TCS on study abroad payments in 2026: what you pay with a loan and without

The short answer

• Above Rs 10 lakh in a financial year, TCS on education remittances under the Liberalised Remittance Scheme (LRS) is 2%.
• Up to Rs 10 lakh, no TCS applies.
• If the money sent is a loan from a financial institution for education, the Act says no TCS is collected on that amount.
• The rate was 5% before the change in the Budget of 1 February 2026.

What the law says

• On 1 February 2026 the Finance Minister said: "I propose to reduce TCS rate for pursuing education and for medical purposes under the LRS from 5% to 2%." (Outlook Business report of the Budget speech.)
• The Income-tax Act, 2025 takes effect on 1 April 2026 (PIB).
• Its Section 394 lists LRS remittances above Rs 10 lakh: 2% for education or medical treatment, 20% for other purposes.
• Section 394(4)(b) says no collection applies where the amount remitted is a loan obtained from a financial institution (as defined in section 129(3)(b)) for education.

What it means in rupees

TCS applies only to the part above Rs 10 lakh, and only when the money is not a qualifying education loan.

• Across Rs 20 lakh to Rs 40 lakh, TCS is about Rs 20,000 to Rs 60,000 at 2%.
• If the same amount is a qualifying education loan, the Act's exclusion means TCS is nil on that part.
• The Rs 10 lakh limit is counted across all LRS remittances in the year (the Act says "amount or aggregate"), so travel or gifts sent by the same PAN can use it up.

Is TCS an extra cost?

TCS is collected in advance. According to a commercial tax guide (Patron Accounting, April 2026), it can be adjusted against the income tax of the person whose PAN it was collected on, and any excess refunded when the return is filed. We have not verified refund timing. Until then, the money is locked, which matters when the family is already borrowing. A simple scale: Rs 40,000 locked for a year costs about Rs 3,600 to Rs 4,000 in interest if it is funded at 9 to 10 percent.

Part loan, part savings: what we could not confirm

Many families send one transfer funded partly by a loan and partly by savings. The Act excludes the loan portion. How the Rs 10 lakh limit is applied to the savings portion in a mixed transfer is not something we verified. Ask the bank (the authorised dealer) to show the TCS calculation in writing before the transfer.

Why older guides show different numbers

GyanDhan's TCS guide, dated 27 May 2025, shows 0.5% for loan-funded and 5% for self-funded, both above Rs 7 lakh. It does not mention the 2% rate. Poonawalla Fincorp, 9 February 2026, explains the cut to 2% and the nil rate for loans, and ends with an advertisement for its own loan. Check the date on any page. Rules for 2026 to 2027 should be read from the Income Tax Department or the Budget documents.

Five questions to ask before the first transfer

1. Is my loan from a lender that counts as a financial institution for the TCS exclusion, and will the bank mark the transfer that way?
2. Will TCS be collected on any part of this transfer? Please show the working.
3. How much of the Rs 10 lakh limit is already used this financial year, including by my parents' other transfers?
4. Whose PAN is the TCS credited to, and how do we claim it?
5. Which exchange rate and fees apply, so that I can compare the full cost?

What this site will and will not do

We do not recommend or rank lenders, and no lender pays us. We do not give tax advice. Talk to a chartered accountant for your case. Test your numbers in the calculator.

Read next: Education loan interest rate abroad, lender terms and site updates.

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