Budget 2026: FM Sitharaman proposes major TCS changes on overseas tour packages, education, medical purposes

Union Budget 2026 Live: The Union Budget has delivered welcome relief for Indians planning overseas travel, with Finance Minister Nirmala Sitharaman announcing a significant reduction in the Tax Collected at Source (TCS) on foreign tour programme packages. The move is expected to make international travel more affordable and ease the upfront tax burden on travellers.

Under the proposal, the TCS rate on overseas tour packages will be slashed from the existing 5% and 20% slabs to a uniform 2%, with no minimum spending threshold. As a result, travellers booking international tour packages will pay substantially lower tax at the time of purchase, simplifying the process from a tax compliance perspective.

“I propose to reduce TCS rate for pursuing education and for medical purposes under the liberalised remittance scheme, popularly known as LRS, from 5% to 2%,” says FM Sitharaman.

The Budget also offers relief to students and patients by lowering the Tax Collected at Source under the Liberalised Remittance Scheme (LRS) for education and medical treatment abroad. The TCS rate for these remittances will be cut from 5% to 2%, easing the financial burden on families sending funds overseas for essential purposes.

In addition, the government has moved to simplify tax deduction rules by clearly classifying the supply of manpower services as payments to contractors. This will bring such transactions under the existing contractor TDS framework, limiting tax deduction to 1% or 2% and reducing uncertainty, compliance disputes and cash-flow pressure for both businesses and workers.