Are you planning to invest in foreign assets, get treated in a foreign country, spend on a foreign vacation, or finance education at an overseas institute with your money earned in India? It is perfectly possible to transfer money out of India under the Liberalised Remittance Scheme (LRS) for meeting financial goals abroad. 

What is the Liberalised Remittance Scheme (LRS)?

LRS is the primary mechanism under the Foreign Exchange Management Act (FEMA), 1999, that allows individual Indian residents to send a limited sum of money abroad in a financial year for permissible overseas expenditures and investments. 

Things to remember while availing outward remittance under the LRS are:

• Maximum permissible outward remittance - Currently, the limit under the LRS is $2,50,000 per individual per financial year (1st April to 31st March)

• Prior approval - As long as remittance is under the maximum permissible limit, Indian resident remitters do not require to take any prior approval from the RBI. 

• Category limits - There exists no category-specific limits under the LRS on outward remittance. For example, if an individual spends $50,000 on foreign vacation in an FY, they can spend the remaining $2,00,000 of the maximum limit or a part of it on any permitted capital or consumption expenditure.  

Who Can Use LRS, and Who Cannot?

Allowed Transactions Under LRS

The RBI allows spending money remitted through LRS for both consumption (current account transactions) and asset creation (capital account transactions) purposes. 

Some of the common permission transactions are:

• Education 

• Travel and tourism 

• Healthcare 

• Investing in overseas stocks, bonds and mutual funds 

• Donation to foreign charities 

• Maintenance of relatives living abroad 

• Emigration purpose  

Prohibited Transactions Under LRS

Certain types of expenses are explicitly prohibited under the LRS mechanism. They include:

• Purchase of lottery tickets or gambling stakes 

• Leveraged speculative trades (e.g., forex trading, stocks and commodity derivatives, etc.)

• Sending funds to countries restricted under FATF (Financial Action Task Force)

• Investing in Foreign Currency Convertible Bonds issued by Indian companies in the overseas secondary market

• Purchased restricted under the Foreign Exchange Management (Current Account Transactions) Rules, 2000

TCS Rules on Foreign Remittances

An advance tax in the form of Tax Collected Source (TCS) applies to outward remittance under the LRS. Individual remitters can claim refund of TCS if actual tax liability is less or adjust the TCS with their total tax liability in a financial year. 

The Union Budget 2025 has made a significant relaxation on TCS obligations on foreign remittance. The exemption limit has been increased to Rs 10 lakhs from the previous limit of Rs 7 lakhs. It means Indian residents may transfer up to Rs 10 lakhs abroad for certain expenses without requiring to pay any TCS. 

How to Remit Under LRS (Process & Documentation)

Individual Indian residents can transfer money abroad through authorised forex dealers (e.g., banks) and authorised money exchangers. It requires submitting a few documents. Many banks now offer simplified online overseas money transfer facilities. 

Step 1 - Mandatory documentation 

Remitters must submit and file the following mandatory documents:

• Form A2 declaration  

• PAN 

• KYC with Aadhar and Address Proof 

• Expense-specific proofs, e.g., visa copy, admission confirmation to education institution, hospital expense estimate, etc. 

Step 2 - Transfer and confirmation 

Once all the necessary documents are submitted and declaration is filed, the chosen bank or the money exchanger transfers the fund to the foreign beneficiary using the SWIFT network. The remitter receives a SWIFT copy or a debit advance from the bank as proof of the transfer. 

Penalties, Reporting & Compliance

The RBI and the FEMA regulation is very accommodative to foreign remittance under the LRS. However, any violation of LRS norms is considered a serious offense attracting penalties. 

• Maximum penalty as high as 3 times of money involved for any transfer beyond the permissible limits of $2,50,000 or transferring for prohibited expenses. However, recent RBI guidelines cap the maximum penalty at Rs 2 lakhs for every minor or non-wilful contraventions.  

• Failure to report foreign assets in annual income tax returns attract a penalty of Rs 10 lakh under the Black Money Act.  

FAQs 

If I don’t use my USD 250,000 limit this year, can I carry it forward to next year?

No. LRS does not allow carry forward of the remittance limit. The limit lapses 31st March of every financial year. 

Is the LRS limit applicable to overseas expenditures done using international credit cards? 

No. As of December 2025, foreign transactions done using international credit cards while travelling abroad are not part of remittance under the LRS. These are cards designed and issued specifically for global usages while Indians are travelling abroad. Common permissible usages include making online and offline transactions in multiple currencies, and also making ATM withdrawals. 

How to lower TCS burden on foreign remittance under the LRS? 

The best way to avoid or lower TCS burden is to split the total transfer among multiple individuals and keep the individual transfers under the minimum threshold of Rs 10 lakh.