Union Budget 2025 Alters Funding, Taxes for Indian Students Abroad

For the tens of thousands of Indian students studying abroad, India’s Union Budget 2025 carries significant implications beyond fiscal projections. It impacts their access to funding, tax liabilities, and long-term financial viability. While the budget focuses on domestic economic growth, international students find themselves at a crossroads, receiving relief in some areas while facing tightening regulations in others.

Allocation to the Fund of Funds for Startups of Rs. 10,000 crores is a major highlight here, which might indirectly benefit students pursuing entrepreneurial careers after graduating. PM Research Fellowship being expanded into 10,000 fellowships to the IITs and IISc is also a good move, which shows that there is still a focus on research funding, which is going to attract Indian-origin scholars to return.

Beyond scholarships, there is little direct financial support for students pursuing education abroad. Unlike previous years, when government-backed student loans saw improvements, this year's budget lacks any announcements to ease education loan interest rates or increase collateral-free loan limits for students going overseas. This could push more students toward private lenders, often at steep rates.

The biggest tax relief for middle-class families funding their children's education abroad is the hike in the income tax exemption threshold to Rs. 12 lakh per annum. It ensures that families with incomes up to Rs. 1 lakh per month would not have to pay income tax, thereby releasing more money for tuition and living expenses. On the other hand, the budget has tightened the compliance measures on remittances under the Liberalized Remittance Scheme (LRS). Although the government did not hike the TCS on foreign remittances on education, still, past hiked percentages, from 5% to 20%, impose a burden on families who remit directly.

For those going back to India, tax deductions for start-ups and GCCs may present potential opportunities. However, staying abroad will add a more challenging tax environment because of the eventual changes in the international tax agreement and increased compliance for NRIs. Even while the outflow of Indian students is increasing day by day, Budget 2025 fails to address the issue of funding gaps for foreign education, leaving behind self-funded students who have to bear the tuition hike. While there are some tax breaks and fellowship expansions, they do not provide much cushion in terms of financial pressure in being abroad to study.