In a significant development for the travel industry, India’s Finance Minister, Nirmala Sitharaman, unveiled the Union Budget 2026-27, which introduces a substantial change in the Tax Collected at Source (TCS) on overseas tours. The TCS has been reduced from the previous tiered rates of 5% and 20% to a flat 2%, promoting greater liquidity for outbound tour operators and creating a fairer competitive landscape against foreign Online Travel Agencies (OTAs).

Beyond tax adjustments, the budget has allocated a remarkable INR 12.2 lakh crore for long-term infrastructure projects, including the construction of seven high-speed rail corridors and a new Seaplane VGF Scheme. This strategic pivot aims to lower travel costs for Indians while enhancing the domestic hospitality sector’s connectivity.

Key Aspects of the Union Budget 2026-2027:

• Infrastructure Boost: Focus on developing infrastructure in Tier 2 and Tier 3 cities, with a projected increase in public capital expenditure to INR 12.2 lakh crores.
• Medical Tourism Support: Plans to create five regional medical tourism hubs and allocate INR 10,000 crores for the Biopharma Shakti programme over the next five years. Minister Sitharaman stated, “I propose to launch a scheme to support states in establishing five regional medical hubs.”
• All India Institutes of Ayurveda: Introduction of three institutes to enhance quality in Ayurveda and expand export capabilities.
• National Institute of Tourism: A program aimed at upskilling 10,000 guides in collaboration with the Indian Institute of Management.

By making these significant investments and providing tax relief, the government aims to not only improve the travel experience for Indians but also bolster the economy through robust infrastructure development.