What is the Liberalised Remittance Scheme (LRS)? Limit, Rules and TCS Explained

A child's first semester fee at a university abroad. A parent's treatment at an overseas hospital. A few shares of a global company you have followed for years. Each of these needs rupees to leave India and become foreign currency, and each happens under one set of rules laid down by the Reserve Bank of India.

That set of rules is the Liberalised Remittance Scheme, or LRS. Once you understand it, sending money abroad becomes a predictable process rather than a maze of forms. This guide explains what LRS is, who can use it, how much you can send, what you can and cannot send money for, how Tax Collected at Source (TCS) works, and how to remit from your AU Small Finance Bank account.

What is the Liberalised Remittance Scheme?

The Liberalised Remittance Scheme is an RBI facility under the Foreign Exchange Management Act (FEMA), 1999, that allows every resident individual in India, including minors, to freely send up to USD 250,000  per financial year abroad   The beauty of LRS is that it covers both Current Account Transactions (like payments for services, travel, education) and Capital Account Transactions (like investments in assets)

Why RBI introduced LRS

The Liberalised Remittance Scheme (LRS) was introduced by the Reserve Bank of India (RBI) to simplify overseas remittances for resident individuals

The scheme was launched with a relatively modest annual remittance limit, which has been progressively enhanced over the years in line with India's growing global integration, increasing international mobility, and evolving financial needs. Today, the annual limit stands at USD 250,000 per financial year, enabling individuals to conveniently meet a wide range of overseas requirements, including education, travel, investments, maintenance of relatives, and other permissible transactions.

In essence, LRS was designed to provide greater financial flexibility to resident individuals while ensuring that outward remittances remain within a transparent and regulated framework.

Before 2004, sending money abroad for most personal purposes needed case-by-case permission. RBI introduced LRS on 4 February,2004

Who is eligible for LRS, and who is not

LRS is available only to resident individuals, meaning persons resident in India under FEMA:

• Salaried and self-employed individuals, students, homemakers and retirees
• Minors, provided the LRS declaration is countersigned by the natural guardian
• Sole proprietors, though the business and the owner share one USD 250,000 limit

LRS is not available to companies, partnership firms, LLPs, Hindu Undivided Families (HUFs) and trusts, which have their own FEMA routes, or to Non-Resident Indians (NRIs), who repatriate funds from NRE, NRO or FCNR(B) accounts under separate rules. Residential status is decided under FEMA, not the Income-tax Act, so confirm your status with your bank if you have recently moved abroad or returned.

How much can you send under LRS?

The LRS limit is USD 250,000, or its equivalent in any freely convertible currency, per resident individual per financial year (April to March). Points people often miss:

• The limit is cumulative across all purposes and all banks. If you have sent USD 100,000 for tuition through one bank, only USD 150,000 remains for the year, whatever the purpose or bank.
• There is no cap on the number of transactions, only on the annual total limit.
• The limit is per person, not per family. Each member, including a minor, has an independent limit. Family members may club their limits for one purpose, such as a child's education. For capital account transactions such as buying property, clubbing is allowed only if all remitters are co-owners of the asset.
• Above-limit remittances are possible in three cases. For education, medical treatment and emigration, a higher amount can be remitted if the institution, hospital or destination country requires it. Other cases need prior RBI approval.
• Bank charges, conversion and forex card loads all count towards the limit.

Parents planning fees and living costs can see how this works in the guide on how much money parents can send to children abroad.

What is not allowed under LRS

RBI prohibits LRS remittances for:

• Lottery tickets, sweepstakes or banned magazines
• Margin money or margin calls to overseas exchanges
• Foreign exchange trading or currency speculation abroad
• Foreign Currency Convertible Bonds of Indian companies bought in the overseas secondary market
• Countries identified by the Financial Action Task Force (FATF) as non-cooperative, or entities flagged by RBI as posing a terrorism risk
• Gifting foreign currency to another resident's overseas account.

Documents and process for an LRS remittance

• PAN. Mandatory for every LRS transaction, whatever the amount or purpose.
• Form A2. The RBI application-cum-declaration for buying foreign exchange: your details, amount, currency, purpose code, beneficiary, and a declaration that the funds are yours and the purpose is permitted. On digital platforms it is generated and signed electronically.
• Supporting documents by purpose. A fee or admission letter for education, a hospital estimate for medical treatment, relationship proof for family maintenance, a broker or account statement for investments.
• KYC. A fully KYC-compliant account.
• Declaration of other remittances. LRS remittances already made through any bank in the current financial year, used to check both the USD 250,000 limit and the TCS threshold.
• Beneficiary details. Name, address, bank, account number or IBAN, and SWIFT code.

Once booked, the bank reports the remittance to RBI and your PAN-linked LRS usage is updated for the year.

Common mistakes to avoid under LRS

• Counting the limit per bank. The USD 250,000 limit is  tracked against your PAN across every bank, so under-declaring remittances made elsewhere can lead to a rejected transaction or wrong TCS.
• Choosing the wrong purpose code. Marking an investment as "family maintenance" invites queries and the wrong TCS rate.
• Forgetting the loan sanction letter. Without it, the bank must collect TCS on a loan-funded education remittance.
• Routing someone else's money. Using your unused limit for a friend or relative is not permitted.
• Skipping the reporting side. TCS credit is lost if not claimed, and foreign assets left out of Schedule FA can invite penalties.
• Leaving it to the last week of March. A remittance booked on 31 March that settles in April may count against the new year's limit.

How to send money abroad under LRS with AU Remit

AU Small Finance Bank offers AU Remit, an outward remittance service for customers holding an active AU Savings Account, and for NRI customers with an NRE account. You can remit online through the AU Remit portal, from the "send money abroad" option in the AU 0101 app, or at a forex-enabled branch. Details are on the AU Remit send money abroad page.

Conclusion

The Liberalised Remittance Scheme becomes simple once you understand annual permissible limit, understand the purpose and TCS (Tax Collected at Source)

Frequently Asked Questions (FAQs)

Can an NRI use the Liberalised Remittance Scheme?

No. LRS is only for persons resident in India under FEMA. NRIs move money out of India from their NRE, NRO or FCNR(B) accounts under separate RBI rules. An NRI customer of AU Small Finance Bank can still use AU Remit from an NRE account for repatriation of non-resident deposits.

Does TCS mean I lose money when I send it abroad?

No. TCS is tax collected in advance and credited to your PAN. you can set it off against your income-tax liability when you file your return; any excess is refunded.

Do I need to submit Form A2 every time I send money abroad?

Yes. Form A2 is the RBI declaration for each purchase of foreign exchange under LRS, recording the purpose code, amount and your confirmation that the transaction is permitted. On digital channels such as AU Remit the form is auto-generated from your profile and remittance details, so it takes seconds rather than a branch visit.

LRS limits and TCS rules are governed by RBI and the Income-tax Act and may change. Please check the latest regulations or consult a tax advisor before remitting.