Budget 2026 Amendment
Liberalized Remittance Scheme and Budget 2026 Relief: The Union Budget 2026 announced a reduction in Tax Collected at Source (TCS) on foreign remittances made for education and medical treatment. This move provides financial relief to Indian families sending funds abroad under the Liberalised Remittance Scheme (LRS).
The decision is aimed at easing cash flow burdens. Lower TCS means individuals will have less upfront tax deduction when transferring money for genuine purposes like higher education and healthcare.
Static GK fact: The Union Budget is presented annually under Article 112 of the Indian Constitution and outlines the government’s estimated receipts and expenditure.
Understanding Tax Collected at Source
TCS is an additional tax collected by the seller from the buyer at the time of sale of specified goods or services. It is governed by Section 206C of the Income Tax Act, 1961.
Under LRS transactions, authorized banks collect TCS when individuals remit funds abroad beyond specified limits. The collected amount can later be adjusted while filing income tax returns, but it temporarily increases the remitter’s financial burden.
Static GK Tip: The Income Tax Act, 1961 is the primary legislation governing direct taxation in India.
What is the Liberalised Remittance Scheme
The Liberalised Remittance Scheme was introduced in 2004 by the Reserve Bank of India (RBI). It allows resident individuals to remit funds abroad without seeking prior approval, subject to limits.
Under LRS, an individual can send up to USD 2,50,000 per financial year. This limit applies to permissible current account transactions, capital account transactions, or a combination of both.
The scheme is available only to resident individuals, including minors. However, it is not available to corporates, partnership firms, Hindu Undivided Families (HUFs), or trusts.
Static GK fact: The Reserve Bank of India was established in 1935 under the RBI Act, 1934, and acts as India’s central banking authority.
Permissible and Prohibited Transactions
Permissible uses under LRS include foreign education, overseas travel, medical treatment abroad, purchase of foreign securities, and maintenance of close relatives overseas.
However, certain activities are prohibited. These include gambling, lottery purchases, and trading or speculation in foreign exchange markets. The scheme ensures that remittances are used for legitimate financial or personal needs.
The USD 2,50,000 ceiling is cumulative for all transactions within a financial year. Exceeding this limit requires special approval from the RBI.
Significance of the Reform
The reduction in TCS under Budget 2026 reflects the government’s focus on supporting global mobility of Indian citizens. With increasing overseas education trends and rising healthcare costs abroad, this policy change reduces compliance pressure.
It also aligns with India’s broader economic reforms aimed at simplifying taxation and improving ease of doing financial transactions.
Static Usthadian Current Affairs Table
Liberalized Remittance Scheme and Budget 2026 Relief:
| Topic | Detail |
| Scheme Name | Liberalised Remittance Scheme |
| Introduced By | Reserve Bank of India |
| Year of Introduction | 2004 |
| Annual Remittance Limit | USD 2,50,000 per financial year |
| Eligible Persons | Resident individuals including minors |
| Not Eligible | Corporates, partnership firms, HUFs, trusts |
| Governing Law for TCS | Section 206C of Income Tax Act 1961 |
| Recent Update | Union Budget 2026 reduced TCS on education and medical remittances |
