existing TCS structure under section 206C(1G)
Previously, under the Income Tax Act, authorised dealers were required to collect TCS at a rate of 0.5% on remittances up to Rs 7 lakh per financial year for educational loans taken from recognised institutions under Section 80E. For amounts exceeding Rs 7 lakh, a 0.5% TCS was also applied.
If the loan was not from a recognised institution under Section 80E or if the remittance was for other educational purposes, the TCS rate stood at 5% on the amount exceeding Rs 7 lakh.
Impact on students
The revised TCS framework aims to reduce the financial burden on students and their families, making higher education abroad more financially viable. By easing taxation on remittances for education, the government reinforces its commitment to fostering education and skill development, a key focus of the Union Budget 2025-26.
This move is expected to provide significant relief to families funding overseas education, ensuring financial constraints do not hinder students' aspirations to pursue global academic opportunities.