Liberalised Remittances Scheme (LRS)

Recent data indicates that outward remittances by Indians under the Liberalised Remittances Scheme declined to $1.94 billion in November 2025, marking a two-year low. This decline was mainly due to a significant reduction in spending on foreign education, reflecting changing trends in overseas expenditure.

About the Liberalised Remittances Scheme (LRS)

The Liberalised Remittances Scheme is governed by the Foreign Exchange Management Act (FEMA), 1999, which regulates foreign exchange transactions in India. The scheme was introduced on February 4, 2004, to facilitate easier outward remittances by individuals.

Under this scheme, resident individuals are allowed to remit up to USD 250,000 per financial year (April–March) for permitted transactions. Any remittance exceeding this limit requires prior approval from the Reserve Bank of India.

Eligibility Under LRS

The scheme permits only resident individuals, including minors, to remit funds abroad. However, entities such as corporates, partnership firms, Hindu Undivided Families (HUFs), and trusts are not eligible to use the scheme.

Frequency of Remittances

There is no restriction on the number or frequency of remittances made during a financial year. However, the total amount remitted must remain within the prescribed limit of USD 250,000 for that year.

Permitted Transactions

The scheme allows individuals to remit money abroad for a variety of purposes. These include opening foreign bank accounts, purchasing immovable property abroad, and making overseas investments such as ODI and OPI. Individuals can also extend loans to NRI relatives.

Additionally, remittances are permitted for personal purposes such as foreign travel (excluding Nepal and Bhutan), education, medical treatment, and maintenance of relatives abroad. Both current account and capital account transactions are covered under the scheme.

Prohibited Transactions

Certain transactions are not permitted under LRS. These include remittances for purchasing lottery tickets or banned items, margin trading in overseas exchanges, and foreign exchange trading abroad. Investments in Foreign Currency Convertible Bonds (FCCBs) in the secondary market are also prohibited.

Furthermore, remittances cannot be made to individuals or entities linked to terrorism or to countries identified as non-cooperative by the Financial Action Task Force (FATF).

Taxation Under LRS

Tax Collected at Source (TCS) is applicable on LRS transactions when the total remittance exceeds ?7 lakh in a financial year. The standard TCS rate is 20%, although it may vary depending on the nature of the transaction.

It is important to note that TCS is not a final tax liability and can be adjusted while filing income tax returns. Additionally, any income or capital gains earned from overseas investments under LRS are taxable in India, depending on the applicable tax rules and holding period.

Conclusion

The Liberalised Remittances Scheme has made it easier for Indian residents to engage in international financial transactions. At the same time, regulatory limits and tax provisions ensure proper monitoring and compliance. The recent decline in remittances highlights evolving economic conditions, particularly in areas such as foreign education.