- Union Budget 2026 reduces TCS on overseas tour packages to a flat 2% rate
- Earlier TCS rates were 5% up to Rs 10 lakh and 20% above that threshold
- TCS cut aims to ease tax burden and simplify compliance for travellers
The Union Budget 2026 has eased the cost of travelling abroad for Indians. Finance Minister Nirmala Sitharaman, in the Parliament today, announced a reduction in the Tax Collected at Source (TCS) on overseas tour packages, making foreign travel more affordable. The TCS on overseas tour programme packages will now be levied at a flat 2%, replacing the earlier structure of 5% for packages up to Rs 10 lakh and 20% on higher‑value bookings.
This sweeping reduction eliminates the high upfront tax burden faced by travellers, tour operators and the booming outbound leisure industry. The move also simplifies compliance by removing value thresholds and implementing one uniform rate.
Part of a Broader Ease‑of‑Living Push
The rationalisation of TCS is aligned with the Budget's broader emphasis on ease of living and reducing compliance friction for individuals. The government has also lowered TCS rates under the Liberalised Remittance Scheme (LRS) for education and medical payments from 5% to 2%, signalling a shift towards friendlier tax treatment for resident Indian consumers.
Officials see the revamped TCS structure as a step toward correcting cash‑flow issues that travellers and service providers faced under the steep 2023 regime. With travel demand surging post‑pandemic and the sector emerging as a strong contributor to foreign exchange spending, the new rule is expected to boost outbound tourism significantly.
Industry Impact and Market Response
The travel and tourism industry, which had repeatedly flagged the earlier TCS framework as restrictive, is expected to benefit from improved liquidity and smoother transactions. Tour operators anticipate an increase in international package bookings as upfront costs drop considerably.
By reducing the overseas tour TCS rate to 2%, the government has positioned this Budget as one that prioritises consumer comfort and global mobility—making foreign travel more accessible for millions of Indians.
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