Currency Rates Under the Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme is the door most Indian residents use to move money out of the country legally, whether it is tuition for a child studying in the US, a gift to family abroad, medical treatment, or a booked overseas trip. The scheme sets the rules, but the exchange rate you actually get is decided in a different place: by the authorized dealer bank that processes your remittance, on the day it lands on their desk.
That gap between “what LRS allows” and “what you pay” is where most of the money quietly leaks. The FX rate, the markup baked into it, the TCS that gets added on top, and the reporting that follows all interact in ways that are not obvious from the outside. This guide walks through how currency rates apply under LRS today, what actually moves the number you see quoted, and where to look before you send.
What LRS is, in one paragraph
LRS is a Reserve Bank of India framework that lets a resident individual remit up to USD 250,000 per financial year for permitted current and capital account transactions. Permitted uses include education, medical treatment, maintenance of close relatives abroad, private travel, gifts, donations, and investments in foreign securities. LRS does not, on its own, quote an exchange rate. It sets who can send, how much, and for what purpose. The rate itself sits with the authorized dealer bank you use for the transfer.
How the exchange rate is actually applied
An LRS remittance in INR converts to the destination currency (usually USD) through your authorized dealer bank, which is almost always a commercial bank in India. The rate you receive is built in three layers.
The interbank or mid-market rate. This is the reference rate at which banks trade currency with each other. It is what you see on Google, Reuters, or XE at any given moment. It is not what customers get.
The bank’s card rate. Banks publish a daily card rate for retail transactions. This card rate already includes a spread above the interbank rate. The spread varies by bank, by currency pair, and by the size of the remittance, and it is rarely disclosed as a separate line item on the receipt.
The transaction-specific quote. For larger transfers, a bank’s forex desk may quote a rate that is slightly better than the card rate. For smaller retail LRS transfers, most customers get the card rate as published.
The effective FX cost of a bank-driven LRS transfer typically runs 1.5 percent to 4 percent above mid-market, depending on the bank and the amount. That spread is invisible on the paperwork. The Form A2 you sign shows the INR amount debited and the USD amount credited, not the markup applied in between.
What US-Based Recipients and NRIs Should Know
If you are a US resident receiving an LRS transfer from a family member in India, the amount landing in your US bank account is already net of that FX spread. You cannot see the markup on the receiving side either. The only way to compare is to ask the sender what INR was debited, look up the mid-market rate on the day, and back-solve. Most people never bother, which is why the spread survives.
Similarly, if you are an NRI who still holds an NRO or resident-status account in India and uses LRS to fund something abroad, the same three-layer rate mechanics apply to you.
The TCS layer on top of the rate
Since October 2023, Tax Collected at Source applies to most LRS transfers.
For overseas tour packages and other private-purpose remittances, the current rates are:
| Purpose | Threshold | TCS rate |
|---|---|---|
| Education funded by an education loan | Any amount | 0.5% above INR 7 lakh |
| Education funded by other sources | INR 7 lakh threshold | 5% above threshold |
| Medical treatment | INR 7 lakh threshold | 5% above threshold |
| Overseas tour packages | Any amount | 5% up to INR 7 lakh, 20% above |
| Other purposes (gifts, maintenance, investments) | INR 7 lakh threshold | 20% above threshold |
TCS is not a cost in the traditional sense. It is prepaid income tax. You claim it back when you file your return in India, either as a refund or as a credit against tax owed. But it does affect your cash flow: for a large gift or travel remittance, TCS can pull an extra fifth of the transfer amount out of your account weeks or months before you recover it.
Two things worth flagging. First, the TCS is calculated on the INR amount remitted, not on the USD received. Second, TCS is separate from any FX markup. You pay both. A remittance of INR 20 lakh for private travel might carry a 2 percent FX spread and a 20 percent TCS on the amount above INR 7 lakh, on top of the bank’s fixed processing fee.
Reporting norms every LRS remitter should know
LRS transactions are reported by your authorized dealer bank to the RBI through monthly returns. From your side, three documents matter.
Form A2. A declaration you sign for every LRS remittance, stating the purpose, the beneficiary, and confirming the transfer falls within your annual limit. Most banks have digitized this.
PAN. Mandatory for any LRS remittance. It is what links the transfer to your tax records for TCS credit and for the RBI’s annual aggregation.
Purpose code. A short code that identifies why the transfer is happening (education, gift, medical, and so on). Banks pick from a fixed list maintained by the RBI. The code you choose determines the TCS treatment and how the transaction is reported. Picking the right purpose code is the customer’s responsibility, and it matters more than most people realize.
On the tax return side, your Form 26AS and AIS will show LRS transfers reported by banks, along with TCS collected. This is why picking the correct purpose code and keeping supporting documentation matters. A mismatch between what you declared and what your bank reported can trigger a tax notice.
