Blog-details

Union Budget 2026-27: International Tour Package Tax Slashed to 2%, Foreign Travel Gets Cheaper

The Union Budget 2026-27 has brought major relief for Indian travelers planning international vacations to popular destinations like Dubai, Thailand, Singapore, Maldives, Europe, the USA, Australia, Bali and Switzerland. In a move that directly benefits tourists, the government has reduced the international tour package tax, making overseas travel significantly more affordable. This announcement was made by Finance Minister Nirmala Sitharaman while presenting her ninth consecutive Union Budget in the Lok Sabha. This change is being seen as a landmark reform under budget 2026 for tourism, especially for outbound travel to destinations such as Dubai, Thailand, Singapore, Europe and the USA, which had become expensive due to high upfront taxes.

Understanding TCS on Overseas Tour Packages

Tax Collection at Source, commonly known as TCS, is a tax collected by tour operators at the time of booking an overseas tour package to destinations like Dubai, Bali, Maldives, Singapore, Europe, Australia or the USA. These tour packages generally include international flights, hotel stays, boarding, lodging, sightseeing and other travel-related services. Earlier, this tax increased the upfront cost of booking foreign trips to popular destinations such as Thailand, Dubai, Maldives and Europe, even though it could later be adjusted while filing income tax returns. The burden of paying higher amounts at the booking stage discouraged many Indians from planning international travel.

International Tour Package Tax Changes in Budget 2026

Under the Union Budget 2026-27, the government has completely simplified the TCS structure for overseas tour packages to destinations like Singapore, Dubai, Bali, Maldives, Europe and the USA. A flat 2 percent TCS will now apply on all international tour packages, regardless of the total amount spent. Earlier, overseas tour packages to destinations such as Europe, Australia, the USA and long-haul countries attracted a 5 percent TCS for spending up to ten lakh rupees, while any amount above that threshold was taxed at 20 percent. This slab-based system has now been removed, making the tax structure simpler and more transparent. This reduction in the international tour package tax is expected to make foreign travel planning easier and more budget-friendly for Indian tourists visiting destinations like Dubai, Thailand, Singapore and Maldives.

Why This TCS Cut Matters for Indian Travelers

The biggest issue with the earlier TCS system was the high upfront payment required while booking an international trip. Even though TCS was refundable or adjustable later, travelers still had to block extra money at the time of booking. With the new 2 percent TCS rule under budget 2026, the upfront financial pressure has reduced significantly. This allows travelers to plan better, manage cash flow easily and allocate more budget towards experiences rather than taxes. As a result, international travel is likely to see higher demand from Indian tourists.

LRS Tax Relief Announced in Union Budget 2026-27

Apart from overseas tour packages, the finance minister also announced relief under the Liberalised Remittance Scheme, commonly known as LRS. Under the new proposal, remittances made for education and medical purposes will now attract a reduced TCS rate of 2 percent instead of the earlier 5 percent. This reduced rate will apply to remittances exceeding ten lakh rupees for education and medical treatment abroad. However, remittances under LRS for purposes other than education and medical needs will continue to attract a higher TCS of 20 percent. This move brings relief to families sending money abroad for higher education or healthcare and aligns with the broader intent of budget 2026 for tourism and global mobility.

Budget 2026 for Tourism and Infrastructure Development

The Union Budget 2026-27 also focuses on strengthening India’s tourism and travel infrastructure. The government has announced the development of five tourism hubs across the Purvodaya states, including Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh. These destinations will receive infrastructure upgrades and better connectivity. In addition, seven high-speed rail corridors will be developed to connect major cities, improving inter-city travel and promoting sustainable transportation. The budget also proposes the creation of five regional medical tourism hubs, combining healthcare services with research, education and post-treatment care facilities.
These initiatives reflect the government’s long-term vision to position tourism as a key economic growth driver.

Travel Industry Response to Budget 2026

The travel industry has largely welcomed the announcements made in budget 2026. Industry leaders believe that reducing TCS on overseas tour packages removes a major psychological and financial barrier for Indian travelers. The focus on infrastructure, destination development and experiential tourism is also expected to improve the overall travel ecosystem in India.
According to experts, if these measures are implemented effectively, Indian tourism can shift from being volume-driven to experience-led.

What Budget 2026 Means for Your International Travel Plans

For Indian travelers, the Union Budget 2026-27 makes international travel more accessible and affordable. Lower taxes, simplified rules and reduced upfront costs make this an ideal time to plan overseas vacations, whether for leisure, education or medical purposes.
The reduction in international tour package tax ensures that travelers can spend more on meaningful experiences rather than unnecessary tax burdens.

Plan Your International Trip Smartly After Budget 2026-27

If you are planning an overseas vacation, now is the perfect time to take advantage of the benefits announced in budget 2026 for tourism. To truly benefit from the Union Budget 2026-27, choosing the right travel partner is important. Planning your international trip with Travsetgo allows you to enjoy lower travel costs due to the newly reduced 2 percent TCS rule, while also receiving customized international tour packages tailored to your preferences. With smooth and hassle-free booking support, Travsetgo helps you make the most of the latest budget 2026 tourism benefits. Now that the tax burden on overseas travel has been significantly reduced, your dream international vacation is closer and more affordable than ever.