Last Updated on Aug 17, 2026 by Durga Mishra
Every time an Indian resident pays overseas university fees, invests in US stocks, funds medical treatment abroad or sends money to a relative overseas, the remittance may fall under the RBI’s Liberalised Remittance Scheme. Under LRS, resident individuals can remit up to $250,000 per financial year for permitted transactions. The scheme also determines eligible purposes, documentation requirements and applicable tax rules such as TCS. This guide explains how LRS works, the current LRS limit, eligible transactions, documentation requirements and how the scheme applies when investing in US stocks from India.
Table of Contents
What is LRS?
The Liberalised Remittance Scheme is an RBI framework that allows resident individuals. The scheme was introduced by the Reserve Bank of India in February 2004 with an initial limit of USD 25,000 per financial year. The limit has been revised multiple times over the past 20 years, in step with India’s growing foreign exchange reserves and the increasing need for individuals to transact abroad. The current limit of USD 2,50,000 per financial year has been in place since 2015.
- Annual Limit: The $250,000 limit applies to the total amount remitted under LRS during a financial year, not separately to each transaction or purpose.
- Permitted Uses: LRS can be used for overseas education, medical treatment, travel, gifts, maintenance of relatives abroad and investments in foreign securities, subject to FEMA rules.
- RBI Approval: Eligible remittances within the LRS limit generally do not require separate RBI approval for every transaction.
- Authorised Banks: LRS remittances are processed through authorised dealer banks. Individuals may need to submit Form A2 and provide the amount, currency and purpose of the remittance.
- Tax Treatment: LRS rules and income-tax rules operate separately. RBI and FEMA govern the remittance process, while tax provisions determine matters such as TCS and related reporting requirements.
LRS Limit: How Much Can You Remit?
Under the Liberalised Remittance Scheme, a resident individual can remit up to $250,000 in a financial year from April to March for permitted current and capital account transactions. This is a cumulative annual limit across all LRS remittances.
- Single Annual Limit: Education, travel, overseas investments, gifts and other permitted LRS transactions all count towards the same $250,000 ceiling. Remittances made through different banks or authorised dealers are aggregated for the year.
- Per Individual: The limit applies separately to each resident individual, including minors. A minor can use LRS, but the declaration must be countersigned by a natural guardian. Family members can combine remittances in certain cases, subject to LRS conditions.
- Returned Funds: Bringing investment proceeds back to India does not restore the LRS limit already used. Once an individual has remitted $250,000 during the year, no further remittance can be made under LRS that financial year even if earlier proceeds are repatriated.
- Card Spending: Eligible overseas spending through debit and forex cards forms part of the applicable foreign-exchange framework. International credit card payments made while overseas continue to remain outside the LRS-TCS mechanism under the government’s deferred implementation of the 2023 change.
- Exceeding the Limit: Remittances above the permitted LRS limit require compliance with the applicable FEMA framework and, where required, RBI approval. FEMA contraventions can attract penalties of up to three times the amount involved where the amount is quantifiable.
Who Can Use the LRS Scheme?
The LRS scheme is available to all resident individuals in India, including minors. For a minor, Form A2 must be countersigned by the natural or legal guardian.
The scheme is not available to the following entities, regardless of the purpose of the transfer:
- Corporates and companies
- Partnership firms
- Limited Liability Partnerships (LLPs)
- Hindu Undivided Families (HUFs)
- Trusts
- Non-Resident Indians (NRIs)
NRIs have separate remittance channels through their NRE and NRO accounts. Funds in NRE accounts are freely repatriable. NRO account remittances are subject to a USD 10,00,000 annual limit after applicable taxes have been paid. NRIs can receive funds remitted from India under LRS by a resident relative, but they cannot initiate outward remittances using LRS themselves.
What Are the Permitted Uses Under LRS Remittance?
LRS covers both permitted current account and capital account transactions. Resident individuals can use the scheme for a range of overseas expenses, transfers and investments within the annual LRS limit.
- Travel and Education: LRS can cover private travel, overseas tuition fees and related education expenses.
