The Reserve Bank of India’s liberalised remittance scheme (LRS) allows resident Indians to send money abroad for various purposes. The budget this year announced a reduced tax collected at source (TCS) for remittances made for certain purposes.
For example, TCS rates on overseas tour packages from financial year 2026-2027 will be flat 2%. TCS rates for medical and education remittances are nil up to ₹10 lakh, but 2% above ₹10 lakh.
For any other purposes, there is a 20% TCS on LRS transactions above ₹10 lakh. It is nil up to ₹10 lakh.
Here is all you should know about LRS:
Investments
Through LRS, residents can invest in listed foreign shares, bonds, exchange-traded funds and even overseas real estate. Venture funds and mutual funds are also permitted, subject to the overseas fund manager being regulated by the host country’s regulator.
However, trading in derivatives listed on foreign exchanges is not permitted.
Travel, education and other uses
Beyond investments, LRS is widely used for routine cross-border needs. It covers expenses related to foreign travel and business trips, overseas education, medical treatment, and relocation for employment. Residents can also use the scheme to support close relatives living abroad.
Watch out for
Creating leverage in foreign currency—such as through overseas loans—is not permitted under LRS. Parking money in overseas fixed deposits remains a grey area, and is generally avoidable. “It appears that investment in fixed deposits offshore is not specified in the list of permitted investments. However, it is not in the list of investments that are not permitted either,” said Prakash Hegde, Bengaluru-based chartered accountant.
Borrowed funds cannot be sent abroad under LRS. “The funds being sent under LRS should be owned by you if the remittance is for a capital account transaction. Borrowed funds (even from relatives) cannot be remitted to make investments. Gifted funds can be remitted, but clubbing provisions under Income Tax Act, may be applicable, in case of spouse and minor children,” explained Bhavya Gandhi, chartered accountant.
Check with your consultant and authorised dealer (AD) about the prevailing view before making payment for an under-construction property.
An authorised dealer (AD), is a financial institution, primarily banks, licensed by the RBI in India) to handle foreign exchange transactions under the Foreign Exchange Management Act (FEMA), 1999.
“Instalment plans that allow enhanced flexible payment terms (with some even permitting instalments beyond the possession date) amount to implicit financing schemes and are not permitted under FEMA,” said Harshal Bhuta, partner at P.R. Bhuta & Co. CAs.
Understanding the annual limit
At the core of LRS is an annual ceiling. Each resident individual can remit up to $250,000, or roughly ₹2.26 crore, in a financial year.
With careful timing, this limit can be optimized. A remittance made before March 31 and another after April 1 falls into two different financial years, allowing an individual to send up to $500,000 within a single calendar year.
Families can combine their individual LRS limits for joint investments. But accuracy is crucial. The ownership of the overseas asset must mirror each person’s contribution.
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