With an estimated 18 lakh Indian students projected to study abroad by 2024, India is set to become one of the top five countries sending students overseas for higher education. While traditional destinations like the US, Canada, the UK, and Australia remain popular, students are increasingly considering alternative options such as Germany, Ireland, Malaysia, Singapore, and New Zealand. Amidst this growing demand, India’s Union Budget for 2024-2025 introduces key reforms that could have a significant impact on how students and their families manage the financial burden of studying abroad.
TCS and Education Loans: Key Provisions for Students
The Union Finance Minister Nirmala Sitharaman, during the budget announcement, outlined several provisions aimed at reducing the financial strain of higher education. A key highlight is the government’s financial support for loans up to Rs. 10 lakh taken for education at domestic institutions. One lakh students annually will benefit from e-vouchers, coupled with a 3% interest subsidy on these loans. This initiative aims to make domestic education more affordable while providing targeted financial relief to students.
For international education, the budget brings clarity to the Tax Collected at Source (TCS) regulations, offering benefits for students taking out loans to finance their education abroad. Under the new rules, TCS rates are zero for loans up to Rs. 7 lakh and only 0.5% for amounts exceeding Rs. 7 lakh. This reduction significantly lightens the immediate tax burden on students who require financial aid, making higher education funding more manageable for families.
Self-Financed Education: Understanding the TCS Impact
While students opting for loans benefit from reduced TCS rates, those financing their education independently face stricter regulations. For self-financed education, the first Rs. 7 lakh is exempt from TCS, but any amount beyond that will attract a 5% TCS rate. Self-financed education expenses typically include tuition fees, living costs, travel, health care, and other university-related expenses. The higher TCS rate reflects the government’s strategy to regulate larger transactions involving overseas education while offering some relief for smaller payments.
TCS is a system where a percentage of the payment made for education is withheld and deposited with the government, ensuring tax compliance. The higher TCS rate for self-financed education aims to ensure that individuals sending large sums abroad contribute to India’s tax base. However, for those using loans to finance their studies, the lower TCS rate alleviates some of the financial strain.
Relieving the Tax Burden: TCS Payments and Employee TDS Adjustments
A new provision in the budget allows employees to notify their employers about any TCS payments made towards education. This information can be factored into the calculation of Tax Deducted at Source (TDS) on employee salaries, thereby reducing the total TDS deduction. This move is designed to streamline tax processes and reduce the financial burden on individuals by making it easier to recover excess taxes paid.
Government Initiatives for Skill Development
In addition to financial relief for higher education, the 2024-2025 Union Budget includes reforms to support skill development and the upskilling of the Indian workforce. The Finance Minister announced an allocation of Rs. 1.48 lakh crore for education and skill-building programs, including the revamping of 1,000 Industrial Training Institutes (ITIs) under a hub-and-spoke model. This initiative aligns with the broader aim of ensuring that students are equipped with skills that match industry demands, making them more competitive in the global job market.
Conclusion: Budget 2024 – A Mixed Bag for Study Abroad Aspirants
The Union Budget 2024-2025 presents a mixed impact for students planning to study abroad. On the one hand, the provisions for education loans and the reduced TCS rates for loan-financed education provide much-needed relief for those relying on financial aid. On the other hand, self-financed students face higher tax rates, making it essential for families to carefully plan and budget for the total costs involved.
Overall, while the budget introduces several positive measures, the cost of studying abroad remains a significant financial commitment for many Indian families. Students and parents must stay informed about these changes and explore all available options to minimize debt and manage expenses effectively.
