Tax on Foreign Remittance Budget 2024 Update: Lower TCS on Overseas Education Loans

Union Finance Minister Nirmala Sitharaman unveiled the 2024 Budget with an increased focus on education, skilling, and employment. While the domestic education sector received a boost, there is a significant change for those planning to study abroad. As per the new Tax Collection at Source (TCS) rules, studying abroad could become more expensive for self-funded students. However, taking an overseas education loan appears to be a smarter choice, thanks to the lower TCS on foreign remittance for education abroad.

Understanding TCS for Overseas Education: What is changing?

Tax Collection at Source, or TCS, is a tax that sellers collect from buyers at the time of sale. In the context of studying abroad, TCS is collected on remittances made for overseas education. The new budget outlines changes in TCS that will affect how much students pay when funding their education abroad. The good news? If your overseas education is funded by a loan, you will be taxed less compared to self-funding.

TCS on Self-Funding vs. Overseas Education Loans

Recent budget changes have made it important to understand what would be the right choice between self-funding and funding through education loans for higher education abroad. Knowing these details can help parents and students make smarter financial decisions as this would determine the TCS. Here’s how.

For students using their own funds, TCS is nil up to Rs. 7 lakhs but jumps to 5% on any amount above that. For instance, if your study abroad expenses amount to Rs. 12 lakhs, the 5% TCS will apply to the Rs. 5 lakhs above the initial Rs. 7 lakhs, resulting in a TCS of Rs. 25,000.

In contrast, those taking an overseas education loan benefit from a much lower TCS rate of 0.5% on amount above Rs. 7 lakhs. For the same Rs. 12 lakhs, the TCS would be just Rs. 2,500. This clearly shows a major saving for those who choose to finance their higher studies abroad through loans.

Additional Costs to Consider

It is important to keep in mind that along with TCS, there are other minor costs and tax on foreign remittance. A minimal 0.18% GST is applied, and remittance service providers may also charge service fees, which can vary.

To sum up, as per Budget 2024 an overseas education loan can significantly reduce the tax burden when compared to self-funding.

For students planning to study abroad, it is crucial to explore all funding options and check education loan eligibility. For this, Élan Overseas Education Loans can help them navigate the changes effectively and make the most cost-effective decisions.

Aspirants looking for this support can connect with our experts and get more insight into this aspect.