Liberalised Remittance Scheme (LRS): Meaning, Limit, Rules

The Liberalised Remittance Scheme (LRS) was launched by the Reserve Bank of India (RBI) in 2004 as part of a major foreign exchange policy reform. The idea was simple yet powerful: to make it easier for resident Indians to access foreign exchange and send money abroad without complicated approvals. 

By setting clear LRS limits and streamlining the rules, the scheme has opened up global opportunities for students, travellers, investors, and families alike. 

But what is the Liberalised Remittance Scheme meaning, what is the LRS limit, and what transactions are allowed? Let us find out.  

What is the Liberalised Remittance Scheme (LRS)?

The LRS is a policy that streamlines the process of sending money abroad. Launched by the RBI in 2004, it lifted many restrictions imposed under the Foreign Exchange Management Act (FEMA) 1999. Under the LRS scheme, you can freely remit funds within a prescribed limit for various approved personal and investment purposes. 

This scheme allows you to spend money abroad on things such as education, buying stocks and other assets, travel, medical care, and more. Spending on gifts, donations, and the maintenance of distant relatives are additional options. You can also open and maintain foreign currency accounts to manage these funds.

What is the Limit Under the LRS Scheme?

The limit under the LRS scheme is USD 2,50,000 per resident individual per financial year (April – March). Minors are also eligible, but their guardian must sign the declaration on their behalf. The LRS limit covers all permitted capital and current account transactions combined.

Also, there’s no limit on the number of times you can remit money under this scheme. However, the total amount sent abroad through all authorised channels in a single financial year must not exceed the overall limit of USD 2,50,000.

Who Can Remit Funds Using LRS? 

Following are the persons who can remit funds using LRS:

• Every individual who is a resident of India can remit funds under LRS.
• Even a minor is eligible to remit funds using LRS. The minor must ensure that their guardian signs the declaration form.

The LRS is not available to firms, HUFs, companies, associations, or charitable trusts. 

What Types of Transactions are Permitted Under LRS?

The LRS permits the following types of transactions for capital and current account transactions.

Capital Account Transactions

Such transactions can change the value of any asset or liability. These assets and liabilities can be located in India as well as owned by an individual living outside India. On the contrary, such assets and liabilities can be located outside India and owned by an individual living in India.

Current Account Transactions

According to Section 2(j) of FEMA 1999, all transactions that are not capital account transactions are classified as current account transactions.

The following is a list of capital and current accounts transactions that are eligible under LRS: 

Capital Account Transactions	Current Account Transactions
Opening and maintaining a foreign currency account with a bank outside India	Undertaking private visits to any country (except Nepal and Bhutan)
Purchase of property outside India	Gifts or donations
Making investments abroad (e.g., foreign equity shares, debt instruments, mutual funds, venture capital funds)	Going abroad for employment
Setting up a wholly owned subsidiary (WOS) or joint venture (JV) outside India under overseas direct investment (ODI) regulations	Emigration
Extending loans (including in INR) to relatives who are NRIs as defined under the Companies Act, 2013	Maintenance of close relatives outside India
	Business travel, attending conferences, or specialised training abroad
	Medical expenses or health check-ups outside India
	Medical treatment outside India
	Studies and education abroad
	Any other current account transaction

What Types of Transactions Are Prohibited? 

The LRS does not allow remitting funds to: 

• Buy lottery tickets, sweepstakes or banned magazines
• Trade foreign exchange abroad
• Countries flagged by the Financial Action Task Force (FATF)
• Individuals or entities linked to terrorism
• Gift foreign currency to another resident’s foreign account
• Buy Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in the overseas secondary market

TCS on Liberalised Remittance Scheme

Under the LRS, any money you send abroad may be subject to tax collected at source (TCS). From April 1, 2025, TCS applies if your total remittances in a financial year exceed ₹10 lakh.

Here’s how it works:

• No TCS is charged on education remittances if the funds come from an education loan taken through a bank or a specified financial institution.
• If you pay for education or medical expenses abroad using your own funds, a 5% TCS applies on amounts above ₹10 lakh.
• For all other types of remittances above ₹10 lakh, a 20% TCS is levied.

The good news is: the TCS paid can be claimed as a credit against your total income tax when you file your returns. So, remember to keep proper records of all foreign transfers and the tax deducted.

Documents For Liberalised Remittance Scheme

For LRS, an individual must designate a branch of the authorised dealer who will be responsible for the transactions. Every individual must submit Form A2 for remittance under the LRS, along with a copy of their PAN. Moreover, the individual must comply with Anti-Money Laundering guidelines. Lastly, the individual must complete their Know Your Customer (KYC) details.

Conclusion

The Liberalised Remittance Scheme is an empowering policy that enables Indians to connect globally, invest abroad, and support their families without complex procedures. By knowing what is LRS scheme, the limits of the LRS scheme, and the do’s and don’ts, you can plan your remittances confidently and remain compliant with RBI norms. 

Always consult your bank or a legal advisor to make the most of this facility.

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