What is LRS (Liberalised Remittance Scheme)? Your Complete Guide
- Share.Market
- 4 min read
- 24 Mar 2026
Highlights
- Understand how LRS allows resident Indians to remit up to USD 250,000 annually for permitted overseas transactions.
- Learn current TCS rates—5% for education loans, 20% for other purposes above the ₹7 lakh threshold.
- Discover permitted uses like overseas investments, property purchase, education, and travel under RBI guidelines.
- Know the complete remittance process, including Form A2, documentation, and bank verification steps.
Introduction
Planning overseas education for your child? Looking to invest in US stocks? Or buying property abroad? India’s Liberalised Remittance Scheme (LRS) makes these possible—but with specific rules, limits, and tax implications.
LRS is the RBI framework enabling resident individuals to send money outside India legally. Understanding what LRS means, how much you can remit, and which purposes qualify helps you plan cross-border financial moves confidently.
LRS Meaning and Your Annual Limit
LRS is a facility from the Reserve Bank of India allowing resident individuals to remit funds abroad for permitted current and capital account transactions.
Annual Limit Evolution:
| Year | Limit |
| 2004 | USD 25,000 |
| 2007 | USD 100,000 |
| 2015 onwards | USD 250,000 |
Who can use LRS?
- All resident individuals (as defined under FEMA)
- Minors (with guardian countersignature on Form A2)
Who cannot?
- Non-Resident Indians (NRIs)
- Corporations, partnership firms, HUFs, or trusts
Each family member gets a separate USD 250,000 limit—a family of four can collectively remit approximately ₹8.3 crore annually.
Permitted Purposes Under LRS
The scheme covers both current account and capital account transactions within the annual limit:
Current Account Transactions:
- Education abroad (tuition fees, living expenses)
- Medical treatment overseas
- International travel expenses
- Maintenance of relatives abroad
- Gifts to non-residents
Capital Account Transactions:
- Purchasing property overseas
- Investing in foreign stocks, bonds, or mutual funds
- Opening or maintaining foreign currency accounts
- Emigration-related expenses
A student paying ₹40 lakh for a master’s programme in the UK or an investor allocating ₹30 lakh to US equities—both fall within LRS provisions, provided they stay under the USD 250,000 ceiling.
Prohibited Activities and Restrictions
Not everything qualifies under LRS. The RBI explicitly prohibits remittances for:
- Lottery tickets, sweepstakes, or gambling
- Banned or proscribed magazines
- Margin trading or margin calls to overseas exchanges/brokers
- Purchasing Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in overseas secondary markets
- Transactions restricted under Schedule I of Foreign Exchange Management (Current Account Transactions) Rules, 2000
Additionally, capital account remittances to countries identified by the Financial Action Task Force (FATF) as non-cooperative territories are not permitted.
TCS (Tax Collected at Source) on LRS
Since October 1, 2023, TCS applies to LRS remittances exceeding ₹7 lakh per financial year.
Current TCS Rates (FY 2024-25):
| Purpose | TCS Rate | Threshold |
| Education funded by loan | 5% | Above ₹7 lakh |
| Education (other) | 20% | Above ₹7 lakh |
| All other purposes | 20% | Above ₹7 lakh |
Union Budget 2023 increased TCS from 5% to 20% (except education loans) to monitor foreign remittances. Important: TCS isn’t extra tax—it’s adjustable against your final tax liability when filing returns. If excess is collected, you get refunds.
How to Remit Under LRS—The Process
Remitting through LRS involves Authorised Dealer banks:
- Approach your bank with a remittance request
- Fill Form A2—self-declaration of purpose and amount
- Submit mandatory documents: PAN card, purpose-specific papers (admission letter for education, property agreement for real estate)
- Bank verifies documentation and LRS eligibility
- TCS deducted (if exceeding ₹7 lakh threshold)
- Remittance processed after compliance checks
Banks report all LRS transactions to RBI in the prescribed format. Processing typically takes 2-5 working days, depending on documentation completeness.
Moving Forward With Clarity
LRS opens global financial doors—from building overseas investment portfolios to funding quality education abroad—while keeping remittances within a structured regulatory framework. The USD 250,000 annual limit, though significant, requires strategic planning across education, investment, and property goals. Understanding permitted uses and TCS implications helps you maximise this facility effectively.
FAQs
Liberalised Remittance Scheme—an RBI facility allowing resident Indians to remit funds abroad for permitted purposes within annual limits.
Yes, LRS permits investment in overseas equity shares, debt instruments, and mutual funds within the USD 250,000 annual limit, subject to 20% TCS above ₹7 lakh.
Yes, TCS collected is adjustable against your final tax liability when filing ITR—you can claim refunds if excess amounts were collected.
Yes, education is a permitted purpose under LRS, with a lower 5% TCS if funded by a loan, 20% otherwise, above the ₹7 lakh threshold.
No. Per the Ministry of Finance notification (June 2023), international credit card use while overseas is currently not considered LRS remittance and isn’t subject to TCS until further regulatory notice.
Banks don’t refund TCS directly. However, TCS is treated as tax paid on your behalf—you can claim credit or refund when filing your annual income tax return.
