Budget 2025: Welcome relief for individuals remitting funds abroad for educational purposes under the Liberalized Remittance Scheme (LRS).

 

The Budget 2025 has indeed brought some welcome relief for individuals remitting funds abroad for educational purposes under the Liberalized Remittance Scheme (LRS).

– Increased Threshold: The threshold for Tax Collected at Source (TCS) on remittances under LRS has been increased from ₹7 lakh to ₹10 lakh. This means that individuals can now remit up to ₹10 lakh without incurring TCS.

– Exemption for Education Loans: Moreover, the Budget 2025 has proposed removing TCS on remittances for education purposes when the remittance is made using a loan from a specified financial institution.. This is a significant relief for students and parents who rely on education loans to fund their studies abroad.

These changes are expected to take effect from April 2025, pending RBI notification. Overall, these moves are likely to simplify tax compliance and reduce the financial burden on individuals pursuing education abroad.
Here are some examples to illustrate the changes to the Liberalized Remittance Scheme (LRS) for educational purposes:

Increased Threshold for TCS
Example 1:
Rahul wants to pursue a master’s degree in the US and needs to remit ₹12 lakh for tuition fees. Previously, TCS would have been applicable on the remittance above 7 lakh I.e. 5 lakh. However, with the increased threshold, TCS will now be applicable only on ₹2 lakh (₹12 lakh – ₹10 lakh).

Example 2:
Priya wants to remit ₹8 lakh for her undergraduate studies in the UK. Since the amount is within the increased threshold of ₹10 lakh, no TCS will be applicable.

Exemption for Education Loans
Example 3:
Karan takes an education loan of ₹15 lakh from a specified financial institution to pursue his MBA in Australia. He remits the entire amount for tuition fees. Since the remittance is made using an education loan, no TCS will be applicable.

Example 4:
Aisha takes an education loan of ₹10 lakh from a specified financial institution to pursue her bachelor’s degree in the US. She remits ₹8 lakh for tuition fees. Since the remittance is made using an education loan, no TCS will be applicable.

These examples demonstrate how the changes to the LRS will benefit individuals remitting funds abroad for educational purposes.