The Liberalized Remittance Scheme (LRS) allows resident Indians to remit money overseas for investment, education, medical expenses, travel, and gifting. The scheme is regulated by the Reserve Bank of India (RBI) and has specific limits, taxation rules, and compliance requirements.
1. Key Features of LRS
✅ Annual Limit: Up to $250,000 per financial year per individual.
✅ Purpose: Education, travel, investment, gifting, medical treatment, maintenance of relatives, etc.
✅ Eligible Individuals: Resident Indians, including minors (through guardians).
✅ Non-Eligibility: LRS is not available for corporates, partnerships, HUFs, or trusts.
2. Permitted Uses of LRS Funds
| Purpose | Allowed Under LRS? |
|---|---|
| Foreign Education | ✅ Yes |
| Medical Treatment Abroad | ✅ Yes |
| Investment in Stocks, Mutual Funds, Real Estate | ✅ Yes |
| Gifting to Relatives Abroad | ✅ Yes |
| Foreign Travel & Expenses | ✅ Yes |
| Purchasing Crypto Assets | ❌ No |
| Remittance for Margin Trading & Gambling | ❌ No |
🔹 NRIs cannot remit funds from India under LRS.
3. How to Remit Money Under LRS? (Step-by-Step Guide)
Step 1: Choose a Bank & Fill LRS Form A2
- Approach an authorized dealer bank (AD Bank) such as SBI, HDFC, ICICI, etc.
- Fill Form A2, declaring the purpose of the remittance.
Step 2: Provide Supporting Documents
- PAN Card (mandatory for tracking remittances).
- Invoice (if applicable) for medical or education expenses.
- Bank statement for financial capacity proof.
Step 3: Transfer Funds
- The bank will process the transfer after verification.
- The amount is debited from the sender’s resident Indian account.
4. TCS (Tax Collected at Source) on LRS Transfers (Updated for 2024)
| Purpose | Amount Limit | TCS Rate |
|---|---|---|
| Foreign Education (With Loan) | Any Amount | 0.5% |
| Foreign Education (Self-Funded) | Up to ₹7 lakh | 0% |
| Foreign Education (Above ₹7 lakh) | Above ₹7 lakh | 5% |
| Foreign Travel & Other Expenses | Up to ₹7 lakh | 0% |
| Foreign Travel & Other Expenses | Above ₹7 lakh | 20% |
🔹 TCS can be claimed as a tax credit when filing ITR.
🔹 No TCS on LRS for business expenses.
5. Restrictions & Key Considerations
✔ Crypto & Speculative Investments: Not allowed under LRS.
✔ Total LRS Limit: $250,000 includes all remittances in a financial year.
✔ Mandatory PAN: PAN is required for all transactions under LRS.
✔ Tax Implications: Keep track of TCS deductions to claim refunds.
Final Thoughts
LRS is a flexible way for resident Indians to send money abroad for various legitimate purposes. However, TCS implications and annual limits must be considered before making large transfers.
Would you like assistance with choosing the best remittance provider or understanding tax-saving strategies? 🚀