- Medical Treatment: Residents can remit money for medical treatment abroad and associated expenses.
- Gifts and Family Support: The scheme permits gifts, donations and maintenance of close relatives living overseas.
- Overseas Investments: LRS can be used to invest in permitted foreign shares, funds and other financial assets, subject to FEMA and overseas investment rules.
- Foreign Assets: Eligible capital account transactions can include opening foreign currency accounts and purchasing permitted immovable property abroad.
Why Does the Purpose Code Matter?
The remittance purpose must be correctly declared in Form A2 using the applicable RBI purpose code. For example, S0305 covers travel for education, including fees and related expenses, while S1301 covers maintenance of close relatives.
This classification is also relevant for TCS. From 1st April 2026, LRS remittances exceeding ₹10 lakh attract 2% TCS for education or medical treatment and 20% for other LRS purposes, subject to applicable exemptions and conditions. Therefore, correctly stating the purpose helps ensure that the remittance receives the appropriate tax treatment.
What is Not Permitted Under LRS?
Certain transactions are specifically prohibited under the Liberalised Remittance Scheme.
- Margin Trading: Remittances for margins or margin calls to overseas exchanges or counterparties are not permitted.
- Forex Trading: LRS cannot be used to remit money for trading in foreign exchange abroad.
- Prohibited Purchases: Lottery tickets, sweepstakes, proscribed magazines and other transactions restricted under FEMA rules are not permitted.
- Restricted Jurisdictions: Capital account remittances to countries identified by FATF as non-cooperative, or to individuals and entities linked to terrorism risks, are prohibited.
- Certain Overseas Securities: LRS cannot be used to purchase FCCBs issued by Indian companies in the overseas secondary market.
- Resident-to-Resident Gifts Abroad: A resident cannot gift foreign currency to another resident for credit to the recipient’s foreign currency account held abroad under LRS.
How to Make an LRS Remittance
LRS remittances are processed through an Authorised Dealer bank or other authorised person. The exact documentation can vary by purpose and bank, but the broad process is as follows.
- Choose the Purpose: Identify whether the remittance is for education, medical treatment, travel, investment, gifts or another permitted purpose.
- Provide PAN and KYC Details: PAN is mandatory for LRS transactions. Banks may also ask for supporting documents depending on the nature of the remittance.
- Submit the LRS Declaration: The remitter provides Form A2 or the bank’s applicable LRS declaration, stating the purpose and confirming that the funds will not be used for a prohibited transaction.
- Bank Verification: The authorised dealer verifies the declared purpose, supporting documents and compliance with FEMA before processing the remittance.
- Track the Annual Limit: All LRS remittances during the financial year count towards the cumulative $250,000 limit, even when transactions are made through different authorised channels.
TCS on LRS Remittances in 2026
From 1st April 2026, TCS on LRS remittances is governed by Section 394 of the Income-tax Act, 2025.
| Purpose | TCS Rate |
| Education funded through a qualifying financial institution loan | 0% |
| Education or medical treatment | 0% up to ₹10 lakh, then 2% on the amount exceeding ₹10 lakh |
| Other LRS purposes, including overseas investments, gifts and maintenance of relatives | 0% up to ₹10 lakh, then 20% on the amount exceeding ₹10 lakh |
| Overseas tour programme package | 2% on the amount paid |
The ₹10 lakh threshold applies to most LRS remittances under Section 394. Overseas tour programme packages follow a separate rule, with TCS charged at 2% from 1st April 2026. Education remittances funded through a qualifying loan from a financial institution are exempt from TCS.
TCS is not an extra final tax. The amount collected is linked to the taxpayer’s PAN and can be adjusted against the final income-tax liability while filing the ITR. If the TCS paid is higher than the tax due, the excess can be claimed as a refund.
LRS for US Stock Investments from India
Indian residents can use the Liberalised Remittance Scheme to invest in permitted foreign securities, including US stocks. Under LRS, a resident individual can remit up to $250,000 in a financial year across all permitted current and capital account transactions.
