Module: | MODULE A: INTERNATIONAL BANKING
Q29: Consider the following statements regarding the Tax Collected at Source provisions on remittances as updated by the Union Budget 2026:
Statement 1: A general threshold limit of 10 Lakh Indian Rupees per financial year applies to most remittances, but the purchase of overseas tour packages attracts a flat 2 percent rate without any minimum threshold limit.
Statement 2: Remittances made for the purpose of medical treatment or self-funded overseas education attract a 5 percent rate on the amount exceeding 10 Lakh Indian Rupees.
Statement 3: For remittances directed towards overseas investments in foreign stocks or mutual funds, the rate remains at 20 percent on the aggregate amount exceeding 10 Lakh Indian Rupees.
Which of the statements given above are correct?
Statement 2: Remittances made for the purpose of medical treatment or self-funded overseas education attract a 5 percent rate on the amount exceeding 10 Lakh Indian Rupees.
Statement 3: For remittances directed towards overseas investments in foreign stocks or mutual funds, the rate remains at 20 percent on the aggregate amount exceeding 10 Lakh Indian Rupees.
Which of the statements given above are correct?
✅ Correct Answer: B
The correct answer is B. Statements 1 and 3 are correct, while Statement 2 is incorrect.
Tax Collected at Source is an advance tax collection mechanism applied to foreign exchange transactions to track capital outflows.
Structurally, the Union Budget 2026, presented in February 2026, introduced major changes to these rates.
A unified threshold limit of 10 Lakh Indian Rupees per financial year applies to most remittances, above which tax is collected.
Statement 1 is correct because the purchase of overseas tour packages was assigned a flat 2 percent rate with no minimum threshold limit.
Statement 3 is correct as remittances for overseas investments in foreign stocks or mutual funds retain the higher 20 percent rate on amounts exceeding the 10 Lakh Indian Rupees limit.
Statement 2 is incorrect because the Union Budget 2026 reduced the rate for medical treatment and self-funded overseas education from 5 percent down to 2 percent on amounts exceeding 10 Lakh Indian Rupees, significantly lowering the upfront financial burden on families.
Education funded by a recognized loan remains at 0 percent.
Tax Collected at Source is an advance tax collection mechanism applied to foreign exchange transactions to track capital outflows.
Structurally, the Union Budget 2026, presented in February 2026, introduced major changes to these rates.
A unified threshold limit of 10 Lakh Indian Rupees per financial year applies to most remittances, above which tax is collected.
Statement 1 is correct because the purchase of overseas tour packages was assigned a flat 2 percent rate with no minimum threshold limit.
Statement 3 is correct as remittances for overseas investments in foreign stocks or mutual funds retain the higher 20 percent rate on amounts exceeding the 10 Lakh Indian Rupees limit.
Statement 2 is incorrect because the Union Budget 2026 reduced the rate for medical treatment and self-funded overseas education from 5 percent down to 2 percent on amounts exceeding 10 Lakh Indian Rupees, significantly lowering the upfront financial burden on families.
Education funded by a recognized loan remains at 0 percent.