CS Shruti Patwardhan


In Feb-2004, Reserve Bank of India (RBI) announced a Liberalized Remittance Scheme (LRS), with the intention of simplifying remittance outside India by resident individuals upto a sum of USD 25000 per financial year (April – March) for various purposes vide its A.P (DIR Series) Circular No. 64 Dt: 04th Feb 2004.

Liberalised Remittance Scheme (LRS) can be availed for purchasing or remitting foreign currency up to USD 250,000 per financial year (April- March) for permissible transactions.

One can purchase foreign exchange from an Authorized Dealer banks, money changers, entities such as Thomas Cook and Cox & Kings and select NBFCs.

Under LRS, residents are allowed to remit up to USD 250,000 per financial year for permissible capital and current account transactions (or a combination of both). Only resident individuals (including minors) are permitted to remit funds abroad under LRS. In case of minors, the LRS declaration form shall be countersigned by the guardian.

All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counter party are not allowed under the Scheme.

LRS is applicable to all Resident Individuals including Minors (i.e., Person resident in India under FEMA 1999) In other words this facility is not available to HUF, Partnership Firm, Trust,  Society, Association of Persons, Body of Individuals, LLP, Company etc.

For remittances under LRS, approval from the Reserve Bank is not required.

LRS is not available to NRI’s.

There is no restriction on frequency of transactions under LRS. However, the total amount of foreign exchange purchased or remitted should not exceed USD 250,000 or its equivalent in the financial year.

Current Account Transactions permitted under LRS

  1. Private Visits to any country (except Bhutan and Nepal)
  2. Gifts or donation
  3. Going abroad for employment
  4. Emigration
  5. Maintenance of close relatives abroad. Relative as per Section 6 of the Companies Act
  6. Business Trip
  7. Medical Treatment abroad
  8. Education abroad
  9. Any other permissible current account transaction as per FEMA.

Capital Account Transactions permitted under LRS

  1. Opening a foreign currency bank account abroad
  2. Transferring money to own foreign currency accounts abroad
  3. Purchasing property abroad
  4. Making investments abroad
  5. Purchasing object of Art subject to provisions of extant Foreign Trade Policy
  6. Loans and gifts in Indian Rupees to NRI/PIO close relatives
  7. Repayment of a loan abroad availed while you were a non-resident

Points to be noted for LRS

Banks are not permitted to offer any kind of credit facilities to facilitate Capital Account remittances under LRS.

One need to designate a branch of the Authorized dealer through which all the remittances under the Scheme will be made. An Authorised Dealer (AD) is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities (the list of ADs is available on www.rbi.org.in) and normally includes banks.

The LRS limit has been revised in stages from February 4, 2004 till date, the LRS limit has been revised as under:

(Amount in USD)
Date Feb 4, 2004 Dec 20, 2006 May 8, 2007 Sep 26, 2007 Aug 14, 2013 Jun 3, 2014 May 26, 2015
LRS limit (USD) 25,000 50,000 1,00,000 2,00,000 75,000 1,25,000 2,50,000

The limit of USD 250,000 is the overall cap for remittance/purchase of foreign currency for all current and capital account transactions listed above. For instance, if one remit/draw USD 100,000 for making investment abroad, the limit under LRS would be reduced by USD 100,000 for the financial year i.e. one can remit only up to USD 150,000 more(in the same financial year) for any permitted transaction.

On breach of threshold of USD 250,000 for the financial year, one is required to take prior approval from the Reserve Bank for further purchase of foreign exchange/remittances.

Exception  to LRS:

Medical treatment

There is an exception to the rule in case of medical treatment, overseas education and emigration. In these cases, one can still remit more than USD 250,000 without approval from RBI if one can produce certain documents. If the Authorized Dealer is satisfied with the documents, it can let one remit more than USD 250,000 without approval from RBI.

The person who is accompanying the patient as an attendant is also allowed to remit up to USD 250,000 per financial year.

Students going abroad

The remittance under this head is also subsumed under LRS.

Like with medical treatment, one need not provide any estimate for remitting up to USD 250,000 per financial year. However, Authorized dealer (bank or institution) may allow remittance exceeding USD 250,000 based on cost estimate from foreign university. RBI approval is not required in such case.

As per FEMA, students are considered NRIs from the day one (of moving abroad for studies). Hence, they can make use of all the remittance facilities available to NRI. They can remit up to USD 1 million from their NRO accounts per financial year.

Rupee loan :

As a resident, one is allowed to offer Rupee loans to NRI/PIO close relatives subject to certain conditions.

