Liberalised Remittance Scheme: Limits, TCS, and Permitted Uses

The Liberalised Remittance Scheme lets any resident individual in India send up to USD 250,000 abroad in a single financial year (April 1 to March 31) for personal, educational, medical, or investment purposes, through an Authorised Dealer bank and without prior Reserve Bank of India approval. Once your total remittances in the year cross ₹10 lakh, your bank starts collecting Tax Collected at Source at rates that depend on the purpose. That upfront deduction catches a lot of first-time remitters off guard, but it isn’t an extra tax — it’s an advance that adjusts against your income tax liability when you file your return.

Who Qualifies

Eligibility turns on a single question under the Foreign Exchange Management Act, 1999: are you a resident individual? That generally means you spent more than 182 days in India during the preceding financial year. Citizenship and nationality don’t matter. If you returned to India after working abroad and cleared the 182-day threshold, you qualify.

Minors can use the scheme as well, provided a natural guardian signs the Form A2 declaration.¹ Individuals who are “resident but not ordinarily resident” for income tax purposes are still resident under FEMA and can use the scheme, though a remitter who is not permanently settled in India is capped at net salary after tax deductions.

The scheme is closed to non-individual entities. Corporations, partnership firms, Hindu Undivided Families, and charitable trusts cannot route money through it.¹

How the USD 250,000 Limit Works

The ceiling is USD 250,000 per financial year, cumulative across every remittance you make.¹ Tuition in London, a property deposit in Dubai, and a gift to a sibling in the United States all draw from the same pool. Current account and capital account transactions share the pool too.

There’s no cap on the number of transfers. You could send money weekly if the running total stays within the ceiling. Before each transfer, your Authorised Dealer bank checks your remaining headroom against the RBI’s centralised tracking system, so a second bank sees the transfers you’ve already made through a first one. The limit resets every April 1, and unused headroom does not carry forward.

International Credit Card Spending

Spending on an international credit card currently does not count toward the USD 250,000 limit. In 2023 the Ministry of Finance amended FEMA rules to bring credit card spending inside the scheme, but implementation was put on hold because of technical challenges with card networks. As of early 2026, only prepaid forex cards, debit cards, and direct wire transfers fall under the scheme’s reporting and TCS requirements. Credit card purchases abroad sit outside the framework, which means they don’t eat into your limit but operate under a separate set of rules.

Pooling Limits Across Family Members

Family members can combine their individual limits, but the rules depend on the transaction. For buying property abroad, multiple relatives who are each resident in India can consolidate their remittances toward the same purchase if every person independently satisfies the scheme’s conditions.¹ A family of four could, in theory, put up to USD 1 million toward foreign real estate.p>

For other capital account transactions, like opening a bank account abroad or investing in foreign securities, clubbing is allowed only if the family members are co-owners or co-partners in the account or investment. You cannot route your limit through a relative’s overseas brokerage account if your name isn’t on it.¹

Permitted Purposes

The scheme covers a broad set of purposes split into current account and capital account transactions.

Current Account Transactions

Private travel to any country other than Nepal and Bhutan, where India settles transactions in Indian rupees under separate arrangements.
Education, including tuition and living costs.
Medical treatment, including expenses for an attendant accompanying the patient.
Maintenance of close relatives living overseas.
Gifts and donations to relatives or approved organisations.
Expenses tied to taking up employment abroad.
Business travel for conferences, training, or meetings.

Employer-sponsored business travel sits outside the scheme entirely. If your company sends you abroad and pays for the trip, those expenses are treated as a separate category of current account transaction with no dollar limit, subject to the bank verifying the business purpose.

Capital Account Transactions

Opening and maintaining bank accounts with overseas banks, without prior RBI approval.¹
Purchasing property outside India.
Investing in foreign stocks, bonds, and other securities. Overseas investments are also governed by the Foreign Exchange Management (Overseas Investment) Rules, 2022, which add conditions on what foreign entities you can invest in and what activities they can engage in.²

Rupee Loans to NRI Relatives

You can lend rupees to a close relative who is a Non-Resident Indian or Person of Indian Origin, but the conditions are strict. The loan must be interest-free with a minimum one-year maturity, and the amount counts against your USD 250,000 limit.¹

The proceeds must be credited to the borrower’s Non-Resident Ordinary (NRO) account and cannot be sent outside India. The borrower can use the funds only for personal needs or their own business in India, and several activities are off-limits, including real estate trading, agricultural or plantation work, chit funds, and construction of farmhouses. Repayment must come through banking channels: inward remittance, or a debit to the borrower’s NRO, NRE, or FCNR account.¹

“Close relative” here follows the Companies Act, 2013 definition: spouse, parents (including step-parents), children (including step-children), children’s spouses, siblings (including step-siblings), and members of the same Hindu Undivided Family.

