Liberalized Remittance Scheme (LRS)
The Liberalized Remittance Scheme (LRS) introduced by the Reserve Bank of India (RBI) in February 2004 is the primary framework that allows resident individuals in India to send money abroad — for investments, education, medical treatment, property purchase, maintenance of relatives, or personal travel — up to a defined annual limit. Every outward remittance from a resident individual's account is governed by the LRS rules under FEMA 1999.
According to the Reserve Bank of India, the current LRS limit is USD 2,50,000 per resident individual per financial year (April to March). This limit applies across all purposes — investment, personal, and current account — combined. The Form A2 remittance application form is mandatory for every LRS outward remittance regardless of amount or purpose.
At N D Savla & Associates, we provide expert LRS advisory including eligibility assessment, permissible transaction guidance, TCS on LRS computation, Form A2 preparation, FEMA compliance review, and full coordination with your Authorised Dealer (AD) Bank.
LRS Quick Reference — Key Parameters at a Glance
| Parameter | Details |
|---|
| Annual Limit | USD 2,50,000 per financial year (April to March) |
| Eligible Persons | Resident Individuals only — including minors |
| Not Eligible | Corporates, HUFs, Partnership Firms, LLPs, Trusts |
| Governing Law | FEMA 1999 + RBI Master Direction on LRS |
| PAN Requirement | Mandatory for all LRS transactions without exception |
| AD Bank Requirement | Designate one Authorised Dealer Bank per financial year |
| Form Required | Form A2 — stating purpose and amount of remittance |
| TCS Applicability | Yes — rates vary from 0.5% to 20% depending on purpose |
| Unused Funds | Must be repatriated or reinvested within 180 days |
| Remittances Per Year | No restriction on number of transactions within limit |
| Borrowing Restriction | Borrowed funds cannot be remitted for capital transactions |
Who Is Eligible for LRS?
The LRS facility is available exclusively to Resident Individuals under FEMA. Minors can also use LRS — Form A2 is submitted by a natural guardian on their behalf, and the full USD 2,50,000 limit applies independently to each minor.
The following cannot use LRS: Hindu Undivided Families (HUFs), Companies, Partnership Firms, LLPs, Trusts, and Non-Resident Indians (NRIs). NRIs making outward remittances follow the repatriation of assets rules instead.
? Attempting prohibited LRS transactions or providing false declarations on Form A2 can attract penalties under FEMA including confiscation and prosecution under Section 13 of FEMA 1999.
Permitted Transactions Under LRS
Current Account Transactions: Private visits abroad (tourism), gifts to persons abroad, donations to overseas organisations, employment abroad, emigration expenses, maintenance of close relatives abroad, business travel, medical treatment abroad, studies abroad (education), and purchase of art/culture/books.
Capital Account Transactions: Opening foreign bank accounts, purchasing overseas immovable property (family members can pool individual LRS limits for joint purchase), overseas direct investment (ODI), purchase of foreign securities (US stocks, ETFs, mutual funds), and interest-free loans to NRI/PIO relatives.
Prohibited Transactions — not covered under LRS: Lottery, betting, gambling; margin trading in foreign exchange; purchase of FCCBs in overseas markets; remittances to FATF non-cooperative countries; remittances to sanctioned entities; Nepal and Bhutan (governed by separate bilateral arrangements); and capital account transactions using borrowed funds.
TCS on LRS — How Much Tax Is Deducted on Outward Remittance?
Tax Collected at Source (TCS) under Section 206C(1G) applies to LRS remittances. It is collected by the AD Bank at the time of payment. TCS is not an additional tax — it is an advance tax payment that is fully creditable against your final income tax liability when you file your ITR.
| Purpose of LRS Remittance | TCS Rate | Threshold / Remarks |
|---|
| Education abroad — loan from financial institution | 0.5% | On amount above ?7 lakh per year |
| Education abroad — own funds | 5% | On amount above ?7 lakh per year |
| Medical treatment abroad | 5% | On amount above ?7 lakh per year |
| Overseas tour packages | 20% | No threshold; full amount attracts TCS |
| All other LRS purposes (investments, gifts, maintenance, etc.) | 20% | No threshold from 1 Oct 2023 |
Note: TCS rates are subject to change through Union Budget amendments. The rates above reflect the position as of July 2026. Always verify with the latest RBI Master Direction and Income Tax Act notifications before making large LRS remittances. Aggregated LRS data is reported by AD Banks to the income tax department through AIR — all LRS outward remittances are visible to tax authorities.
How to Remit Money Under LRS — Step-by-Step Process
- Designate Your AD Bank for the Financial Year. Select one Authorised Dealer Bank for all LRS remittances in the financial year. You cannot split LRS remittances across multiple banks in the same year. If you wish to switch banks, obtain a certificate from the previous bank confirming the total amount remitted so far.
