International Payments From India: LRS Limits, TCS, and FEMA Rules

To send an international payment from India, you route it through an authorized bank under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), which lets any resident individual remit up to USD 250,000 abroad per financial year. The bank collects tax at source on larger amounts, requires you to file a Form A2 declaration with a purpose code, and reports the transaction to the RBI under the Foreign Exchange Management Act, 1999 (FEMA). You reclaim the tax collected when you file your income tax return.

Your Annual Limit Under LRS

The LRS ceiling is USD 250,000 per financial year, which runs April 1 to March 31.¹ Everything you send abroad counts against the same pool: wire transfers to family, tuition payments, forex card reloads for travel, purchases of foreign stocks or property, drafts. It doesn’t matter how the money leaves your account or what currency you convert into. The cap is consolidated.

Minors get their own USD 250,000 allowance, but a parent or legal guardian has to countersign the LRS declaration form on their behalf.¹ If you need to exceed the limit in a given year, your bank has to apply to the RBI on your behalf with documents justifying the additional amount. Approval is case-by-case and not routine.

What You Can’t Send Money For

Being inside the USD 250,000 ceiling isn’t enough on its own. The RBI prohibits using LRS for several specific purposes:

Lottery tickets, sweepstakes entries, and football pools
Margin or margin calls to overseas exchanges or counterparties
Foreign exchange trading and speculation on overseas platforms
Proscribed magazines and other banned publications
Foreign-currency convertible bonds issued by Indian companies on the overseas secondary market

These prohibitions sit in Schedule I and Schedule II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000.¹ Remittances to countries under international sanctions also need specific RBI clearance. If a transaction fits a prohibited category, the bank will refuse to process it.

Tax Collected at Source at the Time of Transfer

Your bank has to collect tax at source (TCS) on outward remittances under Section 206C(1G) of the Income Tax Act. From April 2025, no TCS applies until your total remittances in the year cross ₹10 lakh, up from the earlier ₹7 lakh threshold. Once you cross it, the rate depends on why you’re sending the money:

Education funded by a loan from a recognized financial institution: no TCS, at any amount
Self-funded education or medical treatment abroad: 5% on the amount above ₹10 lakh
Overseas tour packages: 5% on amounts up to ₹10 lakh, 20% on anything above
All other purposes, including investments, gifts, property, and family support: 20% on the amount above ₹10 lakh

The 20% rate catches most people off guard. Send ₹15 lakh to your foreign brokerage account and the bank collects ₹1 lakh upfront (20% of the ₹5 lakh over the threshold). To qualify for the lower education or medical rate, you have to give your bank supporting documents such as an admission letter, fee invoice, or hospital bill. No proof, no reduced rate.

If you don’t furnish your PAN or Aadhaar, the TCS rate doubles. On a general-purpose remittance that means 40% at source. Providing your PAN is not optional in practice.

How You Get the TCS Back

TCS isn’t a lost cost. It’s an advance credit against your income tax liability that you recover through your income tax return. Log in to the Income Tax e-filing portal and check Form 26AS: the TCS your bank remitted should appear there alongside entries in your Annual Information Statement (AIS) and Tax Information Statement (TIS).² If the figures don’t match your bank’s TCS certificate, raise it before filing.

When you file your ITR, enter the TCS in the designated section. It offsets your total tax liability. If the TCS exceeds your liability, which is common for salaried filers sending large sums abroad, the balance comes back as a refund credited to your bank account within a few months of processing. Skipping this step is the equivalent of leaving an interest-free loan with the government.

Documents, PAN, and the Purpose Code

Every outward remittance needs your PAN. Banks use it to track your cumulative LRS usage across the year and to apply the right TCS rate.¹ You also need clean recipient details:

Full legal name as it appears on the recipient’s bank account
Complete physical address matching the recipient’s bank records
SWIFT or BIC code of the receiving bank (8 or 11 characters)
Account number in the format the destination uses: IBAN for Europe and much of the Middle East, or a routing number and account number for countries like the United States

The RBI requires every outward remittance to carry a purpose code, which is a standardized label describing why the money is leaving the country. Common codes include S0305 for education-related travel, S0304 for medical treatment abroad, S1301 for family maintenance, and S0301 for business travel. Your bank presents these in a dropdown when you set up the transfer. Choosing the wrong one can delay the transfer or trigger extra scrutiny.

