If you’ve ever thought about sending money abroad, whether for university fees, investing in US stocks, or just planning that long-overdue Europe trip, you’ve already brushed past the Liberalised Remittance Scheme (LRS), even if you didn’t realise it.
Let’s understand this a little better.
So, what exactly is LRS?
The Liberalised Remittance Scheme is an RBI framework that allows resident individuals to legally send money abroad for education, travel, investments, gifts, and even buying property overseas.
Under the LRS:
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A resident individual can remit up to USD $250,000 per financial year.
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Minors are also covered, provided the remittance is made through a parent or legal guardian.
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The scheme applies only to individuals. Companies, partnership firms, HUFs, and trusts are not eligible.
LRS gives individuals a regulated way to move money outside India without needing special RBI approvals for each transaction.
What kind of transactions does LRS cover?
LRS broadly covers two types of transactions, depending on the nature of the expense:
1. Current account transactions
These include routine or consumption-related expenses such as travel costs, overseas education fees, or medical treatment abroad.
2. Capital account transactions
These involve long-term financial commitments, like investing in foreign stocks or funds, or purchasing property overseas.
This classification determines how remittances are treated under foreign exchange regulations, while still keeping the overall process simple for individuals.
Where can you use LRS?
LRS allows remittances across a wide range of purposes, including:
| Category | Examples |
|---|---|
| Education | Tuition fees, living expenses, application charges |
| Travel | Holidays, medical travel, foreign tours |
| Investments | US stocks, ETFs, foreign MFs, debt instruments |
| Property | Buying real estate abroad |
| Family needs | Gifts, donations, or maintenance of relatives |
In short, if the purpose of remittance is legal and properly documented, it generally falls within the scope of LRS.
Does TCS apply to LRS transactions?
Yes, most remittances made under LRS attract Tax Collected at Source.
TCS is collected by your bank or authorised dealer at the time of remittance. But to clarify, TCS is not an additional tax. Instead, it functions like an advance tax payment and can be claimed back or adjusted when you file your return.
The Budget 2025 revised the TCS thresholds under LRS to make the scheme more practical for individuals making moderate-sized remittances.
Here’s how the revised TCS rules work:
| Purpose | TCS-free Limit | TCS rate above limit |
|---|---|---|
| Education (loan-funded) | No limit | 0% |
| Education/medical (self-funded) | ₹10 lakh | 5% (on amount exceeding ₹10 lakh) |
| Overseas tour package | ₹10 lakh | 5% up to ₹10L, 20% beyond |
| All other purposes | ₹10 lakh | 20% (on amount exceeding ₹10 lakh) |
These TCS rules are applicable from 1 April 2025.
What does this mean for you?
1. No TCS on loan-funded education
If your overseas education expenses are financed through an approved education loan, no TCS is collected.
2. ₹10 lakh threshold for most remittances
For categories such as travel, gifting, or smaller investments, TCS applies only once your total remittances cross ₹10 lakh in a financial year.
3. TCS is refundable
Any TCS paid is reflected in your Form 26AS and can be adjusted against your final tax liability or claimed as a refund when you file your ITR.
Where LRS doesn’t apply?
Despite being liberalised, LRS does come with clear restrictions. RBI does not permit remittances for:
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Buying lottery tickets
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Margin trading or speculative forex transactions
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Sending money to countries or entities flagged by FATF or banned by RBI
If a transaction is speculative, illegal, or high-risk in nature, it will not be allowed under LRS.
So, if you’re planning anything international, understanding LRS will keep your transactions smooth, hassle-free, and help you make the most of its benefits.