Liberalized Remittance Scheme
Liberalized Remittance Scheme (LRS) – A Complete Guide for Resident Indians
The Liberalized Remittance Scheme (LRS) is a facility introduced by the Reserve Bank of India (RBI) allowing Resident Individuals (RIs) to remit funds abroad up to USD 250,000 per Financial Year (April–March) for specified purposes. Introduced in 2004, LRS simplifies outbound remittances and promotes financial flexibility for Indian residents.
1. Who is Eligible under LRS?
- Resident Individuals (including minors)
- Not available to HUFs, Companies, Partnership Firms, Trusts, etc.
2. Permissible Transactions under LRS
| Sr. No. | Purpose | Nature of Transaction | Key Conditions |
|---|---|---|---|
| 1 | Private Visits Abroad | Current Account | Includes airfare, hotels, and travel packages. Not applicable to visits to Nepal/Bhutan. |
| 2 | Gift to NRI/PIO Relatives or Foreign Residents | Current Account | Credited to NRO account if to NRI/PIO; cannot gift to another RI’s foreign account. |
| 3 | Donations Abroad | Current Account | Permissible within LRS limit. |
| 4 | Going Abroad for Employment | Current Account | Limit of USD 250,000 per FY. |
| 5 | Emigration | Current Account | Permitted up to USD 250,000 or as per foreign govt. norms. |
| 6 | Maintenance of Relatives Abroad | Current Account | Allowed under the USD 250,000 limit. |
| 7 | Business Trip Abroad | Current Account | Multiple trips allowed. Employer-paid expenses not counted under LRS. |
| 8 | Medical Treatment | Current Account | No estimate needed up to USD 250,000. Additional with doctor’s certificate. |
| 9 | Education Abroad | Current Account | Above USD 250,000 allowed with university estimate. |
| 10 | Purchase of Art | Current Account | Allowed under Foreign Trade Policy guidelines. |
| 11 | Other Current Account Transactions | Current Account | Permitted unless specifically prohibited. |
| 12 | Foreign Currency Bank Account | Capital Account | No prior approval needed. |
| 13 | Acquisition of Immovable Property | Capital Account | Permissible in own or family member’s name by pooling LRS limits. |
| 14 | Overseas Direct/Portfolio Investment | Capital Account | As per ODI Rules and FEMA Guidelines. |
| 15 | Loans to NRI/PIO Relatives | Capital Account | Loan must be interest-free, credited to NRO a/c, with minimum 1-year tenure. |
| 16 | Investment in IFSC (Gift City) | Capital Account | Permitted with specific compliance. |
💡 Definition of “Relative” includes spouse, parents, children, siblings and their spouses.
3. Prohibited Transactions under LRS
- Trading in foreign exchange
- Remittance for lottery, gambling or prohibited investments
- Purchase of Foreign Currency Convertible Bonds (FCCBs)
- Payments to FATF non-compliant countries or sanctioned entities
4. Documentation & Procedure to Remit Funds
- Designate one Authorized Dealer (AD) Bank per FY
- Maintain the bank account for at least 1 year (for capital account transactions)
- Submit Form A2 with purpose declaration
- PAN is mandatory
- Submit additional documents as required by the AD Bank
5. Important Compliance & Updates
- TCS (Tax Collected at Source) is applicable on LRS transactions as per Income Tax Act. (Refer to TCS FAQs)
- Any unused or uninvested foreign exchange must be repatriated within 180 days unless reinvested
- Pooling of LRS limits by family members is allowed for acquiring immovable property, provided all remitters are joint owners
6. Professional Advisory Recommended
Due to recent changes and complex procedural and tax implications, it is strongly advised to:
- Seek expert consultation before remitting funds
- Coordinate with your AD Bank to avoid compliance issues
- Maintain clear documentation and remittance records
Need Help with LRS Remittances?
At Casela Advisors, we assist resident individuals in:
- Navigating LRS eligibility and compliance
- Documentation for remittances
- Structuring joint family remittances
- Handling TCS and tax implications
- Real-time RBI and FEMA compliance