India is set to make changes to its Tax Collected at Source (TCS) regime that will significantly reduce the upfront tax burden faced by families funding overseas education, with implications for student mobility and cash flow ahead of the April financial year.
TCS is a tax collected by banks or authorised dealers at the time a parent or student remits funds overseas. While the tax can be claimed back or adjusted when filing an income tax return, it requires families to pay the amount upfront, effectively locking away cash for extended periods.
Under the current framework, families remitting funds for overseas education are required to pay TCS at five per cent once remittances exceed prescribed thresholds. This has been a point of concern for students and education agents alike, as the tax applies regardless of the ultimate refundability and adds a substantial immediate cost to education payments.
From 1 April, changes to the TCS structure will reduce the amount collected upfront, easing pressure on family finances. While the tax remains creditable against future income tax liabilities, the revised rates significantly lower the quantum of cash blocked at the time of remittance.
By way of example, a student enrolled in Sydney with annual tuition fees of AUD 48,000 would typically remit approximately INR 31.2 lakh. Under the current rules, this attracts a TCS payment of around INR 1.56 lakh. From April, the same transaction would result in a TCS payment of approximately INR 62,400, substantially reducing the immediate financial outlay.
For Indian families, the change improves affordability and liquidity at a time when exchange rates, living costs and tuition fees remain elevated. For Australian institutions and education agents, the revised settings may remove a friction point that has delayed payments or influenced enrolment decisions.
While TCS was always intended as a tracking and compliance mechanism rather than a final tax, its impact on cash flow has been keenly felt across the outbound education market. The revised approach signals a recalibration by policymakers, balancing tax oversight with the practical realities faced by students pursuing education overseas.
Ravi Lochan Singh, CEO of Global Reach, an Education Agent in India and South Asia says “The reduction of TCS on remittances from 5 to 2 percent is a hugely welcome outcome. The forex rate and the weakening of the rupee has already made study overseas more expensive and any reduction in TCS is welcome. Ideally we should not have TCS on remittances for study overseas but at this time we welcome the reduction. The other aspect of the budget that will benefit the international education sector and the education agents working in India are certain changes in indirect taxes were proposed. The treatment of GST changes for the education agents who were receiving foreign exchange as fees from the Universities and they will now be treated as “exporters” instead of being “intermediaries” following the amendments to the “place of service” definition.
The changes will apply from the start of the next financial year, providing clarity for students planning to commence or continue studies abroad in 2026 and beyond.
