Liberalised Remittance Scheme (LRS) — Sending Money Abroad from India

The Liberalised Remittance Scheme (LRS) is the framework that lets a resident Indian send money out of India for almost any legitimate personal purpose — without applying for prior RBI permission. Introduced in 2004 with a USD 25,000 annual ceiling and progressively expanded since, the scheme today permits remittances of up to USD 250,000 per individual per financial year. The basic mechanics have stayed stable, but the 2023 changes to Tax Collected at Source (TCS) and the unresolved status of international credit card spending have made the scheme more complicated to use than the headline number suggests. This guide covers the current rules, the practical process at the bank, and the situations where LRS is the right tool.

Who Can Use LRS

LRS is available to resident individuals under FEMA — including:

Indian citizens ordinarily resident in India
Minors (parent/guardian must counter-sign Form A2)
Hindu Undivided Families (HUFs) — separately, up to USD 250,000

LRS is not available to:

Non-Resident Indians (NRIs) — they have separate, broader repatriation rights through their NRO/NRE/FCNR accounts
Companies, partnerships, or other entities — these have separate FEMA frameworks (Overseas Direct Investment, External Commercial Borrowings, etc.)
Trusts and societies — generally not permitted under LRS

If you are an NRI sending money out of India, the transferring money abroad guide is the right starting point — not LRS.

The USD 250,000 Limit

A resident individual can remit up to USD 250,000 (or its equivalent in any freely convertible foreign currency) per Indian financial year (1 April to 31 March) for any combination of permissible purposes.

Important details:

The limit is per individual — every adult member of a family can remit USD 250,000 separately. A family of four (two adults, two adult children) can collectively remit up to USD 1 million in a financial year, each via their own LRS allowance.
The limit is cumulative across all permitted purposes — not USD 250,000 per purpose.
The limit resets on 1 April each year.
PAN is mandatory for any LRS remittance.

Permissible Purposes — Current Account Transactions

These are the routine personal transfers allowed under LRS:

Private visits abroad (other than to Nepal and Bhutan)
Gifts and donations to overseas friends or relatives
Going abroad on employment — relocation expenses
Emigration — settling abroad
Maintenance of close relatives living abroad
Travel for business, attending conferences, training
Medical treatment abroad for self or family
Studies abroad — tuition fees, living expenses
Any other current account transaction not specifically prohibited

Permissible Purposes — Capital Account Transactions

These build assets or investments abroad and are also covered under LRS:

Opening foreign currency accounts with banks abroad
Purchasing immovable property abroad (residential, commercial, plot)
Investments abroad — listed shares, ETFs, mutual funds, bonds, debt instruments
Setting up wholly owned subsidiaries or joint ventures abroad (subject to additional Overseas Direct Investment rules above certain thresholds)
Loans to NRI / PIO close relatives in foreign currency, subject to specific conditions

Prohibited Purposes Under LRS

You cannot remit under LRS for:

Margin or margin call trading in overseas exchanges (forex trading on offshore platforms is essentially banned for resident Indians under this rule)
Purchase of foreign currency convertible bonds issued by Indian companies abroad
Purchase of lottery tickets, sweepstakes, banned/proscribed magazines
Remittances to countries identified as non-cooperative by FATF (currently includes North Korea, Iran)
Remittances to Bhutan, Nepal, Mauritius, Pakistan — for any purpose
Trading on the foreign stock exchanges or commodity exchanges, where the trade does not involve actual purchase of a security
Capitalisation of export proceeds held abroad (separate framework)

If you want to invest in US or other listed foreign stocks, that is allowed — but through proper channels (Indian broker with overseas tie-up, Interactive Brokers India unit, or directly through a foreign brokerage account funded under LRS). Margin trading or speculation on offshore retail forex platforms is what the rule blocks.

