Understanding the Liberalised Remittance Scheme by RBI

Date: 8th July 2025 | Read time: 2 Minutes

In today’s global economy, the need to send money overseas—for education, travel, medical treatment, or investments etc is more relevant than ever. To facilitate such outward remittances, the Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS) for resident individuals.

This blog aims to explain what LRS is, how it works, and what you should keep in mind if you plan to send money abroad under this scheme.

The Liberalised Remittance Scheme (LRS) is a facility provided by the RBI that allows resident individuals to remit a specified amount of money abroad each financial year for permitted current or capital account transactions.

Under LRS, eligible individuals can send funds overseas for various purposes such as:

• Travel expenses
• Education and living costs abroad
• Medical treatment
• Maintenance of close relatives overseas
• Investment in foreign stocks, property, or mutual funds
• Gifts or donations etc.

The scheme is designed to offer greater financial flexibility to Indian residents while maintaining transparency and regulatory oversight. Under the LRS, a resident individual can remit up to

USD 250,000 per financial year for permissible transactions.

LRS is available to:

• Resident individuals, including minors (through their natural guardians)

LRS is not available to:

• Companies
• Partnership firms
• Hindu Undivided Families (HUFs)
• Trusts and other non-individual entities

Funds remitted under LRS can be used for:

• Travel for tourism or business
• Paying for education fees and related expenses abroad
• Medical treatment and related travel
• Sending money to close relatives for their maintenance
• Making investments in permitted foreign assets
• Gifting money to individuals abroad
• Making donations to international organisations (subject to guidelines)

While LRS offers flexibility, it comes with certain restrictions. Funds under LRS cannot be used for:

• Trading in foreign exchange or margin trading
• Speculative or lottery-related transactions
• Purchase of banned magazines or items
• Transactions with countries identified by international bodies as high-risk or non-cooperative

To remit funds under LRS, you need to:

1. Approach an authorised dealer bank like AU Small Finance Bank
2. Submit the necessary documents, including PAN card, Form A2 and proof of the remittance purpose.
3. Complete the required declaration forms as per RBI guidelines.
4. Ensure that the remittance complies with the annual limit set by RBI.

It is advisable to retain all documentation and transaction records for future reference or compliance checks.

• The remittance limit under LRS is subject to change based on RBI regulations. Always check the latest guidelines before initiating a transfer.
• Tax collected at source (TCS) may apply on certain transactions under LRS, depending on the purpose and amount.
• The remitter must ensure that the funds are used only for permitted purposes as defined by RBI.

The Liberalised Remittance Scheme is a key step toward enabling global access for Indian residents, whether it’s for personal, educational, or investment purposes. Understanding the scope and limitations of LRS can help ensure that your remittances are compliant, secure, and hassle-free.

For a seamless and secure way to send money abroad, you can explore outward remittance services of AU Remit offered by AU Small Finance Bank.

Disclaimer

This article is for general informational purposes only and does not constitute financial, legal, or tax advice. The Liberalised Remittance Scheme (LRS) is governed by RBI regulations and is subject to change. Readers are advised to consult the latest RBI guidelines or seek professional advice before making any remittance. AU Small Finance Bank does not guarantee the completeness or accuracy of the information provided herein.