Six months into tax year 2026-27, the lower rate of TCS on education remittance is showing up in the bank statements of families paying fees abroad. The Finance Minister announced the cut from 5 per cent to 2 per cent in the Union Budget on 1 February 2026, and PRS Legislative Research records it as a reduction for education and medical remittances above ₹10 lakh. Many parents read the headline as a flat saving on every rupee sent for a child's studies. In practice, the amount a family pays depends on where the money comes from, how the bank codes the transfer and what else the same parent has already sent abroad this year.
That last point is where advisors can help most. The ₹10 lakh threshold below which no TCS is collected is shared across all of a person's remittances under the Liberalised Remittance Scheme, so an investment transfer made in May can use up the room a tuition payment in December was counting on. For clients who are funding a child's education and building assets overseas in the same year, the source and order of each remittance now matter more than the headline rate. Our guide to TCS on foreign remittance sets out the full rate table, and this article looks at how the education rule interacts with everything else a family sends abroad.
What the law now says about TCS on education remittance
The rate sits in Section 394 of the Income-tax Act, 2025, which took over the TCS rules of the old Act from 1 April 2026. According to the section text published by the Income Tax Department, an authorised dealer collects TCS once a person's remittances under the scheme exceed ₹10 lakh. The rate is 2 per cent where the purpose is education or medical treatment, and 20 per cent for every other purpose, which covers investment, gifts and the maintenance of relatives. A footnote to the education entry records that 2 per cent was substituted for 5 per cent by Act No. 4 of 2026, with effect from 1 April 2026, while the 20 per cent rate carries no amendment.
Two other provisions shape what families actually pay. Sub-section (4) of the same section says no TCS is collected when the amount remitted is a loan from a financial institution, as defined in the Act, taken to pursue education. Standard Chartered's notice to customers confirms that this nil rate continues from 1 April 2026, alongside the 2 per cent rate for self-funded education and medical payments above ₹10 lakh. Overseas tour packages now sit in a separate entry at 2 per cent from the first rupee, collected by the seller rather than the bank, so a holiday booked around a graduation follows a different rule.
Why the source of the money changes the answer
The same tuition bill can lead to three different outcomes. If the fee is paid from an education loan sanctioned by a bank or another financial institution covered by the Act, the bank collects no TCS on that transfer. If the parent pays from savings, the first ₹10 lakh in the tax year is free of TCS and the balance attracts 2 per cent. If the payment is coded under the wrong purpose, for example as a gift or as maintenance, the bank applies the 20 per cent rate meant for other remittances. Saurabh Arora, quoted by Outlook Money on 1 April 2026, warned that such a clerical error "can trigger a 20 per cent TCS rate".
For example, a client who remits ₹25 lakh from savings for a son's tuition in tax year 2026-27, with no other remittances that year, pays TCS of 2 per cent on the ₹15 lakh above the threshold, which is ₹30,000. Under last year's 5 per cent rate, the same transfer would have attracted ₹75,000. Had the fee been paid from an eligible education loan, the bank would have collected nothing. The difference is money held back at the point of payment, even though TCS is not a final tax and can be adjusted later.
How an investment remittance can use up the threshold
The threshold belongs to the person sending the money, identified by PAN, and it counts every remittance that person makes under the scheme in the tax year, whichever bank is used. Tax practitioners such as CA Somesh Chandak describe the ₹10 lakh limit as "cumulative across all purposes in a financial year", and our TCS guide applies the same reading. This is where clients who invest abroad and pay for education in the same year are most often surprised.
Take the same client from the earlier example and suppose that in May he sent ₹10 lakh abroad to invest, before the December tuition payment. The investment remittance falls entirely within the threshold, so the bank collects no TCS on it. By December the threshold is used up, and the full ₹25 lakh of tuition attracts 2 per cent, which is ₹50,000. Reverse the order and the arithmetic changes sharply. The tuition paid first attracts ₹30,000, and the later ₹10 lakh investment remittance sits wholly above the threshold at 20 per cent, which is ₹2 lakh.
