LRS - Liberalised Remittance Scheme
10 May 2021

LRS - Liberalised Remittance Scheme

Understand the benefits, rules, and regulations of LRS

TLDR Points

  • The Liberalised Remittance Scheme (LRS) lays down the guidelines for outward remittances from India.
  • It is part of the Foreign Exchange Management Act (FEMA) 1999 by the Reserve Bank of India (RBI).
  • Under the LRS, the upper limit of remittance is $2,50,000 per financial year.
  • You can send money abroad for genuine reasons like your child's education or to fund personal expenses.
  • You cannot remit funds abroad for buying lotteries or banned magazines, amongst others.
  • LRS applies to all resident individuals in India.


A few decades ago, remitting funds abroad to educate your child or help in emergencies was cumbersome and time-consuming. To streamline outward remittances like these, the Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS) in 2004.

This article will give you insight into the LRS and help you understand which transactions the RBI allows and prohibits.

Meaning of Liberalised Remittance Scheme

The Liberalised Remittance Scheme is what enables parents to send money to their child studying abroad. This scheme is available to any resident individual (adult or minor). You can send up to $2,50,000 abroad in each financial year. The LRS is unavailable to corporates, partnership firms, HUF or Charitable Trusts. The scheme enlists authorised dealers such as banks to facilitate foreign exchange between resident Indians and their beneficiaries abroad. For every transaction under the Liberalised Remittance Scheme, you will have to provide your PAN.

A Short History of LRS

With economic liberalisation in the 1990s, India opened her doors to the world. On the 4th of February, 2004, the RBI introduced the Liberalised Remittance Scheme. The LRS is a result of the Tarapore Committee's recommendations.

LRS is the reason why millions of Indians like you can support their families abroad or send money for other purposes around the world.

Purposes for Remittance under LRS

The LRS includes a comprehensive list of purposes for which you can remit funds. The list is different for current account transactions and capital account transactions:

Current Account Transactions

  • Travel and tourism to foreign countries (except Nepal and Bhutan)
  • Gift or donations to legitimate beneficiaries
  • Going abroad for employment
  • Emigration
  • Maintenance of close relatives living abroad
  • Business trips
  • Expenses in connection with medical treatment abroad
  • Paying for education abroad
  • Any other current account transaction that is not covered under FEMA.

Capital Account Transactions

  • Opening, holding, maintaining a foreign currency account abroad with a bank
  • Purchase of property abroad.
  • Making foreign investments in equity shares, debt instruments, mutual funds, venture capital funds, etc.
  • Extending loans to Non-Resident Indians who are relatives as defined under the Companies' Act.
  • Setting up a Wholly Owned subsidiary (WOS) or a Joint Venture (JV) outside India for any bonafide business purpose subject to the rules framed under the Overseas Direct Investments (ODI) regulations.

A resident individual can make remits up to $2,50,000 each financial year. There is no restriction on the number of transactions. However, you must maintain a capital account for at least one year before your first remittance.

Types of remittances prohibited under LRS

As per the latest RBI guidelines, the following remittances are prohibited under the LRS:

  • Remittance for any purposes that are prohibited explicitly under Schedule-I and Schedule II of current account transaction rules, (2000). The purposes include but are not limited to the purchase of lottery tickets and prohibited magazines.
  • Remittance from India for margins or margin calls to overseas exchanges/overseas counterparty.
  • Remittances for purchasing Foreign Currency Convertible Bond issued by Indian companies in the overseas secondary market.
  • Remittance for trading in foreign exchange abroad.
  • Direct or indirect capital account remittances to countries identified by the Financial Action Task Force (FATF) as "non-cooperative countries and territories." The list changes from time to time.
  • Direct or indirect remittances to individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the RBI to the banks.

Liberalised Remittance Scheme: Why is it important?

The Liberalised Remittance Scheme enables you to send money abroad the way you wish to by providing proper structure and guidelines. The LRS highlights legal channels through which you can remit funds.

The LRS empowers resident individuals to invest in foreign assets and build a better economic future for themselves and their families. For families with children studying abroad, LRS ensures a safe and efficient way of paying fees and meeting living expenses. Many Indians go abroad to seek necessary medical treatment. The LRS allows them to pay for it without the added hassle of too many protocols and paperwork.

What does LRS mean for NRIs and their bank accounts?

The Liberalised Remittance Scheme applies to only Indian residents living in the country. While an NRI can hold a bank account in India, the remittance rules will differ.

An NRI can hold any of the following types of bank accounts in India:

  • NRE (Non-resident external)
  • NRO (Non- Resident Ordinary)
  • FCNR (B) (Foreign Currency Non-Resident Bank Account)

RBI guidelines state that an NRI can remit up to $10,00,000 from India each financial year through their NRO account. In the case of an NRE or FCNR (B) account, there is no upper limit. However, there are restrictions on what type of inward remittances are allowed on the NRE and FCNR (B) account.

There are specific terms and conditions laid down by the RBI regarding NRI bank account in India. It is best to check the latest guidelines before proceeding to make remittances from such accounts.


The Liberalised Remittance Scheme provides an extensive and structured system for resident individuals who wish to remit money overseas. You can send money to your loved ones abroad or for other transactions the RBI allows. Remember to keep your PAN card information ready, since it is mandatory.

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