The Union Budget 2026 has brought welcome news for Indian travelers planning international holidays. Finance Minister Nirmala Sitharaman announced a sharp reduction in Tax Collected at Source (TCS) on foreign travel, lowering the rate to a flat 2%. The minimum amount requirement has also been removed, making it easier to book foreign tours at a lower TCS rate in India.
Earlier, overseas tour packages attracted a TCS of 5% on spending up to ₹10 lakh and 20% on amounts above that, leading to high upfront costs for travelers. The new uniform rate is aimed at reducing this burden and making international travel more affordable.
TCS in travel is a tax collected by travel companies at the time of booking an international tour package. While this amount can be adjusted against a traveler’s final income tax or claimed as a refund, it often results in money being blocked for months.
Under the earlier system, travelers booking expensive international trips had to pay a large amount as TCS upfront, even though it was not a final tax. This often discouraged middle-class families and young professionals from planning long-haul or premium holidays.
Union Budget 2026 Travel Tax Relief: The Impact
With TCS reduced to 2% for foreign travel, this Budget 2026 TCS announcement on overseas tour packages is a major win for both travelers and travel companies, eliminating a friction point in purchasing decisions and greatly simplifying backend compliance requirements for the industry.
Expected Boost in Outbound Tourism: Industry experts believe the decision will give a strong push to India’s outbound tourism market. With the simplified structure, travel planners expect an increase in bookings, especially for Europe, Southeast Asia, and long-haul destinations.
The timing is also significant. Indian outbound travel demand has been steadily rising post-pandemic, with 2025 seeing strong growth in international leisure travel. The TCS cut is likely to accelerate this trend in the upcoming summer and festive travel seasons.
Win-Win for Travel Companies: For travel businesses, the change removes a major friction point during the booking process. Earlier, customers often hesitated to confirm high-value tours after seeing the large TCS amount added to the invoice. The lower rate makes pricing more transparent and easier to justify.
TCS on Overseas Tour Packages: Other Key Points
- TCS is still a collection mechanism, not a final tax. It will be adjustable against income tax liability or refundable when filing returns.
- The revised TCS rate applies from April 1, 2026, in line with the financial year and tax implementation cycle.
- Other categories of foreign remittances that do not fall under the concessional 2% regime will continue at higher TCS rates.
As Indians plan their international trips this year, it remains to be seen whether the tax relief leads to more bookings and stronger travel demand. For travel companies, this Budget creates better conditions to attract customers and grow in a highly competitive global tourism market.
