Under the Liberalised Remittance Scheme, a resident individual (including a minor, through a guardian) may remit up to USD 250,000 per financial year for any permitted current or capital account purpose — education, travel, medical treatment, maintenance of relatives, gifts, purchase of property abroad, investment in foreign shares, debt and mutual funds, and Overseas Direct Investment in an operating foreign entity — without RBI approval, through a bank on Form A2 with a PAN. Remittances for margin trading, lotteries, purchase of foreign currency convertible bonds issued by Indian companies, or to countries identified by the FATF as non-cooperative are prohibited. Banks collect tax at source on LRS remittances exceeding ₹10 lakh in a financial year at rates that depend on purpose, creditable against the individual's income tax. Foreign assets acquired must be disclosed in the income-tax return.
Key facts
| Provision | Old reference (to 31 Mar 2026) | New reference (from 1 Apr 2026) | Rate / threshold | Timing | Form |
|---|---|---|---|---|---|
| Limit | USD 250,000 per FY per individual | Unchanged (RBI Master Direction on LRS) | Aggregate of all current and capital account remittances | Financial year | Form A2 |
| Permitted purposes | Schedule III, FEM (Current Account Transactions) Rules; LRS Master Direction | Unchanged | Education, travel, medical, gifts, maintenance, property, portfolio investment, ODI by individuals | — | — |
| Prohibited | LRS Master Direction | Unchanged | Margin trading, lotteries, FCCBs of Indian companies, FATF non-cooperative countries, remittance for banned items | — | — |
| ODI by individuals | OI Rules 2022 | Unchanged | Within LRS; operating entity; not financial services; no step-down if control | — | Form FC, APR |
| Tax collection at source | s. 206C(1G), Income-tax Act 1961 (threshold ₹10 lakh from 1 Apr 2025) | Corresponding TCS provision, Income-tax Act 2025 | Nil for education financed by loan; 5% education/medical above ₹10 lakh; 20% other purposes above ₹10 lakh (rates rationalised further by Finance Act, 2026 for certain categories) | At remittance | Bank collects; Form 27D |
| Foreign asset disclosure | Schedule FA of ITR; Black Money Act | Unchanged | All foreign assets and income | Annual return | ITR |
| Credit card spends abroad | Excluded from LRS for now (Rule 7 deferral) | Check current notification | — | — | — |
Who and how much
Every resident individual — not companies, firms or trusts — has an LRS entitlement of USD 250,000 per financial year, which can be consolidated within a family for a jointly held asset only where each member is a co-owner. The limit aggregates all remittances under the scheme, including gifts, education fees, travel beyond basic allowances, and investments. Current-account purposes exceeding the limit (for example, medical treatment or education costs above USD 250,000) can be permitted by the bank on documentary evidence; capital-account remittances above the limit require RBI approval.
What you can do with it
| Purpose | Notes |
|---|---|
| Education abroad | Fees and living expenses; loan-financed education has nil TCS |
| Travel (private, business, pilgrimage, medical) | Overseas tour packages attract TCS at the package rate |
| Maintenance of close relatives abroad; gifts and donations | Gifts to non-relatives may be taxable in the recipient's hands abroad or in India |
| Purchase of immovable property abroad | Permitted within the limit; joint purchase with relatives possible by pooling entitlements |
| Portfolio investment — foreign listed shares, bonds, mutual funds | Overseas Portfolio Investment under the OI Rules; under 10% of a listed company without control |
| Overseas Direct Investment — setting up or acquiring a foreign company | Permitted in an operating entity not engaged in financial services; if the individual acquires control, no step-down subsidiary; Form FC and annual APR apply |
| Opening and funding a foreign bank account | Permitted; balances count against the limit when remitted |
| Loans to non-resident Indian relatives | Interest-free rupee loans within the limit, with conditions |
Prohibited: remittances for margin or margin calls to overseas exchanges, for lottery or sweepstakes, for purchase of FCCBs issued by Indian companies in the secondary market, to countries identified by the FATF as non-cooperative, and to individuals or entities identified as posing terrorism risk. Remitted funds may not be used to invest in Indian companies in a round-trip, and returns on LRS investments may be retained abroad only in a permitted manner.
Procedure
- The remitter designates a bank branch, holds an account there for at least a year (or produces bank statements), and submits Form A2 with a declaration of purpose and PAN. PAN is mandatory.
- The bank checks the cumulative limit for the year across banks through the RBI's reporting system, collects TCS where applicable, and remits.
- For ODI, Form FC is filed through the bank before remittance; the APR follows each year by 31 December.
