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Financing higher education abroad has always been a challenge for Indian students and their families. The Union Budget 2025-26 brings major updates to the Tax Collected at Source (TCS) rules, making overseas education more affordable.
In this blog, we break down the key TCS changes, how they impact students and parents, and what you need to do to benefit from these reforms.
The government has revised TCS on education-related foreign remittances, bringing clarity and relief for students using education loans or personal funds.
0% TCS on Education Loans for 80E-Compliant Banks
If your bank falls under Section 80E compliance, the TCS charge is now 0%. Previously, a 0.5% TCS was applied to loan amounts exceeding ₹7 lakh. This update makes education loans from 80E-compliant banks the most cost-effective way to finance international studies.
5% TCS on Education Loans Without 80E Compliance
For students borrowing from banks that do not comply with Section 80E, a 5% TCS will be charged on loan amounts exceeding ₹10 lakh. Earlier, this tax applied to loan amounts exceeding ₹7 lakh. This revision increases the tax-free threshold for such loans, but students should still verify if their lender meets 80E criteria before applying.
5% TCS on Self-Funding for Tuition Fees
If students or parents use their own funds to pay tuition fees, a 5% TCS applies to amounts exceeding ₹10 lakh. Previously, the TCS threshold was ₹7 lakh, meaning families now have more flexibility before incurring this tax. Those funding tuition independently should plan remittances carefully to minimize tax deductions.
Better Cash Flow and Reduced Tax Burden
The budget reduces the immediate tax impact for families funding education abroad. Students taking 80E-compliant loans no longer face TCS deductions, improving cash flow. Self-funding families can now send up to ₹10 lakh tax-free, reducing upfront costs.
Encourages Education Loans Over Self-Funding
With 0% TCS on 80E-compliant loans, borrowing from eligible banks is now the most tax-efficient way to fund education abroad. Parents who previously preferred paying tuition upfront may now consider loans to avoid unnecessary tax deductions.
Who Benefits the Most?
Students taking education loans from 80E-compliant banks will gain the most, as they will not incur any TCS deductions. Families self-funding tuition also receive a benefit, as the tax-exempt limit has been raised from ₹7 lakh to ₹10 lakh, reducing the overall tax burden.
1. Opt for an Education Loan from an 80E-Compliant Bank
Education loans from 80E-compliant banks now have 0% TCS, making them the most cost-effective financing option. Students should compare loans from different banks to ensure they qualify for this benefit.
2. Plan Your Remittances Smartly
Parents and students who are self-funding tuition should try to keep annual remittances below ₹10 lakh to avoid the 5% TCS. If tuition costs exceed this threshold, breaking payments into multiple financial years may help manage tax outflow more effectively.
3. Consult Financial Experts
Students should work with study abroad consultants, financial planners, or tax advisors to fully understand the impact of these new TCS regulations and optimize their education funding strategy.
The Union Budget 2025-26 has introduced much-needed relief for Indian students by eliminating TCS on 80E-compliant education loans, raising the TCS exemption threshold to ₹10 lakh for self-funded education, and providing a clear financing roadmap for students and families.
With the right financial planning, these changes make studying abroad more affordable than before. Students and parents should carefully evaluate their funding options to maximize savings and minimize unnecessary tax deductions.
1. What is the new TCS rate for education loans?
The TCS rate is 0% for 80E-compliant loans and 5% for non-80E loans exceeding ₹10 lakh.
2. How much can I send abroad for tuition without paying TCS?
Self-funded tuition payments up to ₹10 lakh per year are now exempt from TCS.
3. Should I take an education loan instead of self-funding?
If your bank is 80E-compliant, taking an education loan is the best option, as you avoid TCS deductions entirely.
4. Will TCS apply to living expenses abroad?
These changes only apply to tuition fees. Other remittances, such as accommodation or personal expenses, may still attract TCS.
