Union Budget 2025: What the tax and funding reforms mean for Indian students abroad

For tens of thousands of Indian students pursuing degrees abroad, India’s Union Budget 2025 carries more weight than just fiscal projections. It shapes their access to funding, their tax liabilities, and their long-term financial viability. This year’s budget, while fixated on domestic economic growth, has left international students at an inflection point—offering relief in some areas while tightening regulations in others.
Funding the Global Indian Dream
The most notable takeaway is the allocation of ₹10,000 crore under the Fund of Funds for Startups—a move that may indirectly benefit students pursuing entrepreneurial careers post-education.More immediately, however, the expansion of the PM Research Fellowship to cover 10,000 additional fellowships in IITs and IISc is a welcome move. Though not directly applicable to students abroad, this signals a continued commitment to research funding, potentially incentivizing Indian-origin scholars to return.
Beyond scholarships, there is little in direct financial support for students seeking international education. Unlike in past years, where government-backed student loans saw enhancements, Union Budget 2025 is notably silent on easing education loan interest rates or expanding collateral-free loan limits for students heading overseas. This omission could force more aspirants to turn to private lenders, often at exorbitant rates.
The Tax Implications: More Money in Your Pocket?
The most significant tax announcement affecting middle-class families—including those funding their children’s education abroad—is the increase in the income-tax exemption threshold to ₹12 lakh per annum. This ensures that families earning up to ₹1 lakh per month will pay no income tax, potentially freeing up resources for tuition fees and living expenses.
However, the budget tightens tax compliance measures on remittances under the Liberalized Remittance Scheme (LRS). While the government did not explicitly raise the TCS (Tax Collected at Source) on foreign remittances for education, past hikes from 5% to 20% for non-loan-based payments remain a burden. Students who rely on direct family transfers for tuition fees and expenses could continue to feel the squeeze.
Implications for Indian Graduates Abroad
For students who seek employment post-study, India’s extended tax breaks for startups and international financial hubs (IFSCs) might encourage some to return. The five-year extension of tax benefits for startups incorporated before April 2030 may be an attractive proposition. Moreover, the government’s push for Global Capability Centres (GCCs) in tier-2 cities suggests a growing domestic job market for highly skilled professionals, particularly in fintech, AI, and engineering.
Conversely, students planning to stay abroad may find themselves navigating a more complex tax landscape. Proposed amendments in international tax agreements and new compliance requirements for NRIs (Non-Resident Indians) could increase their financial reporting burdens.
The Bigger Picture: An Opportunity Missed?
Despite the growing outflow of Indian students to destinations like the US, UK, Canada, and Australia, Budget 2025 does little to address systemic funding gaps. No new incentives for foreign education loans, no additional grants, and no tax deductions for education-related expenses indicate that self-funded students will continue to bear the brunt of rising tuition costs.
For a country that prides itself on being the world’s largest exporter of skilled talent, the budget’s lukewarm attention to outbound students is a missed opportunity. While tax relaxations and fellowship expansions offer some relief, they do not fundamentally alter the financial calculus of pursuing an international degree.
Indian students abroad remain caught between two worlds—betting on global opportunities while tethered to domestic policies. Budget 2025 does little to make that balancing act easier.