Finance minister Nirmala Sitharaman on Sunday announced that the government would reduce the tax collected at source (TCS) to 2 per cent from 5 per cent on foreign education remittances.

“I propose to reduce TCS rate for pursuing education and for medical purposes under the Liberalised Remittance Scheme (LRS) from 5 per cent to 2 per cent,” Sitharaman said in her budget speech.

The announcement came at a time the number of Indian students opting for overseas education remains substantially high. In a written reply in the Rajya Sabha, minister of state for external affairs Kirti Vardhan Singh said on July 24 last year that 7.5 lakh Indian students went abroad for education in 2022, 8.92 lakh in 2023 and 7.59 lakh in 2024 (see chart).

Ravi Lochan Singh, managing director of Calcutta-based education consultancy firm Global Reach, said the reduction of TCS on remittances was a welcome step in view of high forex rates and the weakening of the rupee, which had made studying overseas more expensive.

“Ideally we should not have TCS on remittances for overseas studies but at this time we welcome the reduction. Education agents who were receiving foreign exchange as fees from the universities will now be treated as exporters instead of being intermediaries. It is another welcome move," Singh said.