Sending Money Abroad? Here’s What the LRS Rules Actually Mean for You
By Lekshmi N Iyer & Associates | May 2026 | 5 min read Every year , I get the same set of questions from clients, usually after their bank has already deducted TCS on a foreign transfer and they’re wondering what just happened. So here is a plain-language breakdown of the Liberalised Remittance Scheme (LRS) . No jargon. Just what you actually need to know before you send money abroad.
First, what is LRS?
The Liberalised Remittance Scheme is the RBI’s framework for letting resident Indians send money outside India. The limit is USD 2,50,000 per person per financial year (April to March). You can use it for education, travel, medical treatment, investments abroad, gifts to NRI relatives, property purchases, and more.
Two things people get wrong immediately:
LRS is only for resident Indians under FEMA.
Companies, HUFs, trusts, and NRIs cannot use it. And if you hold an Indian passport but have been living abroad for work, FEMA treats you as an NRI, you cannot use LRS even if your passport says Indian.
The USD 2,50,000 limit- it’s one pot, not per purpose
This is the most common misunderstanding. The limit is cumulative across everything you send in the year , it is not a separate USD 2,50,000 for education and another for investments.
If you send USD 1,00,000 for your child’s university fees and USD 80,000 later for an overseas investment, you have USD 70,000 left for the year. One pot, all purposes.
Sole proprietors, take note: transfers from your business account count toward your personal limit. There is no separate business allowance under LRS.
Going beyond USD 2,50,000 requires prior approval from the RBI , through your bank, with documentation. It is not automatic.
Starting Smart 2026
What TCS is collected and when
TCS (Tax Collected at Source) is not a penalty or an extra tax. It is an advance collection that you get credit for when you file your ITR. Your bank deducts it, deposits it with the government, and you adjust it against your tax liability at the end of the year. If your income is below the taxable threshold, you can claim a full refund , but you must file your ITR to do so.
TCS on LRS remittances — w.e.f. 1 April 2026
- Education loan (Section 80E lender) — Nil, regardless of amount
- Education (self-funded) or medical treatment — Nil up to ₹10 lakh; 2% above ₹10 lakh (5% if PAN is inoperative)
- Overseas tour packages — 2% on every remittance, no minimum threshold
- Everything else (investments, gifts, property, etc.) — Nil up to ₹10 lakh; 20% above ₹10 lakh
The ₹10 lakh threshold is cumulative for the full financial year, across all purposes combined.
What your bank needs from you
Every LRS transfer requires Form A2 (declaration of purpose and PAN). Depending on the type and amount, you will also need:
- Form 15CA — filed on the income tax portal before the transfer
- Form 15CB — a CA’s certificate on the tax position of the remittance, required in many cases alongside 15CA
- Purpose documents — university fee invoice, hospital estimate, broker account details, as applicable
Do not let your bank process the transfer without checking whether 15CA/15CB is required. A gap here surfaces cleanly during FEMA audits or income tax scrutiny.
Three things that catch people out
- The threshold is not per transaction. Many assume ₹10 lakh applies each time they remit. It does not. It is the annual total. Plan your remittances for the year before you start, not mid-way through.
- Not disclosing in the ITR. If your LRS remittance results in a foreign asset or foreign income, it must appear in Schedule FA and Schedule FSI of your ITR. Missing this attracts scrutiny and in serious cases, the Black Money Act.
- Using LRS for what it doesn’t cover. Margin trading, forex speculation, and transfers to FATF-blacklisted jurisdictions are prohibited under LRS. The consequences are FEMA adjudication and compounding — not a minor inconvenience.
When does this get complicated enough to need a CA?
Simple remittances — university fees, a medical trip, a modest overseas investment — are usually manageable with your bank’s help. You need a CA when:
- Your total remittances for the year are likely to cross ₹10 lakh and you want to plan across purposes to minimise TCS
- The source of funds is complex — property sale proceeds, inheritance, gifts — and needs to be documented before 15CB is certified
- You are investing in an overseas company, property, or setting up a WOS/JV — which brings in FEMA capital account regulations beyond LRS
- You are an RNOR just returned from abroad and need to understand how LRS interacts with your transitional tax status
In all these cases, the cost of getting it right upfront is a fraction of the cost of unwinding a mistake.
This post is general information, not advice on any specific transaction. LRS rules change frequently — verify the current position before remitting.. |
“I help founders, NRIs, and corporates turn complex financial laws into strategic clarity—where compliance becomes confidence, and litigation becomes leverage.”
