Paying University Fees Abroad (FY 2026-27): LRS Limits & the New 2% TCS
Last verified: October 2026, against the RBI Liberalised Remittance Scheme rules, the Finance Act 2026 and the Income-tax Act 2025. Rules change often and cases vary — confirm with your authorised dealer bank or a qualified adviser before acting. General information, not personal financial advice.
Sending your child — or yourself — to study abroad means moving large sums overseas for tuition and living costs. From 1 April 2026 the tax collected at source on education remittances paid from your own funds fell from 5% to 2%, and loan-funded education still attracts no TCS. Here is how to pay foreign university fees correctly in FY 2026-27.
Use the LRS — up to USD 250,000 a year
Education remittances go through the Liberalised Remittance Scheme, which allows up to USD 250,000 per student per financial year — enough for tuition plus living expenses on most courses. Remit through your bank (the authorised dealer), quoting PAN and the education purpose code, with the university’s fee invoice or admission letter as support.
TCS on study-abroad remittances
| How the education is funded | FY 2025-26 (above ₹10 lakh) | FY 2026-27 (above ₹10 lakh) |
|---|---|---|
| Education loan from a financial institution | Nil | Nil |
| Own funds or savings | 5% | 2% |
Below ₹10 lakh in a financial year, no TCS applies either way. TCS is adjusted against your income tax and refunded if in excess — it is a timing cost, not an extra tax.
Example: a ₹30 lakh first year
You pay ₹30 lakh for tuition and living costs from savings in FY 2026-27. TCS applies only to the ₹20 lakh above the threshold: 2% = ₹40,000 (it would have been ₹1 lakh at last year’s 5%). If ₹20 lakh of it comes from an education loan, that part attracts no TCS.
Tuition vs living expenses
Tuition paid to the institution and living expenses (rent, food, local travel) sent to the student both count within the same USD 250,000 limit. Many families remit tuition directly to the university and send a separate maintenance amount to the student’s overseas account.
The education-loan angle
A loan-funded structure brings two benefits: no TCS on the remittance, and a deduction for the interest — now under Section 129 of the Income-tax Act 2025 (formerly Section 80E), with no upper limit for up to eight years. Note that the deduction is available only under the old tax regime. See education loan tax benefits.
How to remit, step by step
- Get the university fee invoice, I-20 or admission letter, and your bank’s LRS declaration (Form A2).
- Choose how to send — wire transfer or your bank’s forex facility.
- The bank applies TCS only above ₹10 lakh in the year (nil if loan-funded).
- Keep all receipts and reconcile TCS in your AIS when you file.
FAQs
Is there TCS on education fees sent abroad? Nil if funded by an education loan from a financial institution; 2% on the amount above ₹10 lakh if paid from your own funds (from 1 April 2026). No TCS below ₹10 lakh.
How much can I send for study abroad? Up to USD 250,000 per student per financial year under the LRS.
Can I claim the TCS back? Yes, against your income-tax liability, with any excess refunded.
Is education-loan interest still deductible? Yes, under Section 129 of the Income-tax Act 2025 (old Section 80E), under the old tax regime only.
Sources
- RBI Liberalised Remittance Scheme — education remittances.
- Finance Act 2026 and CBDT FAQs on Budget 2026 — TCS on education and medical remittances reduced to 2% from 1 April 2026.
- Income-tax Act 2025 — Section 394 (TCS) and Section 129 (education-loan interest).