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Budget 2026: Major TCS Rate Cuts Announced
1 Feb
Summary
- TCS rates reduced for tendu leaves, foreign education, and medical treatment.
- Scrap and mineral sales will see an increased TCS rate to 2%.
- Overseas tour packages now attract a reduced 2% TCS rate.
In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman proposed a comprehensive restructuring of the Tax Collected at Source (TCS) system.
The overhaul aims to simplify compliance by reducing the number of different TCS rates and rationalizing them for specific goods and services. This move is intended to lessen the upfront financial strain on taxpayers and reduce cash outflow.
Notable reductions include the TCS rate on tendu leaves falling from 5% to 2% and a significant cut for remittances under the Liberalised Remittance Scheme (LRS) for education or medical treatment. Amounts exceeding ₹10 lakh for these purposes will now attract a 2% TCS, down from 5%.
Furthermore, the TCS rate for overseas tour packages, encompassing travel and accommodation expenses, has been reduced to 2% for amounts up to ₹10 lakh, and also to 2% for amounts exceeding ₹10 lakh, a substantial decrease from the previous 20%. Conversely, the TCS on the sale of scrap and certain minerals like coal and lignite will be hiked from 1% to 2%.
These proposed changes are expected to provide substantial relief to families funding overseas education and medical needs, while also making international travel more affordable by lowering upfront tax liabilities.
