NEW DELHI: For many Indian parents balancing education loans, savings and monthly remittances to support children studying overseas, the Budget offers financial relief.The Centre’s decision to cut tax collected at source (TCS) on education-related foreign transfers from 5% to 2% under the liberalised remittance scheme (LRS) is expected to ease the immediate cash burden on families navigating the high cost of international education. Until now, remittances exceeding Rs 10 lakh a year for overseas education attracted a 5% TCS, meaning a sizeable portion of funds was held back upfront, even though it could later be claimed while filing income tax returns. This has been lowered to 2% for education and medical purposes.
Data from the Bureau of Immigration shows that 7.6 lakh Indian students went abroad for higher studies in 2024, a drop from 8.9 lakh in 2023, but still reflective of the strong demand for overseas education. Over the last five years, the number of outbound students has grown sharply, from 2.6 lakh in 2020 to 4.5 lakh in 2021, 7.5 lakh in 2022, to nearly 9 lakh in 2023, before dipping in 2024. The difference is tangible. For instance, earlier, a family sending Rs 1 lakh every month for tuition and living costs saw Rs 5,000 deducted as TCS, leaving Rs 95,000 to reach the student. Over a year, this added up to Rs 60,000. With the reduced rate, the deduction drops to Rs 2,000 per month, allowing Rs 98,000 to be credited overseas. On an annual remittance of Rs 12 lakh, this translates into savings of Rs 36,000 in upfront deductions.“For us, every rupee counts,” said Saroj, whose son ding a master’s in Canada. “Between tuition, rent and groceries abroad, the costs add up very fast.”Delhi continues to send thousands of students each year to universities in the US, UK, Canada, Australia and Europe, making foreign education a growing aspiration for middle-class families. But with international tuition fees rising and exchange rates remaining unfavourable, parents say liquidity matters as much as total costs.Abhinav, who is planning to send his daughter abroad for further studies, said the change offers practical relief. “The lower TCS doesn’t reduce the total cost, but it certainly softens the immediate hit,” he said.Some experts believe the decision could encourage students to pursue joint degrees, exchange programmes and specialised courses. However, not everyone is convinced. “It contradicts the Indianisation of knowledge systems, a vision central to the Viksit Bharat mission, by promoting the opposite. It also fuels brain drain and domestic income leakage,” said Vineeta Sharma, associate professor of economics at Kirorimal College.TCS is collected by banks or authorised dealers at the time of overseas remittance, depending on the purpose of transfer.
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