Liberalised Remittance Scheme (LRS): Current Limits and Reporting Requirements
The Liberalised Remittance Scheme is the framework that lets a resident Indian send money abroad each year for education, travel, investment, or gifting — but the annual limit is a single combined ceiling across every purpose put together, not a separate allowance for each.
What the LRS is
The Liberalised Remittance Scheme (LRS), under FEMA, allows a resident individual to remit funds abroad up to a specified annual limit (commonly referenced around USD 2,50,000 per financial year, subject to confirming the currently applicable figure) for a broad range of permitted current and capital account transactions, without needing case-by-case RBI approval for each remittance within that limit.
The critical point: it's one combined annual limit, not per-purpose
Permitted uses under LRS
- Overseas education expenses for the remitter or a dependent.
- Overseas travel expenses.
- Maintenance of close relatives residing abroad.
- Gifts and donations to persons or entities abroad.
- Investment in foreign securities, property, and setting up overseas ventures (subject to the specific conditions applicable to each category under the LRS framework).
- Medical treatment expenses abroad.
What's specifically restricted under LRS
Certain purposes remain outside LRS's permitted scope even within the monetary limit — including remittances for margin trading or trading in foreign exchange abroad, purchase of lottery tickets or similar prohibited items, and remittances to countries or entities specifically identified as restricted destinations under FEMA/RBI guidance from time to time.
Tax Collected at Source (TCS) on LRS remittances
Remittances under LRS above specified threshold amounts are subject to Tax Collected at Source by the authorised dealer bank processing the remittance — the applicable TCS rate varies by the purpose of remittance (education funded through a loan typically attracting a lower rate than other purposes, and different rates applying to different remittance categories more broadly) and has been revised over recent years, so the current applicable rate for the specific purpose should be confirmed with the remitting bank at the time of the transaction. TCS collected is not an additional final cost — it is generally available as a credit against the remitter's overall income tax liability when filing their return, similar to how TDS credit works.
Practical planning implications
Because the annual limit is a shared, combined ceiling, a resident planning multiple significant remittances within the same financial year — a foreign education payment and a separate investment remittance, for instance — should plan the timing and sizing of each against the same running annual total, rather than assuming each purpose has independent headroom. Spreading planned remittances across financial years (where the underlying need genuinely allows for this) is a common, legitimate way to work within the annual ceiling for larger cumulative remittance needs.