- Maintain Account for the Required Period (Capital Transactions). For capital account transactions — buying overseas property, making overseas investments — your account with the AD Bank must have been maintained for at least one year. Current account transactions (travel, education, maintenance) do not have this requirement.
- Ensure PAN Is Linked to Your Bank Account. PAN is mandatory for every single LRS transaction. No exceptions. The AD Bank will not process the remittance without a PAN-linked account.
- Complete and Submit Form A2. Form A2 is the outward remittance application form for LRS. It states the purpose of the remittance, the country, the amount, and the beneficiary details. Most banks now offer digital Form A2 submission via net banking.
- Submit Supporting Documents Based on Purpose. Education: university admission letter, fee invoice. Medical: hospital letter, treatment cost estimate. Property purchase: sale agreement, property valuation. Gifts/maintenance: self-declaration; relationship proof for close relatives.
- Pay TCS to the AD Bank. The AD Bank deducts TCS on LRS at the applicable rate. This TCS is credited against your income tax liability. You receive a TCS certificate (Form 27D) for use while filing your income tax return.
- Execute Remittance and Receive SWIFT Confirmation. The AD Bank processes the LRS outward remittance via SWIFT. You receive a SWIFT MT103 confirmation as proof of transfer. Keep all Form A2 copies, TCS certificates, and SWIFT confirmations for your tax records. Unused foreign exchange must be repatriated to India within 180 days if not used or reinvested.
Why Choose N D Savla & Associates for LRS Advisory?
- Purpose Classification Advice. We advise on the correct classification of your LRS transaction — which affects the applicable TCS on LRS rate — ensuring you are not over-paying TCS due to incorrect purpose coding on Form A2.
- TCS Refund Planning. For clients whose TCS on LRS exceeds their annual tax liability, we prepare and file the ITR to ensure timely and accurate TCS refunds through the income tax portal.
- Annual LRS Limit Tracking. We maintain remittance records for clients across the financial year to ensure the cumulative USD 2,50,000 LRS limit is not inadvertently breached.
- Multi-Family LRS Pooling Strategy. For large overseas purchases — property, business investments — we structure LRS remittances across eligible family members to legally pool individual limits.
- Certification and Form A2 Filing. We prepare all Form A2 declarations and supporting documentation packages for submission to the AD Bank, alongside Form 15CA/15CB where required.
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Frequently Asked Questions
Can I remit more than USD 2,50,000 under LRS in a single year?
Generally, no. The LRS limit of USD 2,50,000 per resident individual per financial year is a hard ceiling for most transactions. However, there are two specific exceptions where the AD Bank can permit higher amounts without RBI prior approval: (1) Education abroad — if the university's estimate exceeds the LRS limit, the bank can allow additional remittance with the estimate letter; (2) Medical treatment abroad — if the treating hospital certifies that the cost exceeds the limit, the AD Bank can permit the excess. For all other purposes, RBI approval is required.
Is TCS on LRS refundable?
Yes — TCS on LRS is fully refundable. TCS collected by the AD Bank under Section 206C(1G) is credited to your Form 26AS and Annual Information Statement (AIS). When you file your income tax return, the TCS on LRS is set off against your final tax liability. If the TCS collected exceeds your total tax payable for the year, the excess is refunded by the income tax department directly to your bank account.
Do NRIs need to follow LRS rules for sending money abroad?
No. The Liberalized Remittance Scheme applies only to Resident Individuals under FEMA. NRIs, by definition, are not residents of India under FEMA and therefore LRS does not apply to them. When an NRI sends money from their Indian bank accounts (NRO accounts) to their overseas accounts, the applicable framework is the FEMA repatriation of assets rules — including the USD 1 million annual limit from NRO accounts — not LRS.
Can I pool my LRS limit with family members?
Yes, but only in specific circumstances. The LRS limit is individual — each resident individual has their own USD 2,50,000 per year. Pooling is permitted only when multiple family members are joint owners or beneficial owners of the asset being purchased — for example, jointly buying an overseas property. Pooling is not permitted for individual purchases where only one person will own the asset.
What happens if I do not repatriate unused LRS funds within 180 days?
Under FEMA and the RBI LRS Master Direction, if you remit funds overseas under LRS and those funds are not utilised for the declared purpose within 180 days, they must be repatriated back to India within that period. Failure to repatriate within 180 days constitutes a FEMA violation. However, if you have invested the unspent funds in a permissible overseas asset — a foreign bank account, foreign stocks, or property — the RBI considers the funds to have been "utilised" and repatriation is not required.