Tax Collected at Source (TCS) — The 2023 Regime

This is the single biggest practical change to LRS in recent years. The Finance Act, 2023 restructured TCS on LRS remittances effective 1 October 2023:

Purpose	TCS Rate
Education abroad — via education loan from a notified financial institution	0.5% above Rs. 7 lakh
Education abroad — self-funded	5% above Rs. 7 lakh
Medical treatment abroad	5% above Rs. 7 lakh
Overseas tour package — up to Rs. 7 lakh	5%
Overseas tour package — above Rs. 7 lakh	20% (5% on first 7 lakh + 20% on amount above)
All other LRS remittances (gifts, investments, property, maintenance, etc.) — above Rs. 7 lakh	20%
All other LRS remittances — up to Rs. 7 lakh	NIL

How the Rs. 7 lakh threshold works

Per individual, per financial year, cumulative across all LRS purposes
Banks track remittances and apply TCS once the cumulative amount crosses Rs. 7 lakh
TCS is collected by the bank at the time of remittance and deposited with the Income Tax Department against your PAN

TCS is not a tax — it is an advance

A common misconception. TCS is not an additional tax; it is advance tax that gets credited against your annual income tax liability:

TCS appears in your Form 26AS and Annual Information Statement (AIS)
File your income tax return as usual
TCS is set off against tax payable; excess is refunded
For someone with no Indian tax liability, the entire TCS comes back as refund — though it sits with the Income Tax Department for several months

Practical impact

Sending USD 100,000 (~Rs. 84 lakh) to buy property abroad — under the "all other purposes" bucket — triggers:

TCS = 20% on Rs. 77 lakh (the amount above Rs. 7 lakh)
= Rs. 15.4 lakh held by the IT Department until your refund comes through

This is the single biggest reason LRS is more painful than the USD 250,000 number suggests. Plan cash flow accordingly.

International Credit Card Spending — Currently Outside LRS

In May 2023, the government issued a notification bringing international credit card spending abroad under LRS — meaning every dollar spent on a foreign trip via credit card would have been counted toward the USD 250,000 limit and triggered TCS above Rs. 7 lakh.

After significant pushback, the government clarified in June 2023 that international credit card transactions are not to be brought under LRS for the time being, pending IT system readiness at banks. As of 2026, this remains the operative position:

Credit card spending abroad — outside LRS, no TCS
Debit card / forex card spending abroad — within LRS, TCS applies above Rs. 7 lakh per FY
Wire transfers / outward remittances — within LRS

This means routine foreign travel paid by credit card is unaffected by the TCS regime — but loading a forex card before travel is. Many travellers are switching back to credit cards for this reason.

GIFT City IFSC — A Special Carve-Out

Remittances from a resident Indian to GIFT City International Financial Services Centre (Gandhinagar, Gujarat) are treated favourably:

LRS limit applies, but the Rs. 7 lakh TCS threshold and rates do not apply for educational and certain investment purposes within IFSC
IFSC banks offer GIFT Nifty futures, IFSC-listed mutual funds, alternative investment funds (AIFs), and other instruments at preferential rates
Particularly relevant for residents wanting dollar-denominated investment exposure without sending money outside India in the strict sense

The IFSC ecosystem is evolving rapidly — check the IFSC Authority website (ifsca.gov.in) for current rules.

How to Make an LRS Remittance — The Process

Step 1 — Identify your AD bank

LRS remittances are made through an Authorised Dealer Category I bank (most major Indian banks — SBI, HDFC, ICICI, Axis, Kotak, Yes, IndusInd, etc.). Online platforms like HDFC Remit2Home, ICICI Money2World, Wise (where licensed in India), and similar can be used; they all run LRS remittances under the same RBI framework.

Step 2 — Complete Form A2

The standard form for outward remittance, available in:

Online form on the bank's portal — most major banks now have an online LRS workflow
Paper form at the branch

Form A2 captures:

Remitter's name, address, PAN
Beneficiary's name, address, country
Beneficiary's bank account details (IBAN/SWIFT/account number)
Purpose of remittance (LRS sub-code)
Amount in foreign currency

Step 3 — Self-declaration of source and purpose

You declare:

Source of funds — salary, business income, savings, sale of assets, gift, inheritance, etc.
Purpose code under LRS — one of approximately 35 RBI purpose codes
Total LRS used in the current financial year (so the bank can track the USD 250,000 ceiling)

Step 4 — Submit supporting documents

What is required varies by purpose:

General LRS — PAN copy, identity proof
Education — university admission letter, fee invoice
Medical treatment — hospital invoice or estimate, doctor's letter
Property purchase — sale agreement / advance receipt
Investment — broker confirmation, account opening letter
Gift / maintenance of relatives — relationship declaration

For amounts above USD 25,000 in a single transaction, the bank may ask for additional KYC and source-of-funds documentation.

