LRS for NRIs: Liberalised Remittance Scheme

Liberalised Remittance Scheme allows remittances to foreign countries so that Indian residents can conduct transactions smoothly across India's international borders. But how does it affect NRIs? Read this article to find out!

January 10, 2024
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International money transfers are subject to diverse regulations. Do you know how to transfer money to foreign accounts and the limit?

In India, the Foreign Exchange Management Act (FEMA) is the regulatory framework for overseeing the inflow and outflow of funds. The Liberalised Remittance Scheme (LRS) was introduced in 2004 specifically to govern transactions where currency is transferred from India to foreign countries.

Familiarising with the LRS regulations is necessary if resident Indians have family staying abroad. And, if traveling abroad for tourism or business. Or plan to invest in foreign markets - shares, mutual funds, etc.

What is the Liberalised Remittance Scheme (LRS)?

A remittance refers to the transfer of money abroad by an individual. Remittances can be:

  • inward remittances (funds sent to India from overseas)
  • outward remittances (income earned in India and sent out of the country).

LRS exclusively governs outward remittances in India by resident Indians and is not applicable to NRIs.

Under the LRS, resident Indians can remit money abroad for specified purposes. For example, resident Indians can send money to their loved ones living abroad, pay for their child's education expenses abroad, etc. However, these remittances are subject to an annual maximum limit.

Foreign remittance limits have gradually increased from $25,000 to $2,50,000 or its equivalent in other currencies since the inception.

Earlier, transferring money abroad was a complicated process, where approvals from RBI were required. With the introduction of LRS, resident Indians can easily remit money to foreign countries without any hassle. 

Outward remittances by resident Indians under LRS increased by 50.64% to $9.1 billion in the 2023 April-June quarter. The key determinants include equity and debt investments, deposits, and the international travel segment, etc.

Is LRS Applicable for NRIs?

 LRS is not applicable for NRIs. It applies only to Indian residents. The remittance regulations vary for NRIs holding bank accounts in India. The following are the types of NRI bank accounts:

  • Non-Resident External (NRE) Account
  • Non-Resident Ordinary (NRO) Account
  • Foreign Currency Non-Resident (FCNR) Account

As per RBI guidelines, NRIs can remit up to $1 million per financial year from India through their NRO account. There is no upper limit for outward remittances through NRE or FCNR accounts.

Features of the Liberalised Remittance Scheme

  • Eligibility: For resident Indians only.
  • Remittance: Only outward remittance from India.
  • Regulated by: Foreign Exchange Management Act 1999 by the Reserve Bank of India (RBI).
  • Remittance limit: $2,50,000 (or its equivalent) per financial year.
  • Permissible accounts: Current or capital account transactions or a combination of both.
  • Remittance unavailable: For purchase of lottery tickets, sweepstakes, banned magazines, etc.

Remittance under LRS

Permissible Remittances

Permissible remittances under LRS can be categorised as current account and capital account transactions. 

According to FEMA 1999, Current Account transactions involve payments related to foreign trade, services, banking, credit facilities, and living expenses abroad. 

Capital Account transactions, in contrast, entail changes in assets and liabilities held abroad by resident Indians.

The table below lists the permissible capital and current account transactions under LRS:


Current Account Transactions

Capital Account Transactions

To travel abroad (except Nepal and Bhutan)

Purchase of property abroad

Gifts or donations to legitimate beneficiaries

For opening, holding, and maintaining a foreign currency account with a bank abroad

Travelling abroad for employment purposes

For investing abroad, i.e. buying and holding of shares of listed and unlisted companies, debt instruments, mutual funds, VC funds, etc.


Providing loans to NRIs who are relatives as defined in the Companies Act.

To cover the living or medical expenses of close relatives living abroad

To set up a foreign wholly owned subsidiary (WOS) or Joint Venture (JV) for legitimate business purposes, adhering to regulations under Overseas Direct Investment (ODI).

Business trips


Education fee payment abroad


Various current account transactions which are not covered under the FEMA


Prohibited Remittances

The following remittances are prohibited under LRS:

  • Remittances prohibited under Schedule I - purchase of lottery tickets, sweepstakes, proscribed magazines, etc.
  • Remittances restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000. 
  • Remittance from India for margins or margin calls to overseas exchanges/counterparty.

  • Remittances for purchasing Foreign Currency Convertible Bonds (FCCB) issued by Indian companies in the overseas secondary market.

  • Remittance for trading in foreign exchange abroad.

  • Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as 'non-cooperative countries and territories' from time to time.

  • Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

  • Gifting by a resident to another resident in foreign currency.

Benefits of Liberalised Remittance Scheme

 The following are the benefits of Liberalised Remittance Scheme:

  • It allows resident Indians to invest in foreign assets and create a diversified portfolio.
  • If children are studying abroad, LRS provides resident Indians with a safe and efficient way of transferring funds for their education and living expenses.

  • If traveling abroad for medical treatments, resident Indians can easily pay for it without any hassle of protocols and paperwork.

Formalities and Documentation Required for LRS

 Under LRS, resident Indians can make outward remittances through a demand draft in their name or the name of a beneficiary (they must submit a self-declaration in the prescribed format).

Additionally, resident Indians can open, maintain, and hold foreign currency accounts with a bank outside India for remittance purposes.

The following is necessary for LRS:

  • Resident Indians must have a designated branch of an authorised dealer bank for remittances.
  • Submit Form A2 for purchase of foreign exchange.
  • Submit Permanent Account Number (PAN).
  • Resident Indians must adhere to the prescribed Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines. 

Liberalised Remittance Scheme (LRS): Frequently Asked Questions (FAQs)

Are remittances made only in US Dollars?

The remittances can be made in any freely convertible foreign currency.

Can bankers open foreign currency accounts in India for residents under LRS?

Bankers cannot open foreign currency accounts in India for residents under LRS.

Can I remit more than $2,50,000?

Yes. Resident Indians can remit more than $2,50,000 by getting prior permission from RBI.

Is LRS taxable?

Outward foreign remittances attract Tax Collected on Source (TCS). Foreign remittances beyond Rs 7,00,000 in a year attract 20% TCS. This will apply to sending money abroad, international travel, and other remittances.

Can I claim TCS on LRS?

Yes, resident Indians can claim the TCS. They need to fill out Form 26AS while filing ITR.

Is there any restriction on the total number of remittances I can make in a financial year?

There is no restriction on the number of remittances resident Indians can make in a financial year. However, the total amount of all remittances should be within the LRS limit ($2,50,000).

Can a minor send money under the LRS?

Yes, LRS is available for all Indian residents. However, for transactions by a minor, the natural guardian must sign form A2.

I'm an Indian passport holder, but I've been residing abroad for employment for the last 20 years. Am I eligible for the LRS?

As per FEMA, you are an NRI since you have left India for employment. Though you are an Indian citizen, you cannot use LRS because you are not a resident of India.

Is LRS, in addition to using international credit & debit cards?

Yes, LRS is in addition to the use of an international credit card. The RBI does not limit remittances made through an international credit card to cover expenses during foreign visits.

Resident Indians cannot use their international credit card for payments in foreign exchange in Nepal and Bhutan. Additionally, using debit cards for foreign transactions is subject to the guidelines issued by the RBI under the LRS.

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