Introduction to the Liberalised Remittance Scheme (LRS)
Sending money from India to other countries, a process known as outward remittance, is a common requirement for many Indians. Whether it’s for funding a child’s education abroad, investing in global markets, or managing travel expenses, these transactions are a key part of our globalized economy. To simplify and regulate these flows, the Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS). This LRS scheme provides a clear framework for resident individuals to send money abroad easily and legally.
What is the Liberalised Remittance Scheme (LRS)?
LRS Meaning Explained
The Liberalised Remittance Scheme, or LRS, is a set of guidelines from the RBI that allows resident individuals in India to freely remit a certain amount of money abroad each financial year for permissible transactions. In simple terms, it’s the rulebook that lets you send money overseas for specific purposes like paying for your child’s tuition fees in Canada, investing in US stocks, or sending a monetary gift to a relative in the UK.
LRS vs. Other Types of Remittance
It is crucial to understand that the LRS scheme is applicable only to resident individuals, including minors. It is not available for corporates, partnership firms, or HUFs, which have different regulations for their business-related foreign transfers.
Who is Eligible for LRS?
The scheme is available to all resident individuals as defined under the Foreign Exchange Management Act (FEMA), including minors. As mentioned, it cannot be used by corporates, partnership firms, or Hindu Undivided Families (HUF).
LRS Limits and Permitted Uses
What Is the Current LRS Limit?
Under the latest RBI guidelines, the LRS limit is USD 250,000 per person per financial year (April to March). This liberalised remittance scheme limit applies to all permissible current and capital account transactions combined.
Permitted Uses Under LRS
You can use the remittance under LRS for a variety of purposes, including:
- Education Abroad: Paying university tuition and accommodation fees.
- Travel: For business or personal tourism (except to Nepal and Bhutan).
- Medical Treatment Abroad
- Gifts and Donations
- Maintenance of Close Relatives Abroad
- Overseas Investments: Investing in foreign stocks, mutual funds, and immovable property.
Transactions Not Permitted
The LRS explicitly prohibits remitting funds for certain activities, such as trading in foreign currency, purchasing lottery tickets, or any activity banned by FEMA.
LRS Remittance Process: A Step-by-Step Guide
How to Send Money Under LRS
Sending money abroad under the LRS scheme involves a simple, compliant process:
- Choose an Authorized Dealer: Select a bank (AD Category-I) or an RBI-authorised remittance platform to process your transfer.
- Submit Documents: Fill out and submit Form A2, which is a declaration of the purpose of your remittance. You must also provide your PAN card, which is mandatory for all LRS transactions.
- Declare Purpose Code: You must select the correct purpose code for your outward remittance, as this is required for regulatory reporting.
- Compliance Check: The bank or platform will perform KYC and verify that your request is within the LRS limit and for a permissible purpose.
- Fund Transfer: Once cleared, the funds are converted to the foreign currency and transferred to the recipient’s account abroad. The standard processing time is typically 1-3 business days.
TCS on Liberalised Remittance Scheme (Latest Updates)
A key aspect of the LRS scheme is the applicability of Tax Collected at Source (TCS). For a detailed breakdown, you can read our complete guide to TCS on Foreign Remittance.
What is TCS Under LRS?
TCS is a tax collected by the authorized dealer (your bank or remittance platform) at the time of the transaction, as mandated by Section 206C(1G) of the Income Tax Act. It is important to note that TCS is not an additional tax; it is an advance tax that can be adjusted against your total income tax liability.
TCS Rates and Thresholds (As of FY 2024-25)
The rate of tcs on liberalised remittance scheme depends on the purpose and amount:
| Purpose of Remittance | Threshold (No TCS) | TCS Rate Above Threshold |
| Education Abroad (if financed by loan) | Any Amount | 0.5% on amount > ₹7 Lakh 28 |
| Education & Medical Treatment (self-funded) | Up to ₹7 Lakh | 5% on amount > ₹7 Lakh |
| Other LRS Purposes (Investment, Gifts, Travel, etc.) | Up to ₹7 Lakh | 20% on amount > ₹7 Lakh |
How to Claim TCS Refund
The TCS amount collected from you will reflect in your Form 26AS. You can claim this amount as a credit when you file your annual Income Tax Return (ITR). If your tax liability is lower than the TCS collected, you will receive a refund.
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FAQs
What is the Liberalised Remittance Scheme?
The Liberalised Remittance Scheme (LRS) is an RBI framework that allows resident individuals in India to send a specific amount of money (currently up to $250,000) abroad per financial year for permitted purposes. 30
What is the LRS limit for 2025?
The LRS limit for the financial year 2024-2025 is USD 250,000 per person. This limit covers all permissible current and capital account transactions combined. 31
Is LRS applicable for business payments?
No, the LRS scheme is only applicable to resident individuals. Corporations, partnership firms, and HUFs have separate guidelines under FEMA for their business-related remittances. 32
What are the TCS rates on LRS transactions?
The TCS rates on LRS transactions vary from 0.5% to 20%, depending on the purpose and whether the amount exceeds the ₹7 lakh threshold in a financial year. 33
How do I send money abroad under LRS?
To send money under LRS, you need to approach an authorized dealer like a bank or a licensed fintech platform, submit Form A2 and your PAN card, and declare the correct purpose code for the transfer.
