During the Union Budget 2026-27 presentation, Finance Minister Nirmala Sitharaman proposed a significant overhaul of the tax collected at source (TCS) framework, aiming to reduce the multiplicity of rates, as well as rationalise the TCS rates on certain goods and services.
Presenting her ninth consecutive Budget, Sitharaman said the cut in TCS rates in specific areas aims to ease the financial burden on taxpayers. This announcement comes as part of the government’s broader effort to simplify tax compliance and reduce upfront cash outgo.
Proposed changes
— Sale of alcoholic beverages for human consumption: TCS rates on alcoholic drinks will be increased from 1% to 2%.
— Sale of tendu leaves: This product will attract a TCS rate of 2% if the change is approved, down from the earlier rate of 5% during its sale.
— Sale of scrap: The Budget 2026 proposes to hike the TCS rate on the sale of scrap to 2%, from the current 1% figure.
— Sale of minerals (coal, lignite, or iron ore): TCS rate on the sale of these products has been proposed to be hiked from 1% to 2%.
Reduction in TCS for education, healthcare expenses
Finance Minister Nirmala Sitharaman also announced a reduction in the TCS rate for education and medical purposes from 5% to 2% in the Union Budget 2026, providing major relief for students and families.
The TCS rate on remittance under the LRS of an amount or aggregate of the amounts exceeding ₹10 lakh has been proposed at 2% for purposes of education or medical treatment from the current 5%, according to the announcement.
Meanwhile, for the sale of an “overseas tour programme package,” including expenses for travel or hotel stay or boarding or lodging or any similar or related expenditure, the TCS rate has been reduced from 5% to 2% on amounts up to ₹10 lakh. The TCS rate on amounts exceeding ₹10 lakh was 20%. It has also been reduced to 2%.
How does it ease tax burden on people?
The reduction in TCS rate will help reduce cash-flow pressure on Indian households, who are either planning foreign travel, education or medical treatment abroad.
If this proposal is approved and implemented, families who seek to book overseas tour packages will now have to pay far less tax upfront, freeing liquidity for spending on other things.
The introduction of simpler tax laws, extended timelines and targeted exemptions in this Budget will also help cut compliance anxiety and litigation for small taxpayers.
Experts hail move
“The reduction of TCS under the Liberalised Remittance Scheme from 5% to 2% for education and medical remittances is a welcome move that eases the upfront cash-flow burden on individuals,” said Moin Ladha, Partner at Khaitan & Co.
Speaking of the move's impact, the expert further added that it is expected to provide meaningful relief to families who fund overseas education and medical treatment, while the existing reporting and monitoring framework under the LRS remains in place.