Along with the purpose code, you complete Form A2, the formal application to purchase foreign exchange. It captures your account details, the foreign currency amount, and a signed declaration that the funds are yours and won’t be used for anything FEMA prohibits.¹ Errors on Form A2 are the most common reason banks send remittance requests back for correction.

When Form 15CA and 15CB Also Apply

Section 195 of the Income Tax Act adds a separate compliance layer for payments that are chargeable to tax in India, such as fees to a foreign consultant, software licenses, or rent to a non-resident landlord. In those cases you file Form 15CA electronically before the bank processes the transfer, and once the amount exceeds ₹5 lakh in a financial year, a chartered accountant has to issue Form 15CB certifying the tax treatment.² Personal transfers to family or your own tuition abroad don’t trigger this because the payment isn’t taxable income for the recipient. If you’re paying for services, royalties, or interest, skipping the form will cause the bank to reject the transfer.

How to Initiate the Transfer

Through Net Banking

Most major Indian banks have a foreign outward remittance section inside their net banking portal. You add the overseas recipient as a beneficiary first, which usually triggers a cooling-off window of a few hours to one full business day before the first transfer will go through. Once the beneficiary is active, you enter the amount, pick the purpose code, and confirm the tax declarations. The bank sends an OTP to your registered mobile number to authenticate the final submission. Online transfers generally cost less in both processing fees and exchange rate spread.

At a Branch

If you’d rather do it in person, visit your bank’s authorized dealer branch with a signed Form A2, your PAN card, and any supporting documents such as an admission letter or medical invoice. A bank officer reviews everything, confirms your balance covers the transfer plus TCS, and submits the request. You leave with a confirmation receipt.

Either way, international wires generally take one to three business days to reach the recipient, depending on how many intermediary banks handle the transaction. Save the reference number your bank issues in case funds are delayed and you need to trace them.

What It Actually Costs

Several charges sit on top of the amount you’re sending:

Bank processing fee, typically ₹500 to ₹1,000 for online transfers and higher at a branch, running up to ₹5,000 for large transactions at some banks
GST at 18% on the bank’s forex service value, calculated on a slab basis: 1% of the converted amount (minimum ₹250) for the first ₹1 lakh, 0.5% on the next ₹9 lakh, and 0.1% above ₹10 lakh, capped at ₹60,000
SWIFT messaging charges, generally ₹500 to ₹2,000 per transaction
Correspondent bank deductions of roughly $10 to $30 per intermediary, taken from the amount in transit
Exchange rate markup, usually 0.5% to 2% above the mid-market rate

On a ₹10 lakh transfer these can add ₹5,000 to ₹15,000. If you want the recipient to receive the full amount without intermediary deductions, most banks offer a “charges borne by remitter” (OUR) option that shifts all correspondent fees to you upfront, at a higher total cost than the default shared-charges arrangement.

Penalties If You Break the Rules

Violating FEMA, whether by going over the USD 250,000 limit without approval, using LRS for a prohibited purpose, or misdescribing a transaction, exposes you to penalties under Section 13 of the Act. The fine can reach three times the amount involved. Where the amount can’t be quantified, the penalty is up to ₹2 lakh per instance, with an additional daily charge for continuing violations. Beyond the fine, the RBI or the Enforcement Directorate can require you to repatriate the excess funds. Because banks report every LRS transaction to the RBI, discrepancies surface.

If you realize you’ve slipped up, you can voluntarily settle through compounding: admit the contravention, apply to the RBI (physically or through the PRAVAAH portal), and pay the compounding amount the RBI sets after reviewing your case. The application fee is ₹10,000 plus 18% GST, and you have to obtain any pending approvals and finish corrective steps before applying. Once the RBI issues its order you have 15 days to pay; miss that window and the application is treated as never filed, and the matter goes to the Enforcement Directorate for formal proceedings.³ For an honest mistake, compounding is faster and cheaper than adjudication.

1
Reserve Bank of India. Liberalised Remittance Scheme
2
Income Tax Department. Form 15CA FAQs
3
Reserve Bank of India. FAQs on Compounding of Contraventions Under FEMA, 1999