LRS Big Relief: Higher TCS Limit & Zero Tax on Education Loans

Current position — reviewed 22 August 2026

These relaxations were enacted and took effect on 1 April 2025, so they are law rather than a proposal.

• The TCS threshold on remittances under the Liberalised Remittance Scheme is Rs 10 lakh in a financial year, raised from Rs 7 lakh.

• Remittances for education funded by a loan from a specified financial institution attract nil TCS.

• Other remittance purposes continue at the rates prescribed for the relevant category, and TCS collected is creditable against your tax liability or refundable on filing.

• For remittances on or after 1 April 2026 the provision is renumbered under the Income-tax Act, 2025; confirm the current threshold and rate for the financial year of your remittance before you send funds.

CBDT Eases TCS Burden on Foreign Remittances and Students

In a significant taxpayer-friendly move, the Central Board of Direct Taxes (CBDT), under the Ministry of Finance, has proposed major relaxations in the Tax Collected at Source (TCS) framework applicable to foreign remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). These changes, effective from 1 April 2025, are aimed at reducing compliance pressure, improving cash flow for families, and providing targeted relief to students pursuing education abroad.

The proposal focuses on two key areas:

1. Increasing the LRS threshold for TCS applicability, and
2. Completely removing TCS on education loan remittances.

1. Higher LRS Threshold: From ₹7 Lakh to ₹10 Lakh

Under the existing provisions of Section 206C(1G) of the Income-tax Act, 1961, TCS was applicable once total foreign remittances under LRS crossed ₹7 lakh in a financial year.

The CBDT has now proposed to increase this threshold to ₹10 lakh, meaning:

• No TCS will be collected if total remittances under LRS remain within ₹10 lakh in a financial year.
• TCS will apply only on the amount exceeding ₹10 lakh, not on the entire remittance.

This amendment has been introduced by modifying the first proviso to Section 206C(1G).

📌 Important Note:
This enhanced threshold does not apply to overseas tour packages, which will continue to be governed by a separate and stricter TCS framework.

2. Zero TCS on Education Loan Remittances

Perhaps the most impactful relief comes for students studying abroad.

Earlier:

• Remittances made from an education loan obtained from a specified financial institution (as per Section 80E) attracted TCS at 0.5%.

Now:

• The government has proposed to reduce this TCS rate to NIL (0%).
• This has been done by amending clause (i) of Section 206C(1G).

This means:

• Students using bank-approved education loans for overseas education will no longer face upfront tax collection, improving affordability and reducing financial stress on families.

Why This Change Matters

These proposals signal a clear policy intent:

• Lower upfront tax burden on genuine foreign remittances
• Encouragement for higher education, especially overseas studies funded through loans
• Improved cash flow for taxpayers, as TCS often created liquidity issues despite being adjustable later
• Simplified compliance and reduced friction in international transactions

While TCS rates on certain other LRS remittances have been rationalised or increased, the complete exemption for education loans clearly reflects the government’s priority toward supporting students and long-term human capital development.

What Taxpayers Should Do

• Track total LRS remittances carefully to stay within the ₹10 lakh threshold.
• Ensure education loans are taken from specified financial institutions to claim NIL TCS benefit.
• Remember that TCS is not a tax cost, but an advance collection adjustable against final tax liability—still, avoiding it improves cash flow.

Conclusion

The CBDT’s proposal to raise the LRS TCS threshold and fully exempt education loan remittances marks a welcome and practical reform. It balances revenue considerations with genuine taxpayer relief, especially for students and middle-class families funding overseas education.

If implemented smoothly, these changes will make foreign remittances simpler, cheaper, and more taxpayer-friendly in the coming financial years.