New Tax Break Makes Studying Abroad Easier for Indians

Good news for study abroad aspirants—the finance minister revises the Tax Collected at Source (TCS) on education loans and other foreign remittances. The finance minister, Nirmala Sitharaman, presented the union budget 2025–26, announcing a big relaxation on TCS for students planning their higher studies from foreign universities. The decision has come as a relief for students and their families, easing the financial burden on them.

This Story also Contains

1. What is TCS?
2. What is Section 80E?
3. What is the impact of the tax break on students?
4. Lower taxes, bigger opportunities

As per the new TCS rates on foreign remittance, if a student takes an education loan from an approved charitable institution or a reputed financial institution under Section 80E of the IT Act, he/she does not have to pay any TCS for remittances up to 7 lakh and above. And if the loan is taken more than 7 lakh from an organization that is not covered under 80E, students need to pay 5% TCS on the amount that is more than 7 lakh.

What is TCS?

Tax collected at source, or TCS, refers to the collection of tax through a specified percentage from the seller by the buyer at the time of sale. If we talk about the foreign remittance from India, the Liberalized Remittance Scheme (LRS) applies, and the TCS is collected by the authorized dealers at the time of remitting funds abroad. One thing to note is that this TCS is not an additional tax but an advance payment tax.

What is Section 80E?

Under Section 80E of the Income Tax Act, a borrower is eligible for deduction of tax paid on loan interest taken solely for higher studies. The interest shall be solely for loans raised from a notified bank or specified public financial institutions. Further, the deductibility is for only the interest and can be claimed for as many as eight years or as long as it is repaid, whichever happens earlier. The measure helps lighten the tax burden students face in paying for their educations through loans.

What is the impact of the tax break on students?

As per the reports, over 80% of students worry about the cost of education when studying abroad. This recent tax break will ease the financial burden on students and their families and help in financial planning. This development aims to strengthen the education system of the country, enabling it to boost the skills development sectors.

Earlier, Section 80E included a 0.5% TCS charge on an education loan from a recognized institution for reimbursements up to Rs 7 lakh, and such a rate was to be levied on any advance amount beyond Rs 7 lakh. For example, if a student had to pay a total amount of 30 lakh for higher education, he/she had to pay 11,500 as TCS. Now, only the total amount needs to be paid. With this new tax break, the entire process will get simplified, and the total upfront cost associated with studying abroad will also be reduced.

Following are some of the impacts of tax breaks on Indian students:

• Sustained reduction in upfront costs, which makes it relatively easier to control your total study abroad costs.

• Manage your family's cash flow more efficiently as it navigates the critical first months of foreign education.

• Less paperwork and simplified financial planning for studying abroad.

Lower taxes, bigger opportunities

This tax break means lower taxes and bigger opportunities for students who want to pursue higher studies abroad. It's an excellent time to announce a budget for the fiscal year 2025-2026 as a relief to aspirants seeking higher education abroad. It means the government recognizes the need of global Indians and takes steps toward affordability and effortless means. This big relaxation will encourage more students to fulfill their dreams of studying abroad without burning a hole in their pockets.