Step 5 — Bank executes the remittance

Bank applies the prevailing exchange rate (usually inter-bank rate plus a markup of 0.5%–2% depending on bank and amount)
TCS is calculated and deducted at source if applicable (above the Rs. 7 lakh cumulative threshold)
Wire transfer is initiated; usually credited to beneficiary in 1–3 working days
TCS certificate (Form 27D) is issued and reflects in Form 26AS

Required Documents — Master Checklist

For any LRS remittance, keep ready:

PAN card
Identity proof (passport / Aadhaar)
Address proof if not already updated with bank
Source of funds proof — salary slip / bank statement / sale deed / gift declaration
Purpose-specific document — see above
Bank account statement showing the funds
Recipient's bank details in beneficiary country (SWIFT / IBAN / routing number)
For minors — birth certificate + parent/guardian identification

Common Scenarios

Sending money to a child studying abroad

Most common LRS purpose
TCS at 0.5% (with education loan) or 5% (self-funded) above Rs. 7 lakh
Documents: I-20 / CAS / Confirmation of Acceptance, fee invoice, accommodation invoice
Many banks offer a dedicated "education remittance" channel with lower exchange margins
Tip: if the funding is from an education loan, carry the loan sanction letter — TCS rate drops from 5% to 0.5%

Buying property abroad

Permissible under LRS
TCS at 20% above Rs. 7 lakh — significant cash flow impact for property purchases
Documents: sale agreement, builder/seller details, bank account verification of recipient
Multiple family members can pool LRS allowances — each remits up to USD 250,000
Tip: structure the purchase so multiple individual remittances flow into a single property purchase, but be aware that some receiving countries (e.g., USA) treat such pooling as a gift for their tax purposes

Investing in foreign stocks (US ETFs, etc.)

Permissible under LRS
TCS at 20% above Rs. 7 lakh
Easier through Indian broker tie-ups (HDFC Securities Global Investing, ICICI Direct Global, Vested, INDmoney) than direct foreign brokerage
Annual reporting in your Indian ITR (Schedule FA — Foreign Assets) is mandatory; non-disclosure is a serious offence under the Black Money Act, 2015

Maintenance of relatives abroad

Permissible — sending money to elderly parents in another country, or to children settled abroad
TCS at 20% above Rs. 7 lakh
Documents: relationship declaration, beneficiary's bank account
Many remitters spread this across the financial year to stay below Rs. 7 lakh

Overseas tour packages

Booking through Indian travel agents / online travel platforms is treated as remittance for an overseas tour package
TCS at 5% up to Rs. 7 lakh, 20% above — the most punishing TCS bracket
Booking flights and hotels separately (each under Rs. 7 lakh) generally avoids the "tour package" classification
Tip: book international flights and hotels independently rather than as a packaged tour to optimise TCS exposure (legal under current rules)

Sending a gift to a relative or friend abroad

Permissible
TCS at 20% above Rs. 7 lakh
Documents: gift declaration
The recipient may have local tax implications in their country (e.g., US gift tax reporting) — check before sending

Helping an NRI close relative

Allowed as "maintenance of close relatives" — spouse, parent, sibling, child
Same TCS treatment as gifts
Useful for parents in India sending start-up help to NRI children settled abroad

NRI vs Resident — Avoid the Confusion

LRS applies only to residents. NRIs follow a different framework:

Status	Outward Remittance Mechanism
Resident Indian	LRS — USD 250,000 per FY
Non-Resident Indian (NRI)	NRE / FCNR balances — fully repatriable, no cap
NRI with NRO balance (income or sale proceeds in India)	NRO repatriation — USD 1 million per FY

If your residential status changed during the year (e.g., you returned to India after years abroad), the LRS applies from the date you became a resident — but legacy NRO/NRE balances carry forward under their original rules. Get a clear position from your bank or a CA in transition years.

Reporting and Tax Compliance

Bank-side reporting

Banks report all LRS transactions to the RBI via the CIMS portal (Centralised Information Management System) and to the Income Tax Department via the Statement of Financial Transactions (SFT) filings. This means every LRS remittance is visible to the IT Department against your PAN.