- TCS on Investments: US stock investments fall under LRS purposes other than education or medical treatment. From 1st April 2026, no TCS applies up to the cumulative ₹10 lakh threshold. The amount above ₹10 lakh attracts TCS at 20%.
- Annual LRS Limit: US stock investments use the same $250,000 annual LRS limit as other remittances such as travel, gifts and maintenance of relatives. There is no separate limit for investments.
- TCS Adjustment: TCS deducted on an LRS remittance is linked to the investor’s PAN. It can be adjusted against the final income-tax liability while filing the ITR. If the TCS paid is higher than the tax due, the excess can be claimed as a refund.
- Repatriated Proceeds: If you sell US stocks and bring the money back to India, it does not restore the LRS limit already used. The $250,000 annual limit is based on the amount remitted abroad during the financial year.
Conclusion
The Liberalised Remittance Scheme allows resident individuals to send money abroad for permitted purposes such as education, medical treatment, travel, gifts and overseas investments. The scheme sets an annual remittance limit and requires individuals to follow the applicable documentation and tax rules.
For US stock investments, LRS is the framework used to transfer money from India for investing abroad. Understanding the annual limit, permitted uses and TCS treatment can help investors manage these remittances more clearly.
Frequently Asked Questions About the Liberalised Remittance Scheme
What is LRS?
LRS stands for Liberalised Remittance Scheme. It is an RBI framework that allows resident individuals, including minors, to remit up to $250,000 abroad in a financial year for permitted current and capital account transactions. Eligible remittances within this limit generally do not require separate RBI approval for each transaction.
What is the LRS full form?
The LRS full form is Liberalised Remittance Scheme. It provides resident individuals with a simplified framework for permitted overseas remittances under FEMA, subject to the annual limit and applicable conditions.
What is the LRS limit for 2026?
The LRS limit for 2026 is $250,000 per resident individual per financial year from April to March. The limit is cumulative across all permitted LRS transactions rather than applying separately to education, travel, investments or other purposes.
What is the LRS meaning for NRIs?
LRS applies to resident individuals and is not available to NRIs for their own overseas remittances. NRIs use separate FEMA routes. For example, eligible balances in an NRO account can generally be remitted up to $1 mn per financial year, subject to applicable conditions and taxes.
What are the permitted uses of LRS remittance?
LRS can be used for permitted purposes such as overseas education, medical treatment, private travel, gifts, maintenance of relatives and investments in foreign securities. It can also cover permitted capital account transactions such as overseas bank accounts and property purchases, subject to FEMA rules.
Can I use LRS to invest in US stocks?
Yes, the investment in permitted foreign securities can be made under LRS. From 1st April 2026, remittances for purposes other than education or medical treatment attract 20% TCS on the amount exceeding the cumulative ₹10 lakh threshold.
Disclaimer: This information is for educational purposes only. Please consult a tax or financial professional for advice specific to your circumstances.
What is the RBI Liberalised Remittance Scheme’s relationship with FEMA?
LRS forms part of India’s foreign exchange framework under FEMA and is administered by the RBI. FEMA and RBI rules govern matters such as permitted remittances and the annual limit, while income-tax provisions separately govern TCS and tax reporting.
What is Form A2 and is it mandatory for LRS transfers?
Form A2 is used for foreign exchange remittances and captures information such as the remittance purpose and amount. Banks and authorised dealers may process LRS declarations electronically or through their prescribed remittance process, so it is better not to state that a physical signed Form A2 is mandatory in every case.
What happens if I exceed the LRS limit?
Once the $250,000 annual limit is exhausted, further remittances cannot generally be made under LRS during that financial year. Transactions beyond the permitted framework may require specific approval or another applicable FEMA route.
Does debit card spending abroad count toward the LRS limit?
Overseas spending through international debit cards is generally covered by the applicable LRS framework and counts towards the annual limit. Treatment can differ for international credit card spending, so travellers should check the prevailing FEMA and tax rules when making overseas payments.