  1. The loan should be free of interest and the minimum tenor should be 1 year.
  2. The loan amount shall be credited to NRO account of the NRI/PIO close relative.
  3. The loan amount shall not be remitted outside India.
  4. The loan amount shall be utilized for borrower’s personal requirements or business in India.
  5. The loan amount cannot be invested in chit funds, Nidhi Company, agricultural or plantations activities, real estate business (with exceptions) or used for construction of farm houses or trading in TDRs.
  6. Repayment of the loan shall be made through inward remittances or through debit to NRO, NRE or FCNR accounts or out of sale of security against which such loan was granted.

Please note the rupee loan amount shall be considered under LRS and the LRS limit for the financial year will go down by the loan amount. Therefore, the cap of USD 250,000 per financial year under LRS applies to such loans too.

Close relative is Relative as per Section 6 of the Companies Act.  Relative includes parents, grandparents, siblings and their spouses, children and their spouses and grandchildren and their spouses.

Gift in Indian Rupees or Foreign Currency to non-resident close relatives is also subsumed under LRS.

Do note that (resident Indian) cannot gift, in Foreign Currency, to another resident for crediting the latter’s foreign currency account opened under LRS.

Prohibited Remittances :

  1. Prohibited under Schedule I (remittance out of lottery winnings, income from racing/riding, or for purchase of lottery tickets etc.) of FEM (Current Account Transaction Rules), 2000.
  2. Restricted under Schedule III (cultural tours, advertisement in foreign print media etc) of FEM (Current Account Transaction Rules), 2000.
  3. Capital Account Remittances to countries identified by Financial Action Task Force (FATF) as non-cooperative countries and territories.
  4. Remittance for margin/margin calls to overseas exchange/overseas counterparty
  5. Remittance for purchase of Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in the overseas secondary market
  6. Remittance for trading in foreign exchange abroad
  7. Remittances to individuals and entities identified by RBI as posing significant risk of terrorist activities

Income Tax Act and FEMA:

The remittances to non-residents abroad will be governed by FEMA (Foreign Exchange Management Act). Additionally, the authorized dealer banks need to ensure that the remittance is in compliance with the Income Tax laws i.e. tax has been duly paid on the funds being remitted and TDS, if any has been deducted.

RBI does not issue any instructions under FEMA about the procedure to follow to ensure income tax compliance.  As per Rule 37BB of the Income Tax Act, one has to furnish a declaration under Form 15 CA and a CA certificate under Form 15 CB.  CA certificate is to ensure that appropriate TDS has been deducted for the proposed payment/remittance.

Authorized Dealers’s role:

Remittances under LRS do not require RBI approval. RBI has delegated the power to Authorized dealers. Authorized dealer (banks or entities such as Thomas Cook) has to satisfy itself that the remittance/drawal of foreign currency is not in contravention of FEMA or Income Tax Act.

For compliance with FEMA, it may rely on Form A2 (for payments other than imports and remittances covering intermediary trade) and declaration under LRS.

For compliance with Income Tax Act, it will rely on Form 15 CA and Form 15 CB, if required.

Apart from this, it must also follow KYC guidelines and anti-money laundering rules before effecting the remittance.

The Authorized Dealer has to ensure that the payment for purchase of foreign exchange is being made out of funds belonging to the remitter.

Therefore, payment for purchase of foreign exchange must be made by cheque/demand draft/ debit card/ credit card/pay order/net banking.

For broader understanding one may refer Master Direction on LRS as may be amended from time to time.

Source : https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10192&Mode=0

(In case of any inconsistency or clarification/ suggestions, Author can be contacted for further details at csshruti2007@gmail.com)

Disclaimer: The views and opinions expressed in this article are those of the author. The legal information is not advice and should not be treated as such.


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  1. Vikas Goel says:

    Hi Shruti,
    i have a query on LRS
    resident Mother wants to gift 10 lacs $ to her NRI Daughter ( 4 times more appx from 2.5 lacs limit)
    RBI guidelines says in that case one will have to take the permission from RBI.
    Kindly guide
    in case you can take it up .. do share me ur no. will call u.

  2. krishnamohan says:

    A Father wants to take a loan from him friend and remit the money to his son under the LRS scheme. Full amount i.e. 250000 USD. Are there any restrictions on sending money taken on loan or or there any restrictions applicable to person lending money as he is lending it knowing it will be remitted to his friend’s son.

  3. S. Krishnamoorthy says:

    Thanks Shruti for your illuminating piece of article. Very lucid. Many will be benefitted by reading this one.
    S. Krishnamoorthy

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