By Vibha Kagzi

The Union Budget 2025-26 has introduced major changes to Tax Collected at Source (TCS), offering relief to Indian students aspiring to study abroad. These revisions aim to reduce the financial burden on families by lowering tax implications on foreign remittances under the Liberalised Remittance Scheme (LRS). Under this scheme, authorized dealers collect TCS when individuals transfer funds abroad. However, TCS is not an additional tax but an advance that can be adjusted against total income tax liability or refunded if overpaid.

How This Benefits Students and Parents

The recent budget has revised TCS rates on educational remittances, offering significant relief to students funding their studies through education loans from recognized financial institutions and approved charitable organizations under Section 80E of the Income Tax Act.

These changes aim to make overseas education more financially accessible, particularly for students relying on education loans, by reducing the tax burden and simplifying compliance for students and their parents.

Those funding their education through loans from recognized institutions under Section 80E are now completely exempt from TCS on tuition and related payments, making loans a more attractive option.

Self-Financing Students

Families paying for education from personal savings still face 5% TCS on remittances exceeding Rs 7 lakh, requiring careful financial planning to manage tax deductions and reduce unnecessary financial burdens.

By eliminating TCS on substantial loan-funded remittances, the government acknowledges the financial challenges families face and provides much-needed relief for students pursuing overseas education.

Strategic Financial Planning Post-Budget

Securing loans from institutions specified under Section 80E can lead to significant tax savings, as remittances made through these loans are exempt from TCS, regardless of the amount.

Plan Remittances Wisely

For those funding education through personal means, it’s prudent to limit annual remittances to Rs 7 lakh to avoid the 5% TCS. If higher amounts are necessary, be prepared for the additional tax and ensure proper documentation for future tax filings.

Maintain Comprehensive Records

Accurate documentation of all educational expenses and loan details is essential. This practice will facilitate smoother tax return processes and potential refunds of excess TCS paid.

Seek Professional Guidance

Navigating financial regulations can be complex, and expert advice can help students make informed decisions. Consulting financial advisors or education consultants can provide clarity on tax-saving options, eligible loans, and compliance requirements, ensuring a smoother transition to studying abroad.

Conclusion

The Budget 2025-26 introduces much-needed TCS relief for Indian students pursuing education abroad. These updates ease financial pressure on families, making international education more accessible. With strategic planning, students can optimize their remittances, ensuring compliance while reducing unnecessary tax burdens. This is a positive step toward supporting aspirational learners and their global ambitions.

(Author is Founder & Chief Education Officer, ReachIvy.com)

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