Reality Check: What the LRS Rate Actually Costs You
Consider a resident sending USD 20,000 to a US university for tuition. Mid-market rate is INR 83.50 per USD. Bank card rate is INR 84.90. The bank also charges a INR 500 processing fee.
True INR cost: 20,000 x 84.90 + 500 = INR 16,98,500. Mid-market equivalent: 20,000 x 83.50 = INR 16,70,000. FX cost: INR 28,500 (about 1.7 percent above mid-market). Plus TCS at 0.5 percent on amount above INR 7 lakh (if funded by education loan) = INR 4,993.
The transfer arrives instantly on the US side once processed. The FX cost, however, is real and permanent. The TCS is recoverable but affects your cash for the year.
Where Sliq Pay fits in this picture
For US to India transfers, Sliq Pay is a cross-border payments app that uses mid-market Google FX with zero markup, applies a small transparent transaction fee, and settles instantly via UPI or IMPS. It is the reverse direction of an LRS transfer: instead of moving money out of India, it moves USD from a US bank account into an Indian recipient’s account or UPI ID.
For LRS-direction transfers (INR out of India, for tuition, family maintenance, private travel, or gifts), Sliq Pay is building an LRS product that keeps the same principles: mid-market FX with zero spread, a small transparent fee, and digital KYC that takes about 10 seconds. TCS is handled on-flow, so you do not need a separate banking trip to sort out documentation. It is a couple of months out from public launch, so if you are researching LRS options now, you can join the waitlist to be notified when it opens.
Travel Tip: Time your rate check, not your transfer
The mid-market rate moves through the day, but the card rate your bank uses is usually set once at market open and held. If you are sending on a Monday morning, the rate you get was often locked based on Friday’s close. That is not manipulation, it is just how retail forex works. Trying to time the mid-market rate for a retail LRS transfer is mostly wasted effort. What you can time is the market: when you initiate the transfer, the bank’s card rate for that day is what applies.
FAQs
How is the exchange rate for an LRS transfer decided? By the authorized dealer bank, using their published daily card rate for the currency pair. For larger transactions the bank’s forex desk may quote a slightly better rate. The bank’s card rate typically includes a 1.5 to 4 percent spread above the mid-market rate you see on Google or Reuters.
Do I have to pay TCS on every LRS transfer? No. Education loan-funded education transfers up to INR 7 lakh, medical transfers up to INR 7 lakh, and other purposes up to INR 7 lakh are exempt. Above those thresholds, TCS applies at rates that depend on the purpose code.
Is TCS the same as a tax I owe? TCS is prepaid income tax. You claim it back when you file your tax return in India, either as a refund if you have no other tax liability or as a credit against tax owed. It affects cash flow but not your final tax liability.
Can I choose a different bank for a better exchange rate? Yes. Different authorized dealer banks publish different card rates. For larger LRS transfers, it is worth comparing at least two or three authorized dealers before booking. The difference on a INR 15 lakh transfer can be several thousand rupees.
What happens if I cross the USD 250,000 annual LRS limit? Your bank will block any transfer that exceeds the limit. If you have a legitimate reason to remit more, you would need to apply for specific RBI approval under a different scheme. Most retail purposes do not require this.
Do I need to declare the purpose of every LRS transfer? Yes. You sign a Form A2 declaration and select a purpose code for every transfer. The purpose code determines the TCS treatment and how the transaction is reported to RBI and tax authorities. Get comfortable with this before you initiate the transfer, since fixing it after the fact is much harder.
Is there an easier way to handle FX and TCS in one place? Sliq Pay is building an LRS product that handles both in one flow: mid-market FX with zero spread and TCS calculated and collected within the app, so you do not need a separate banking trip. You can join the waitlist for early access.
Before You Go
The LRS framework itself is generous by global standards. The USD 250,000 annual limit covers most retail and educational needs comfortably. Where LRS quietly gets expensive is the layer of FX markup, TCS, and paperwork that sits between the rule and the actual transfer. Knowing which layers you can control (the bank you use, the day you initiate, the purpose code you pick) and which you cannot (the TCS thresholds, the reporting norms) turns LRS from a black box into a checklist.
The rate you pay is not just the exchange rate. It is the sum of mid-market, spread, TCS, and fees. Once you can see the pieces, you can shop for a better version of each, and payment apps like Sliq Pay are starting to unbundle them so the trade-offs become visible upfront.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute legal, financial, tax, or professional advice. Product features, pricing, eligibility, and availability may vary by country, user type, regulatory requirements, and are subject to change.
Please refer to Sliq Pay’s Terms of Use and official product pages for the most accurate and up-to-date information. Sliq Pay makes no representations or warranties regarding the completeness, accuracy, or reliability of the content.
