If an overseas holiday has been on your mind, Union Budget 2026–27 has delivered some welcome cheer for Indian travellers. In a move expected to make international travel more affordable and easier to plan, Finance Minister Nirmala Sitharaman on Sunday, February 1, announced a sharp cut in Tax Collected at Source (TCS) on international tour packages, bringing it down to a flat 2%.
Presenting the Budget in the Lok Sabha, Sitharaman proposed slashing the TCS on overseas tour programme packages from the existing 5% and 20% slabs, while also removing any minimum transaction threshold. The measure is likely to reduce upfront costs for travellers and simplify overseas trip bookings.
What changes for international travellers?
Under the current rules, travellers booking overseas tour packages costing up to Rs 10 lakh attract a 5% TCS, while expenses beyond this limit are subject to a steep 20% TCS. These packages include costs related to airfare, hotel stays, boarding, lodging and other associated travel expenses.
With the new Budget proposal, this structure will be replaced by a uniform 2% TCS across all international tour packages, regardless of the total amount spent. Importantly, the government has also removed the minimum transaction limit, meaning the lower rate will apply equally to budget travellers and luxury holidaymakers.
The change is expected to provide immediate cash-flow relief, especially for travellers who previously had to block large sums upfront due to the higher 20% TCS on expensive packages.
Travel industry likely to benefit
Industry experts believe the move could lead to a revival in outbound travel demand, particularly among middle-income households that had been discouraged by the higher tax outgo in recent years. Tour operators and travel companies are also expected to benefit from smoother booking cycles and reduced customer hesitation caused by steep TCS deductions.
By simplifying the tax structure, the government has also addressed long-standing concerns raised by the travel industry about uneven slabs and booking complexities.
Relief under Liberalised Remittance Scheme (LRS)
The Budget 2026 has also extended relief under the Liberalised Remittance Scheme (LRS). Finance Minister Sitharaman announced a reduction in TCS from 5% to 2% on remittances made for education and medical purposes.
The lower rate will apply to remittances exceeding Rs 10 lakh for these two categories. At present, resident individuals, including minors, are allowed to remit up to USD 250,000 per financial year under LRS for permitted current and capital account transactions.
“I propose to reduce the TCS rate for pursuing education and for medical purposes under the Liberalised Remittance Scheme from 5 per cent to 2 per cent,” Sitharaman said while tabling her ninth consecutive Union Budget.
However, she clarified that remittances under LRS for purposes other than education and medical treatment will continue to attract a higher 20% TCS.
What this means for travellers
For Indian travellers, the reduction in TCS on overseas tour packages is expected to lower upfront costs, improve affordability and make international holidays more accessible. Combined with easing under LRS for education and medical remittances, the measures signal a broader attempt by the government to simplify tax compliance while supporting consumer spending.
As global travel continues to rebound, the Budget 2026 announcements are likely to give Indian outbound tourism a fresh push.
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