The Liberalised Remittance Scheme (LRS) is an initiative by the Reserve Bank of India (RBI) that allows Indian residents to remit (send) money abroad for various purposes such as education, travel, medical expenses, investments, and more. Since its introduction in 2004, LRS has played a crucial role in facilitating seamless international transactions for individuals.
In this detailed blog, we’ll explore what LRS is, its objectives, limits, permissible transactions, taxation, and important rules every Indian should know before sending money abroad.
What is the Liberalised Remittance Scheme (LRS)?
The Liberalised Remittance Scheme (LRS) was introduced by the RBI in 2004 to simplify foreign remittances for Indian residents. Under this scheme, individuals can send up to USD 250,000 per financial year (April–March) outside India for permissible transactions without requiring prior approval from the RBI.
This means that Indian residents can freely remit funds for purposes like foreign travel, overseas education, investments, gifts, donations, medical treatment, and more—as long as they comply with RBI guidelines.
Objectives of the Liberalised Remittance Scheme (LRS)
The primary goals of LRS include:
- Ease of Foreign Transactions –
- Allow Indian residents to transfer money abroad conveniently.
- Supporting Global Education –
- Enable students to pay for tuition, accommodation, and living expenses abroad.
- Encouraging Investments –
- Allow individuals to invest in foreign stocks, bonds, mutual funds, real estate, and startups.
- Facilitating International Travel & Medical Treatment –
- Help Indian citizens meet expenses for foreign travel and medical emergencies.
- Boosting Global Business Interactions –
- Support business travel, foreign partnerships, and knowledge-sharing opportunities.
Who Can Use LRS?
The Liberalised Remittance Scheme (LRS) is available only to resident individuals, including:
- Indian citizens (adults and minors)
- NRIs (Non-Resident Indians) cannot use LRS (they have separate remittance rules under FEMA).
Note: If a minor wants to remit money abroad, their guardian must make the transaction on their behalf.
Permissible Transactions Under LRS
Under LRS, individuals can remit funds abroad for the following purposes:
1. Education Expenses
- Payment of tuition fees, hostel charges, books, living expenses for studying abroad
- Includes schooling, college education, vocational courses, and training programs
2. Travel & Tourism
- Expenses for leisure travel, business trips, and religious pilgrimages
- Includes airfare, accommodation, food, and shopping expenses
3. Medical Treatment
- Hospital charges, doctor’s fees, medicine costs, and travel expenses for medical treatment abroad
- Covers expenses for the patient and accompanying family members
4. Investments in Foreign Stocks & Real Estate
- Investment in global stock markets, foreign mutual funds, ETFs, and private equity funds
- Purchase of foreign property (residential or commercial real estate)
5. Gifts & Donations
- Sending money as a gift to family or friends abroad
- Donating to charities, foundations, or NGOs
6. Business & Professional Services
- Payments for consulting, freelancing, or other professional services
- Attending international seminars, workshops, and conferences
7. Emigration & Visa-Related Expenses
- Fees for citizenship applications, residency permits, and visa processing
Transactions Not Allowed Under LRS
- The following transactions are NOT permitted under LRS:
- Trading in foreign currency (Forex trading)
- Investing in cryptocurrency or virtual digital assets
- Remittances to countries under RBI restrictions (like those blacklisted by FATF)
- Gambling, betting, lottery, or sweepstakes transactions
- Payments for margins or collateral for derivative trading
- Buying property in Nepal or Bhutan
LRS Limit: How Much Can You Remit?
Under LRS, individuals can remit up to USD 250,000 per financial year (April–March).
Example:
- If you send USD 100,000 for your child’s education, you can still send USD 150,000 for other purposes in the same financial year.
- If you exceed the USD 250,000 limit, you need special approval from the RBI.
Advantages of the Liberalised Remittance Scheme
- Encourages Global Investment –
- Allows Indians to invest in international markets
- Simplifies Education Abroad –
- Hassle-free tuition fee payments
- Supports Digital Payments & Financial Freedom –
- No cash dependency
- Boosts International Trade & Business –
- Supports entrepreneurs and freelancers
- Strengthens India’s Foreign Exchange Market –
- Transparent currency transactions
Taxation & TCS (Tax Collected at Source) Under LRS
Since October 1, 2023, new Tax Collected at Source (TCS) rules apply to foreign remittances under LRS:
| Purpose of Remittance | TCS Rate (up to ₹7 lakh per year) | TCS Rate (above ₹7 lakh per year) |
|---|---|---|
| Education (using an education loan) | 0% | 0.5% |
| Education (without a loan) | 0% | 5% |
| Medical Treatment | 0% | 5% |
| Foreign Travel (Tour Packages) | 5% | 20% |
| Other Remittances (Investment, Gift, etc.) | 5% | 20% |
- TCS Refund:
- You can claim TCS as a tax credit while filing your Income Tax Return (ITR).
- PAN is mandatory for remittances exceeding ₹2.5 lakh.
How to Send Money Abroad Under LRS?
Follow these simple steps to remit funds under LRS:
Step 1: Choose a Bank or Financial Institution
Most major banks in India, like SBI, HDFC, ICICI, Axis, and Kotak, offer LRS remittance services.
Step 2: Submit Required Documents
- PAN Card (Permanent Account Number)
- Aadhaar Card (For KYC verification)
- Purpose Declaration Form (A2 Form) –
- Mentioning the reason for remittance
- Supporting documents (Admission letter for education, doctor’s report for medical remittance, etc.)
Step 3: Transfer Money via Approved Channels
You can use:
- SWIFT Transfer (Wire Transfer)
- Net Banking/RTGS/NEFT from your bank
- Foreign exchange dealers like Western Union & Thomas Cook
Conclusion
The Liberalised Remittance Scheme (LRS) has made global financial transactions easier, faster, and more transparent for Indian residents. Whether you’re planning to study abroad, invest in global stocks, or send money to family overseas, LRS provides a structured and legal way to do so.
However, it’s important to understand the rules, taxation policies, and documentation requirements before making remittances. Always check with your bank or financial advisor to ensure compliance with RBI guidelines.
