In a major relief for Non-Resident Indians (NRIs) and citizens sending money abroad, Finance Minister Nirmala Sitharaman announced significant changes to the Tax Collected at Source (TCS) rates in the Union Budget 2026-27, aimed at reducing upfront tax burdens and simplifying compliance.
Key Highlights:
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Lower TCS on Overseas Tour Packages:
The TCS on foreign tour packages has been slashed to 2%, down from the earlier 5% and 20% rates, with no minimum transaction threshold. This move is expected to make international travel more affordable for Indian tourists and reduce the initial tax outflow when booking overseas trips. -
Relief for Students and Medical Travelers:
Under the Liberalised Remittance Scheme (LRS), the TCS on funds sent abroad for education and medical purposes has also been reduced from 5% to 2%. Families sending money overseas for tuition or healthcare will now benefit from lower upfront taxation, easing financial planning for essential needs. -
Clarity on TDS for Manpower Services:
To remove ambiguity in tax rules, the government clarified that the supply of manpower services will be treated under payments to contractors. Consequently, the TDS on such services will be 1% or 2%, providing simpler compliance and reducing tax friction for both businesses and workers.
Implications:
These measures are expected to boost financial flexibility for NRIs, students, and patients, while also improving transparency and compliance in the services sector. Experts note that the move aligns with the government’s broader aim of reducing tax bottlenecks, promoting ease of doing business, and supporting citizens in global transactions.
By addressing key pain points in overseas remittances and service payments, the Budget 2026-27 ensures that India’s taxpayers, both domestic and abroad, face lower upfront tax burdens while benefiting from clearer regulations.