Liberalised Remittance Scheme: Limits, Permitted Uses and TCS
Overview
The Liberalised Remittance Scheme (LRS) lets Indian residents send money abroad for approved purposes. It was brought in by the Reserve Bank of India in 2004 to make foreign remittances easier.
Key facts
- Introduced: 2004, by the RBI.
- Limit: USD 250,000 per financial year (April to March); going beyond needs special RBI approval.
- Who can use it: resident individuals including minors (through a guardian); NRIs cannot, as separate FEMA rules apply to them.
- Example: USD 100,000 for a child’s education still leaves USD 150,000 for other uses that year.
Permitted purposes
- Education abroad: tuition, hostel, books, living costs.
- Travel and tourism, including business trips and pilgrimages.
- Medical treatment for the patient and accompanying family.
- Investment in foreign stocks, mutual funds, ETFs, private equity and foreign property.
- Gifts and donations.
- Professional services, seminars and conferences.
- Emigration and visa fees.
Not permitted
- Forex trading.
- Investment in cryptocurrency or virtual digital assets.
- Remittances to countries under RBI restrictions, such as those FATF-blacklisted.
- Gambling, betting, lotteries and sweepstakes.
- Margins or collateral for derivative trading.
- Buying property in Nepal or Bhutan.
TCS since 1 October 2023
| Purpose | Up to ₹7 lakh a year | Above ₹7 lakh a year |
|---|---|---|
| Medical treatment | 0% | 5% |
| Tour packages for foreign travel | 5% | 20% |
| Investment, gifts and other purposes | 5% | 20% |
| Education funded by an education loan | 0% | 0.5% |
| Education funded otherwise | 0% | 5% |
- TCS can be claimed as a tax credit while filing the ITR.
- PAN is compulsory above ₹2.5 lakh.
How to remit
- Pick a bank or financial institution such as SBI, HDFC, ICICI, Axis or Kotak.
- Submit PAN, Aadhaar, the A2 purpose declaration form and supporting papers (for example an admission letter or a doctor’s report).
- Transfer through SWIFT, net banking, RTGS or NEFT, or via foreign exchange dealers such as Western Union and Thomas Cook.
Advantages
- Encourages global investment and simplifies fee payment abroad.
- Supports digital payments, trade, entrepreneurs and freelancers.
- Makes currency transactions more transparent.
Exam angle
- Scheme of: RBI; since 2004.
- Annual limit: USD 250,000.
- TCS regime effective: 1 October 2023.
- Form for stating purpose: A2.