Liberalised Remittance Scheme (LRS) is an RBI scheme under FEMA that permits resident individuals in India to remit up to USD 250,000 per financial year for permissible current account and capital account transactions without requiring specific RBI approval. Under Indian law, LRS covers overseas education, travel, medical treatment, gifts, donations, investment in foreign securities, purchase of immovable property abroad, and maintenance of close relatives — with Tax Collected at Source (TCS) applicable under Section 206C(1G) of the Income Tax Act on remittances exceeding specified thresholds.
Legal definition
The RBI Master Direction on LRS (part of the Master Direction on Liberalised Remittance Scheme) provides:
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 250,000 per financial year for any permissible current or capital account transaction or a combination of both.
Permitted transactions under LRS:
| Category | Examples |
|---|---|
| Current account | Overseas education, medical treatment, travel, gifts to relatives, donations |
| Capital account | Opening foreign currency accounts, investment in shares/mutual funds abroad, purchase of immovable property, setting up JVs/WOS |
| Maintenance | Maintenance of close relatives abroad |
Prohibited transactions:
| Cannot be used for |
|---|
| Margin trading or margin calls |
| Purchase of lottery tickets or sweepstakes |
| Proscribed magazines or prescribed items under Schedule II of FEMA |
| Remittance to countries identified as "non-cooperative" by FATF |
| Capital account remittances to Nepal and Bhutan (current account permitted) |
Tax Collected at Source (TCS) under Section 206C(1G) Income Tax Act:
| Purpose | TCS Rate | Threshold |
|---|---|---|
| Overseas education (financed by education loan) | 0.5% | Above Rs 7 lakh |
| Overseas education (self-financed) | 5% | Above Rs 7 lakh |
| Medical treatment | 5% | Above Rs 7 lakh |
| Overseas tour packages | 5% | Above Rs 7 lakh (reduced from 20% by Budget 2024 amendment) |
| All other LRS purposes | 20% | Above Rs 7 lakh |
How courts have interpreted this term
LRS is primarily an administrative scheme governed by RBI circulars and directions, and has not been the subject of extensive judicial interpretation. Key regulatory actions include:
RBI enforcement of LRS limits — The RBI has issued multiple clarifications regarding the computation of the $250,000 limit. Remittances by a minor are within the minor's own limit (not clubbed with the parent's). However, if the parent remits on behalf of the minor from the parent's bank account, it counts against the parent's limit. The annual limit resets on April 1 of each financial year.
CBDT Circular on TCS (2023)
The Central Board of Direct Taxes issued clarifications on TCS applicability under Section 206C(1G), establishing that: TCS is collected by the authorised dealer bank at the time of remittance; TCS paid can be claimed as credit against income tax liability in the ITR; and the Rs 7 lakh threshold is per individual per financial year (not per transaction). The initial 2023 announcement of 20% TCS on all LRS remittances (except education and medical) was modified after significant public backlash.
ED investigations on LRS misuse
The Enforcement Directorate has investigated cases where individuals used LRS to remit funds abroad that were disproportionate to their declared income — routing unaccounted money through LRS by using multiple family members' quotas, thereby circumventing the per-individual limit. Such cases are treated as FEMA contraventions and, if proceeds of crime are involved, as PMLA offences.
Why this matters
LRS is the primary legal channel for Indian residents to move money abroad for personal and investment purposes. The scheme has grown exponentially — from barely $1 billion in total remittances in its early years to over $27 billion in FY2023-24 — reflecting India's increasing integration with the global economy, the growth of outbound tourism, overseas education, and individual participation in global capital markets.
For individuals, LRS enables: sending children abroad for education (the largest use case), purchasing property in foreign countries, investing in US stocks and global mutual funds through platforms like Vested and INDMoney, and maintaining family members who are non-resident. The $250,000 per person limit means a family of four could theoretically remit $1 million in a financial year.
The TCS provisions (introduced in 2020 and progressively tightened) are a significant compliance burden. At 20% TCS for investment-related remittances above Rs 7 lakh, the upfront cash outflow is substantial — though the TCS is adjustable against income tax liability, it creates a cash flow impact. Many investors in overseas markets have cited TCS as a deterrent, and the provision has been repeatedly debated in the context of India's capital account liberalisation trajectory.
Related terms
Parent framework:
Related outbound routes:
Tax implications:
Opposite (illegal channel):
Frequently asked questions
What is the annual limit under LRS?
The current limit is USD 250,000 per financial year (April-March) per resident individual. This is an aggregate limit — all LRS remittances during the year (whether for education, travel, investment, or property) are counted together. The limit resets on April 1. Minors have their own separate limit. The limit has been progressively increased from $25,000 (when introduced in 2004) to the current $250,000.
Is TCS deducted on all foreign remittances?
TCS under Section 206C(1G) applies to LRS remittances exceeding Rs 7 lakh in a financial year. Below Rs 7 lakh, no TCS is deducted. Above Rs 7 lakh, the TCS rate depends on the purpose: 0.5% for education (loan-financed), 5% for education (self-financed), medical, and overseas tours, and 20% for all other purposes (including overseas investment and property). TCS paid is adjustable against the individual's income tax liability.
Can NRIs use LRS?
No. LRS is available only to "persons resident in India" as defined under FEMA. NRIs (Non-Resident Indians) are persons resident outside India and cannot use LRS. However, NRIs have their own framework for repatriation of funds from India (through NRE/NRO accounts) which is governed by separate FEMA regulations.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.