Prohibited Purposes

Some transactions are explicitly banned to prevent speculation, money laundering, and public-policy violations:

Margin deposits or margin calls on overseas exchanges or with foreign counterparties.
Trading in foreign exchange abroad.
Buying Foreign Currency Convertible Bonds issued by Indian companies on secondary markets overseas.
Lottery tickets, sweepstakes entries, and similar items.
Capital account remittances to countries the Financial Action Task Force has identified as non-cooperative on anti-money-laundering standards.

The FATF restriction only applies to capital account transactions. Current account remittances, such as medical treatment, remain permitted to those countries.

Tax Collected at Source on Your Remittances

From FY 2025-26 onward, every remittance under the scheme is potentially subject to TCS, collected upfront by your bank or forex dealer. The threshold is ₹10 lakh in aggregate remittances per financial year; below that, most purposes attract no TCS at all.

For FY 2026-27 (effective April 1, 2026), the rates are:

Education funded by a loan from a financial institution covered under Section 80E of the Income Tax Act: no TCS, regardless of amount.
Self-funded education or medical treatment: no TCS up to ₹10 lakh; above that, 2% of the excess (reduced from 5% by Union Budget 2026-27).
Overseas tour packages: a flat 2% on the entire amount with no threshold (reduced from the earlier tiered 5% and 20%).
All other purposes: no TCS up to ₹10 lakh; above that, 20% of the excess.

The 20% rate for general remittances is where the surprises happen. On a USD 150,000 transfer for foreign stocks, the upfront collection is significant. It isn’t lost money, though. TCS is an advance collection that you claim as a credit when filing your income tax return, and if the total collected exceeds your actual liability, the balance is refunded.

Claiming the TCS Credit

Check that every TCS collection appears in your Form 26AS on the Income Tax e-filing portal. When filing your return, enter the TCS details in the “Taxes Paid and Verification” section and the system adjusts the amount against your tax liability. Refunds typically arrive four to five weeks after assessment. Keep the Form 27D TCS certificate from each transaction as proof if anything fails to reconcile.

Documents and Process

Every remittance requires a Permanent Account Number, with no exceptions — the PAN is how banks reconcile your cumulative remittances across institutions for the year.¹

The main form is Form A2, provided by your Authorised Dealer bank. You enter the amount, the beneficiary, and a purpose code from the RBI’s standard list; your bank can identify the right code if you’re unsure.³ You also sign a declaration that the funds belong to you, that they won’t be used for any prohibited purpose, and that your total remittances for the year (including this one) will stay within USD 250,000.¹

You must go through an Authorised Dealer Category I bank, which is a full-service commercial bank licensed by the RBI for foreign exchange. For capital account remittances, you have to designate a single AD branch through which all such transfers will flow.¹ Current account remittances don’t carry that restriction.

The actual sequence is straightforward:

Submit Form A2 and your PAN. Most large banks accept these through their online portals.
The bank verifies your identity and your remaining LRS headroom against the RBI’s centralised system.
Currency conversion runs at the bank’s prevailing rate, plus service charges.
TCS is collected if your year-to-date remittances exceed ₹10 lakh, or immediately at the flat 2% for tour packages.
The wire transfer goes out to your overseas beneficiary. Two to five business days is typical, depending on the destination and intermediary banks.

Penalties for Breaking the Rules

FEMA contraventions are civil, not criminal, but the financial exposure is real. Under Section 13, a contravention can attract a penalty up to three times the amount involved. Where the amount can’t be quantified, the penalty can reach ₹2 lakh, with an additional ₹5,000 per day if the violation continues. In serious cases involving undisclosed foreign holdings, authorities can confiscate the foreign exchange or foreign assets and pursue imprisonment of up to five years.

If you’ve breached the rules inadvertently, by exceeding USD 250,000 or using the funds for a prohibited purpose, there’s a voluntary route called compounding. You file an application with the RBI (in person or through the PRAVAAH Portal), pay a ₹10,000 application fee plus GST, and the RBI fixes a compounding amount based on the nature and gravity of the violation.⁴ The RBI issues its order within 180 days, and the compounding amount must be paid within 15 days. Miss the 15-day window and the application is treated as though it was never filed.

Compounding is not available in every case. Suspected money laundering, terror financing, matters affecting national sovereignty, and situations where the Directorate of Enforcement has already imposed a penalty are excluded. The same type of violation cannot be compounded twice within three years.⁴

1
Reserve Bank of India. Liberalised Remittance Scheme
2
Government of India. Foreign Exchange Management (Overseas Investment) Rules, 2022
3
Reserve Bank of India. Form A2
4
Reserve Bank of India. Directions – Compounding of Contraventions under FEMA, 1999