- The individual retains evidence of purpose and reports foreign assets and income in the income-tax return.
Tax collection at source
Since 1 April 2025, TCS applies to LRS remittances exceeding ₹10 lakh in a financial year (raised from ₹7 lakh): nil for education financed by a loan from a specified institution; 5% for education and medical treatment above ₹10 lakh; 20% for other purposes above ₹10 lakh; overseas tour packages at their own slab. The Finance Act, 2026 further rationalised TCS for certain LRS and tour-package categories — the bank applies the rate in force at the date of remittance and issues Form 27D. TCS is not an additional tax: it is credited against the remitter's income-tax liability for the year or refunded on filing the return. Employees can have TCS considered in their TDS on salary by informing the employer.
Reporting foreign assets
Shares, bank accounts, property and any other asset held abroad, and income from them, must be reported in Schedule FA of the income-tax return. Non-disclosure attracts penalties under the Black Money Act even where the asset was lawfully acquired under LRS. Dividends and gains on foreign investments are taxable in India, with foreign tax credit claimed through Form 44 (old Form 67).
Worked example
A Bengaluru-resident founder wants, in financial year 2026-27, to pay USD 60,000 of a child's university fees (loan-financed), invest USD 100,000 in US-listed ETFs and set up a Delaware LLC with USD 50,000 to hold a software product.
- Total USD 210,000 — within the USD 250,000 limit.
- University fees: Form A2, purpose education; TCS nil (loan-financed) even though cumulative LRS exceeds ₹10 lakh.
- ETFs: Overseas Portfolio Investment; Form A2; TCS at 20% on the amount above the ₹10 lakh threshold (the bank tracks the cumulative figure across purposes) — creditable against income tax.
- Delaware LLC: Overseas Direct Investment by an individual — permitted (operating entity, not financial services); Form FC filed through the bank before remitting; UIN; APR by 31 December each year; the LLC may not set up a subsidiary while the founder controls it.
- All three appear in Schedule FA of the founder's return; LLC income is assessed under the place-of-effective-management rules if managed from India.
Common mistakes we see
- Paying for a foreign company's incorporation by credit card or through a friend abroad, outside LRS and without Form FC.
- Assuming each family member's limit can be pooled for an asset held by one of them. Pooling works only for jointly owned assets.
- Treating TCS as a cost rather than a credit; claim it in the return.
- Letting the foreign LLC set up a subsidiary while the individual has control, breaching the OI Rules.
- Omitting Schedule FA because the assets were small or loss-making.
- Remitting under 'maintenance of relatives' for what is in substance an investment, which misstates the purpose code.
Frequently asked questions
What is the LRS limit for 2026-27?
USD 250,000 per resident individual per financial year, aggregating all permitted current and capital account remittances.
Can I buy shares of a foreign company under LRS?
Yes. Listed shares below 10% without control are Overseas Portfolio Investment. Setting up or acquiring an unlisted foreign company is Overseas Direct Investment — permitted for individuals in an operating entity not engaged in financial services, with Form FC and annual APR obligations.
Is TCS applicable on LRS remittances?
Yes, on remittances exceeding ₹10 lakh in a financial year: nil for loan-financed education, 5% for education and medical treatment, 20% for most other purposes, with further rationalisation for certain categories under the Finance Act, 2026. TCS is credited against your income tax.
Can a minor remit under LRS?
Yes, through a natural guardian who countersigns Form A2; the minor has a separate USD 250,000 entitlement.
Do I have to bring back income earned on LRS investments?
Income and sale proceeds may be retained and reinvested abroad in permitted ways; they must be reported in your Indian return and taxed in India as a resident.
Can I remit more than USD 250,000 for medical treatment?
Yes. Banks may permit remittances above the limit for medical treatment and education on documentary evidence; other capital-account remittances above the limit need RBI approval.
Sources
Primary sources only. Statutory text is read from the official publication; where a provision has been renumbered, the pre-2026 reference is given alongside so older material can be reconciled.
- RBI Master Directions — Reporting under FEMA; External Commercial Borrowings; Overseas Investment; Export of Goods and Services; LRS
- FEMA notifications — Reserve Bank of India
- Income-tax Act, 2025 and Income-tax Rules, 2026 — Income Tax Department, Tax Laws & Rules
- e-Gazette of India — Finance Act, 2026; Income-tax Rules, 2026; FEMA notifications
Last reviewed on 1 November 2026 by Suchit Jhunjhunwala, FCA, VMS Jhunjhunwala & Co. Law stated as at that date; the Income-tax Act, 2025 and Income-tax Rules, 2026 apply from 1 April 2026.
