What is Liberalized Remittance Scheme (LRS) in India?

For Indians who regularly send money abroad, the Liberalised Remittance Scheme streamlines the process to ensure that funds are transferred in compliance with regulations.

Whether you need to transfer funds for education, medical treatments or investment, it is important what Liberalized Remittance Scheme is and how it works.

What is Liberalized Remittance Scheme (LRS)?

Introduced in 2004 by the Reserve Bank of India (RBI), the Liberalised Remittance Scheme (LRS) allows individuals to remit abroad with amounts up to USD 250,000. The scheme was designed to make cross-border transactions more convenient. The LRS scheme is regulated by the Foreign Exchange Management Act (FEMA), 1999.

Key Benefits of LRS for Indian Residents

The Liberalised Remittance Scheme (LRS) enables resident Indians to send money abroad within the specified limit. This scheme provides a few key advantages for money transfers to Indian residents:

Higher Remittance Limit:
Wide Range of Use Cases: Funds can be sent abroad for education, travel, medical treatment, investments, gifts, and donations.
Streamlined Process: No RBI approval is required for cross-border transactions under the LRS scheme, making it accessible for most individuals.
Portfolio Diversification: Individuals can diversify their portfolio through LRS investments which gives them access to global stocks, bonds, ETFs and real estate.

What are the Eligibility Criteria for LRS?

The eligibility criteria for the LRS scheme are minimal. To ensure financial inclusion in terms of remittance transfers abroad:

You should be an Indian citizen.
Resident minors are also eligible for the LRS scheme. The guardian of the minor will have to sign the LRS declaration form during the transfer process.

However, corporate, partnership and HUF firms are not eligible under this scheme. NRIs also cannot avail this scheme when sending money to India.

Annual Remittance Limits and Caps

For individuals planning to use the LRS scheme for remittance, it’s important to consider the limitations applicable under this scheme:

The upper annual LRS scheme limit of USD 250,000 applies to all remittances in a financial year. This limit applies to different bank accounts held by a resident individual.
The transactions are tracked by the individual’s PAN to ensure that the total amount does not exceed the annual cap.
Consider requesting special RBI approval if you want to send more money than the cap.

Prohibited Transactions Under LRS

Under the Liberalised Remittance Scheme (LRS), resident individuals are not allowed to remit funds abroad for the following purposes:

Individuals cannot send money abroad to buy lottery tickets, enter sweepstakes, or purchase items that are banned in India.
Sending money overseas for margin trading, margin calls, or foreign exchange (forex) trading is prohibited by the LRS scheme.
The Liberalized Remittance Scheme (LRS) restricts Indian companies from acquiring Foreign Currency Convertible Bonds (FCCBs) issued in overseas secondary markets.
Individuals cannot transfer funds to countries that are blocked by RBI under the Financial Action Task Force (FATF) or to people flagged by the RBI for security concerns.
Under the LRS, an Indian resident is not permitted to accept foreign currency as a gift to deposit into their foreign exchange account maintained abroad.

By being aware of these limitations, one can avoid any penalties or other issues while transferring funds abroad. It is important to keep yourself updated on the latest RBI guidelines for LRS.

Open DBS Treasures Account

Tax Rules & Form Requirements

When factoring in the costs of sending money abroad, it is important to consider the taxation applicable to the LRS scheme. Refer to the table below for a quick overview:

Purpose of Remittance	TCS Rate (Above ₹10 lakh/year)
Education (from education loan)
Education (not from loan) & Medical Treatment	5%
All Other Purposes (travel, investment, etc.)	20%

Notes:

The exemption limit for LRS remittance has been increased to INR 10 lakh per fiscal year in accordance with the most recent income tax bill.
When submitting your income tax returns, you have the option to claim the TCS payment as either a refund or a credit against your tax liability.
Form 67 is required in LRS to claim a foreign tax credit for taxes paid abroad on income earned from funds remitted overseas, preventing double taxation in India.

How to Send Money Abroad Under LRS

Remittance under the LRS scheme is an easy process for resident individuals. Here is a step-by-step guide for LRS:

Step 1: Select a service or bank that accepts LRS payments such as DBS Treasures Remittance services which offer a paperless process for sending money abroad.

Step 2: Provide mandatory documents which are a PAN card, a valid Indian passport, and proof of purpose (if required by the bank).

Step 3: Submit Form A2 which declares the purpose of your remittance and verifies it according to the RBI guidelines.

Step 4: Provide Remittance details such as the purpose of transfer, receiver’s name, bank account details, and country and the amount to be sent.

Step 5: After applying, the bank will review and process the transaction to the beneficiary.

It is essential to retain all receipts and confirmations that can assist in tracking the LRS application status.

RBI Guidelines and Recent Updates

Here are some recent changes in regulations for the Liberalized Remittance Scheme:

According to LRS regulations, money loaded onto forex cards is regarded as an outward remittance. The person who funds the card, not the cardholder, is subject to the LRS limit.
GIFT City is a special financial zone allowing Indian residents to open foreign currency accounts and invest in international financial assets. The LRS scheme allows you to invest directly in these options without transferring money abroad.

Also Read: Changes in LRS

Open DBS Treasures Account

Conclusion

The Liberalised Remittance Scheme empowers Indian residents to send up to USD 250,000 abroad annually for education, healthcare, investments, and more without cumbersome approvals. By understanding eligibility, limits, tax rules, and prohibited uses, individuals can transfer funds confidently and compliantly, making global opportunities accessible while staying within RBI’s regulatory framework.

DBS Treasures Remittance services let you send up to USD 250,000 abroad annually with zero bank fees, competitive FX rates, and same-day, paperless transfers to over 200 countries, making international money transfers fast, easy, and cost-effective for Indian residents.

Liberalized Remittance Scheme (LRS) Guide for Indians