What is Liberalised Remittance Scheme (LRS)?

The LRS full form is Liberalised Remittance Scheme. The Liberalised Remittance Scheme by the RBI allows resident Indians to remit up to USD 250,000 annually abroad for education, travel, healthcare, gifts, and investments. Budget 2025 revised the LRS scheme with a higher TCS-free threshold, making global financial transactions easier.

Overview of LRS

What is LRS?

The LRS full form is Liberalised Remittance Scheme. It is a foreign exchange policy initiative introduced by the Reserve Bank of India in 2004. It intended to simplify and streamline the process of remitting funds outside India. 

This scheme helped Indians overcome international fund transfer restrictions as set by the FEMA (Foreign Exchange Management Act), 1999. Under LRS, resident individuals can freely remit funds up to a certain limit for various permissible transactions involving a current or capital account.

LRS Scheme for NRIs

The LRS scheme applies only to resident individuals. Since NRIs cannot maintain resident savings accounts in India, they are not eligible to remit funds under the LRS.

However, NRIs can repatriate funds from their NRO, NRE and FCNR accounts as per FEMA regulations:

• Funds in an NRO account can be repatriated up to USD 1 million per financial year, subject to applicable taxes and submission of the prescribed documents, including Forms 15CA and 15CB.
• Funds in NRE and FCNR accounts are freely repatriable without any monetary limit.
• NRIs can use these accounts to remit funds abroad for eligible purposes in accordance with RBI regulations.

Liberalised Remittance Scheme Availability

The Liberalised Remittance Scheme is available to the following individuals and circumstances:

• The Foreign Exchange Management Act states that LRS is available to all resident individuals, including minors and students.
• The eligible citizens must have an Indian bank account, a valid Permanent Account Number (PAN), and a passport.
• They can use the remitted amount for educational, business, personal, or other purposes.

Liberalised Remittance Scheme limit

Under the Liberalised Remittance Scheme, a resident individual can remit up to USD 250,000 per financial year for permissible transactions. 

The LRS scheme limit for education, medical treatment, employment, emigration, travel and overseas investments is the same as mentioned above. However, remittances are not permitted for purposes such as margin trading, lottery tickets, gambling and other transactions prohibited under FEMA. Investment in overseas real estate is permitted within the overall LRS limit.

Tax on Liberalised Remittance Scheme 2025

As per Budget 2026, the threshold limit for Tax Collected at Source (TCS) on remittances under the Liberalised Remittance Scheme continues to be ₹10 lakh per financial year. 

• No TCS is applicable on eligible LRS remittances up to ₹10 lakh in a financial year.
• No TCS is applicable on remittances for education financed through loans from specified financial institutions.
• A 2% TCS applies on the amount exceeding ₹10 lakh for self-funded education and medical treatment abroad.
• Overseas tour packages attract a flat 2% TCS.
• For other LRS remittances exceeding ₹10 lakh, 20% TCS is applicable.
• The TCS collected can be claimed while filing the Income Tax Return (ITR), and the details are reflected in Form 26AS.

RBI Guidelines for Outward Remittance 

Outward remittance indicates the transfer of funds from an Indian account to a foreign account. As per the RBI guidelines, outward remittance can be paid through a demand draft issued in the individual or the beneficiary's name. You can also open a bank account outside India to maintain foreign accounts. 

Here are some of the steps to do the same:

• Choose a bank branch that is an authorised dealer through which all payments will be made.
• Make sure to carry your PAN card.
• Follow the Anti-Money Laundering (AML) and KYC (Know Your Customer) guidelines.
• Fill out Form A2 to purchase foreign currency.
• Last but not least, banks are prohibited from providing any credit facilities to residents under LRS.

Benefits of Liberalised Remittance Scheme(LRS) in India

Some of the notable benefits of LRS scheme are as follows:

• Diversification of investment: The LRS allows individuals to diversify their investment portfolio by investing in foreign assets such as stocks, bonds, mutual funds, and real estate.
• Overseas education: The LRS enables individuals to remit money for education-related expenses such as tuition fees, living expenses, and books. This allows students to pursue higher education in foreign universities and colleges.
• Medical treatment: The LRS allows individuals to remit money for medical treatment outside India. This is particularly helpful for those requiring specialised medical treatment unavailable in India.
• Travel: The LRS enables individuals to remit money for travel-related expenses such as tickets, hotel bookings, and other expenses.
• Start-ups and business investments: The LRS allows individuals to invest in foreign businesses, start-ups, and joint ventures. This helps entrepreneurs and business owners expand their businesses globally.
• Gift and donations: The LRS enable individuals to gift or donate money to their family members or charitable organisations outside India.

The Liberalised Remittance Scheme (LRS) provides Indian residents a structured framework to send funds abroad for various needs while ensuring compliance with RBI’s guidelines. With an annual limit of USD 250,000, increased TCS-free threshold of ₹10 lakh, and multiple eligible categories, the LRS scheme supports global investments, education, healthcare, and lifestyle requirements.