TCS is down, but the 'hidden fees' remain: Why budget 2026 is only step one for Indian students
India is experiencing a rare and welcome convergence of policy momentum. The Budget 2026 slashed Tax Collected at Source ( TCS) to a flat 2%, a reduction that benefits two of India's fastest-growing communities: the student heading to a university abroad, and the family taking their first international holiday. The previous rates of 5% on education remittances and a steep 20% on overseas tour packages had created a real and tangible barrier. Both will be gone come April 1.
And in December 2025, the Reserve Bank of India issued directions to Authorized Dealers (ADs) to ensure full fee transparency on forex transactions, requiring financial institutions to disclose all charges and exchange rate markups before a transaction is initiated on an online platform. For students as well as international travellers, the TCS reduction announced in the Budget is meaningful, and when combined with the RBI's direction to ADs, India has well and truly begun to dismantle the opacity that has quietly drained Indian households for decades. Together, these two moves represent the most significant shift in cross-border payment policy that Indian families have seen in years.
The mechanism of that opacity is worth understanding. Many traditional banks and remittance service providers advertise low fees or 'zero commission' while burying their real costs inside an inflated exchange rate. If the rate you are offered differs from what you see on Google, the mid-market rate, you are paying a hidden markup. Banks routinely apply markups of 3% to 3.5%. On a ₹30 lakh tuition transfer, that hidden fee can cost a family an additional ₹1 lakh, essentially negating the entire benefit of the TCS reduction. Similar markup is applied when you are using your credit cards for international transactions or want to load foreign currency in your prepaid forex card. Exchange Houses charge as high as 8% when a traveller exchanges Indian Rupee with foreign currency notes.
The RBI's directions is a great start to ensure transparency in the fees and rates by industry players. Mandatory pre-transaction disclosure changes the power dynamic entirely: when a customer can see the true cost before committing, providers who have relied on opacity must compete on actual value instead. The fintech sector, including certain providers like Wise, have already demonstrated that it is possible to offer the mid-market rate with a single, transparent upfront fee for students sending tuition payments and travellers spending abroad alike. The proposed framework would extend that standard of transparency as a baseline expectation across the entire industry.
The scale of the opportunity has substantial benefits to Indians. Indian students represent nearly one-third of the international student population in hubs like the US, UK, Canada, and Australia, with student outflows projected to hit 800,000 by 2030 and annual spending expected to soar to $66 billion. Alongside them, Indian outbound tourism is booming: in FY2024-25, Indians made an estimated 31.7 million trips abroad, and their estimated spends overseas exceeded $30 billion, a 25% increase on the previous year.
While the rules have been enacted, the responsibility still falls on students, parents, and travellers to be aware and cautious. Two habits are worth building:
Budget 2026 has opened the door wider for students and travellers alike. The RBI's directions for transparency would transform the room they walk into. It is now up to the financial sector to meet this moment with total transparency and ensure that India's global ambitions are not quietly taxed away through hidden fees.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
And in December 2025, the Reserve Bank of India issued directions to Authorized Dealers (ADs) to ensure full fee transparency on forex transactions, requiring financial institutions to disclose all charges and exchange rate markups before a transaction is initiated on an online platform. For students as well as international travellers, the TCS reduction announced in the Budget is meaningful, and when combined with the RBI's direction to ADs, India has well and truly begun to dismantle the opacity that has quietly drained Indian households for decades. Together, these two moves represent the most significant shift in cross-border payment policy that Indian families have seen in years.
The mechanism of that opacity is worth understanding. Many traditional banks and remittance service providers advertise low fees or 'zero commission' while burying their real costs inside an inflated exchange rate. If the rate you are offered differs from what you see on Google, the mid-market rate, you are paying a hidden markup. Banks routinely apply markups of 3% to 3.5%. On a ₹30 lakh tuition transfer, that hidden fee can cost a family an additional ₹1 lakh, essentially negating the entire benefit of the TCS reduction. Similar markup is applied when you are using your credit cards for international transactions or want to load foreign currency in your prepaid forex card. Exchange Houses charge as high as 8% when a traveller exchanges Indian Rupee with foreign currency notes.
The RBI's directions is a great start to ensure transparency in the fees and rates by industry players. Mandatory pre-transaction disclosure changes the power dynamic entirely: when a customer can see the true cost before committing, providers who have relied on opacity must compete on actual value instead. The fintech sector, including certain providers like Wise, have already demonstrated that it is possible to offer the mid-market rate with a single, transparent upfront fee for students sending tuition payments and travellers spending abroad alike. The proposed framework would extend that standard of transparency as a baseline expectation across the entire industry.
The scale of the opportunity has substantial benefits to Indians. Indian students represent nearly one-third of the international student population in hubs like the US, UK, Canada, and Australia, with student outflows projected to hit 800,000 by 2030 and annual spending expected to soar to $66 billion. Alongside them, Indian outbound tourism is booming: in FY2024-25, Indians made an estimated 31.7 million trips abroad, and their estimated spends overseas exceeded $30 billion, a 25% increase on the previous year.
While the rules have been enacted, the responsibility still falls on students, parents, and travellers to be aware and cautious. Two habits are worth building:
- Demand the mid-market rate: Always compare your provider's offered rate against the mid-market rate, available on Google. The best providers use this rate and charge a single, transparent upfront fee. Whether you are sending tuition fees abroad or loading a travel card for a holiday, if the total received does not match what you were quoted, walk away.
- Use technology to your advantage: Platforms that offer rate-lock features and rate alerts allow families to time large tuition payments when the Rupee is stronger. For travellers, products like the recently launched Wise Travel Card that support multiple currencies and convert at the mid-market rate mean every rupee goes further, whether you are in Bangkok, London, or New York.
Budget 2026 has opened the door wider for students and travellers alike. The RBI's directions for transparency would transform the room they walk into. It is now up to the financial sector to meet this moment with total transparency and ensure that India's global ambitions are not quietly taxed away through hidden fees.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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