None of this changes the client's final tax bill, because TCS is credited against the income tax payable for the year and any excess is refunded once the return is processed. What changes is cash flow. A parent who has ₹2.3 lakh sitting with the tax department instead of ₹50,000, often until a refund arrives months later, will want to know in advance that the timing of two transfers made the difference.
Family remittances and the questions they raise
Because the threshold is per person, some families split fee payments between two parents, or ask a grandparent to fund part of a semester. Each remitter then has an individual ₹10 lakh threshold, and each must code the payment correctly. That approach raises its own questions. When one family member gives money to another so that the second person can remit it, the clubbing of income rules and the gift tax provisions may apply, depending on the relationship and how the money is later used. Those questions belong with the client's CA, and the answer should be recorded before the money moves rather than explained after a notice arrives.
What advisors should do before the next fee payment
The practical work is a short review of each client's remittance calendar for the rest of tax year 2026-27. The steps below follow the order in which most problems appear, starting with what has already been sent.
- Ask whether the client has made any remittance this tax year, for any purpose and through any bank, and work out how much of the ₹10 lakh threshold is left.
- Check whether the next education payment will come from savings or from an education loan, and confirm with the lender that the loan qualifies.
- Make sure the remittance application names education as the purpose and that the bank holds the admission letter and fee demand it needs.
- Where an investment remittance is also planned, review the order of transfers with the client's CA, remembering that any TCS collected can be credited in the return.
- After each transfer, collect the TCS certificate and check that the amount appears in Form 26AS before the return is filed.
Certificates now carry a new number. From tax year 2026-27 the TCS certificate is Form 133, and our article on Form 133 and TCS certificates explains what it shows and when banks issue it. Advisors who introduce eligible clients through Raveum's partner page will recognise the pattern, because a family investing in diversified US commercial real estate through an investment remittance draws on the same threshold as its tuition payments. Any such investment carries risk, including loss of capital, illiquidity, distributions not being paid and currency movements, and its timing should never be driven by TCS alone.
The 2 per cent rate has made education remittances cheaper for families who pay from their own savings, and that is a welcome change. Yet the rate on the bank statement is the last link in a chain that starts with the source of funds, runs through the purpose code and ends with whatever the same parent has already sent abroad this year. Advisors who map that chain with clients at the start of each tax year, rather than at the fee deadline, will spare them most of the surprises. The TCS on foreign remittance guide remains the reference for every rate and threshold discussed here.
Frequently asked questions
What is the TCS rate on education remittance in 2026-27?
For tax year 2026-27, banks collect TCS at 2 per cent on self-funded education remittances above ₹10 lakh, down from 5 per cent last year. The first ₹10 lakh a person remits in the year carries no TCS. Payments funded by an education loan from a qualifying financial institution attract no TCS at all.
Is TCS charged on an education loan remittance?
No, provided the amount sent abroad is a loan from a financial institution as defined in the Income-tax Act, 2025, taken for education. Section 394(4) of the Act says the bank does not collect TCS on such a remittance. The client should confirm with the lender that the loan qualifies before the payment is made.
Is the ₹10 lakh TCS limit per person or per family?
The threshold applies per person, identified by PAN, and covers all of that person's remittances under the Liberalised Remittance Scheme in the tax year, whatever the purpose. Two parents each have their own threshold. When one family member funds another's remittance, the clubbing of income and gift tax questions should be checked with a CA.
Does an investment remittance affect TCS on later tuition payments?
Yes. An investment remittance made earlier in the tax year uses up part or all of the ₹10 lakh threshold, so a later tuition payment can attract 2 per cent TCS from its first rupee. Reversing the order can push the investment remittance into the 20 per cent rate, so the timing of both deserves attention.
Can a family get TCS on education fees back?
Yes. TCS is not a final tax. It appears in Form 26AS and is credited against the remitter's income tax for the year when the return is filed, with any excess refunded after processing. The real cost to the family is cash held by the tax department until the refund arrives.
What risks should a client weigh before investing abroad in a year of fee payments?
An overseas investment can lose value, may be hard to sell before the property or fund exits, may not pay distributions, and is exposed to currency movements that also raise the rupee cost of fees. Clients should make sure education costs are funded first and that the investment suits their time horizon and need for cash.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