Income Tax Return obligations

LRS remittances appear in your Annual Information Statement (AIS)
TCS is creditable against your tax liability
Schedule FA (Foreign Assets) of the ITR must report any foreign assets created (property, investments, bank accounts) — this is independent of whether you used LRS to fund them
Non-disclosure of foreign assets triggers heavy penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — including 30% tax + 90% penalty + prosecution risk

When you need to file Schedule FA

If at any time during the financial year you held:

A foreign bank account
Foreign immovable property
Foreign equity, debt, mutual funds
Foreign cash value insurance/annuity
Beneficial ownership in a foreign entity

You must report it. Even if value is small. Even if held jointly with another resident or NRI. Even if you closed it later in the year.

This is the most under-appreciated risk for LRS users — building foreign assets via LRS without reporting them in the ITR.

Common Pitfalls

Treating the Rs. 7 lakh threshold as per-purpose — it is cumulative across all LRS purposes for the year
Forgetting to factor TCS into cash flow — especially for property purchases where 20% gets locked up
Overlooking Schedule FA reporting — the most expensive mistake under the Black Money Act
Using LRS for unauthorised purposes like offshore margin trading — exposes you to FEMA penalties up to 3× the amount involved
Loading forex cards extensively during a year of high credit card spend — the forex card portion now triggers TCS while credit card spending does not, causing avoidable TCS lock-up
Not preserving documentation — banks are required to keep LRS records for 8 years, but you should also retain your own copies for tax assessments and Schedule FA reporting
Misclassifying tour packages vs separate bookings — using a single agent to book the entire trip can attract the 20% TCS rate; booking separately keeps you in the 5% (or even nil) bracket
Sending money via informal channels (hawala) to avoid TCS — illegal under FEMA and the Prevention of Money Laundering Act; penalties dwarf any TCS saving

Recent Changes Worth Watching

The LRS framework is updated periodically. Recent and pending changes:

TCS rationalisation — there is ongoing industry pressure to reduce the 20% rate; budget announcements in coming years may revise
GIFT City rules — IFSC continues to expand; more LRS purposes are being relaxed for IFSC channels
International credit card — the 2023 deferment is technically interim; long-term position pending
Crypto and digital assets — increasingly captured under LRS reporting; specific guidance is evolving

Always confirm the current rates and rules with your bank or a qualified CA before significant remittances — this article reflects the position as of 2026, but the regulatory environment moves.

Quick Reference

Item	Value
Annual ceiling per individual	USD 250,000
Financial year	1 April – 31 March
PAN required	Yes, mandatory
TCS-free threshold (cumulative across purposes)	Rs. 7 lakh per FY
TCS rate above threshold (general)	20%
TCS rate — education with loan	0.5%
TCS rate — education self-funded / medical	5%
TCS rate — overseas tour package above Rs. 7L	20%
Credit card spending abroad	Outside LRS (current position)
NRIs covered	No
Form	Form A2
Schedule FA in ITR	Mandatory if foreign assets held

Official Sources

RBI Master Direction on LRS — rbi.org.in → Notifications → Master Directions
Income Tax e-filing portal (for AIS, Form 26AS, ITR Schedule FA) — incometax.gov.in
FAQ on LRS — RBI publishes a regularly updated FAQ; check the RBI website
GIFT City / IFSCA — ifsca.gov.in

Final Word

The Liberalised Remittance Scheme is genuinely one of the most useful relaxations of India's foreign exchange regime — a USD 250,000 annual outflow allowance per individual, no RBI permission needed, for almost any legitimate purpose. The complications now are primarily on the TCS side, where 20% advance-tax collection on most large remittances has materially changed the cash-flow planning needed for foreign property purchases, large gifts, or overseas investments. Plan around the Rs. 7 lakh threshold, file your Schedule FA disclosures honestly, and LRS remains an efficient and well-understood channel.

For sending money abroad as an NRI (which uses different rules — NRE/FCNR/NRO and the USD 1 million limit), see the transferring money abroad guide. For repatriating sale proceeds of property in India specifically, see the transfer of property funds guide.