International Bank Transfers Under the Liberalised Remittance Scheme (LRS)
Introduction
If you have ever tried to send money from India to a foreign account, you have already run into the Liberalised Remittance Scheme, even if the bank didn’t name it. The LRS is the rulebook that decides how much you can send out of India in a year, what you can send it for, and how the paperwork gets filed with the Reserve Bank of India. Understanding it upfront saves you two things people usually learn the hard way: rejected transfers at the branch, and unexpected tax at year end.
This guide walks through what the LRS actually is, what it lets you do, what it does not, and the reporting that comes with it. It is written for resident individuals sending funds abroad in 2026 and does not cover business or capital-account flows that sit outside the scheme.
What Is the Liberalised Remittance Scheme
The Liberalised Remittance Scheme is a framework introduced by the Reserve Bank of India in 2004 that lets resident individuals send foreign currency abroad for a permitted list of purposes without prior RBI approval. Before the LRS, cross-border personal transfers were tightly controlled and often required case-by-case sign-off. The LRS made outbound remittance a routine banking transaction, subject to an overall annual cap and a defined list of end-uses.
The scheme applies to all resident individuals, including minors, though a minor’s remittance has to be countersigned by a natural guardian. It does not apply to companies, partnerships, HUFs, trusts, or non-residents. If you are an NRI holding an NRO or NRE account, your outward transfers are governed by a different set of rules under the Foreign Exchange Management Act, not by LRS.
Every LRS remittance has to move through an Authorised Dealer bank. That means your regular commercial bank, provided it holds an AD Category-I licence. The bank is the gatekeeper: it verifies your PAN, checks the purpose, calculates any applicable tax, and files the reporting to the RBI on your behalf.
Permitted Transactions Under the LRS
The LRS covers a defined list of current account and capital account transactions. The most common current-account uses are:
- Private visits abroad, including tourism and personal travel
- Gifts and donations to individuals or organizations outside India
- Emigration-related expenses when you are relocating
- Maintenance of close relatives residing abroad
- Business travel, conferences, or specialised training
- Medical treatment abroad, including for a companion accompanying the patient
- Fees for pursuing studies abroad, including tuition, living expenses, and related costs
On the capital account side, LRS allows:
- Opening a foreign currency account with a bank outside India
- Purchase of immovable property overseas
- Investment in overseas equity, debt instruments, mutual funds, and ETFs
- Extending loans in rupees to non-resident Indians who are relatives
What sits outside the LRS is worth knowing too. You cannot use the scheme to remit funds for margin trading, lottery tickets, sweepstakes, purchase of foreign exchange bearer bonds, or anything specifically prohibited under Schedule I of the FEMA Current Account Transaction Rules. Trading in foreign exchange abroad and remittances to countries or persons identified by the Financial Action Task Force as non-cooperative are also blocked.
Annual Limits Under the LRS
The headline number is USD 250,000 per financial year per resident individual. The Indian financial year runs from April 1 to March 31, and the cap resets on April 1. If a family of four each has separate PANs and separate LRS eligibility, each individual has their own USD 250,000 headroom in the same year.
A few points that trip people up:
The cap is a combined limit across all permitted uses. If you send USD 100,000 for a child’s tuition, USD 50,000 for a family vacation, and USD 30,000 in overseas investments in the same year, you have used USD 180,000 and have USD 70,000 left. You do not get a separate USD 250,000 bucket per purpose.
The limit is per remitter, not per receiver. Sending USD 250,000 to one relative or splitting it across ten different recipients makes no difference to your available headroom.
Amounts declined or reversed by the beneficiary bank still count against your annual limit until the funds return to your Indian account. If you send and the transfer bounces, ask your AD bank to update your utilised limit once the reversal settles.
Some medical treatment and studies-abroad remittances can exceed USD 250,000 in a year, but only if an estimate from the hospital or institution abroad is submitted, and the excess is specifically approved by the AD bank against documentary evidence. This is not a workaround for the general cap.
Reporting Norms
Every LRS transaction is reported by the AD bank to the RBI. The two documents you will encounter as the remitter are Form A2 and, for larger amounts, supporting documentation of the purpose.
Form A2 is a self-declaration filed at the time of the transfer. It captures the amount, purpose code, beneficiary details, and your PAN. For remittances up to USD 25,000, most banks accept Form A2 on its own. Above that threshold, banks typically ask for purpose-specific supporting documents: an invoice for tuition, a treatment estimate for medical, a sale deed draft for overseas property, and so on.
Your bank also files a monthly statement of LRS transactions with the RBI in a prescribed format. This is what feeds the central database that tracks each PAN’s cumulative usage across the financial year. If you switch banks mid-year, your new bank can pull your used limit through this system before processing any new transfer.
At tax filing time, LRS transactions above certain thresholds show up in your Annual Information Statement. It is worth reconciling the AIS against your own records early, especially if you have used multiple banks. Discrepancies are usually a matter of purpose-code mislabelling and are easier to fix in the same financial year than after the return is filed.
Sending Money Abroad Under the LRS: What Actually Happens
The mechanical steps at the bank look roughly like this. You give the bank the beneficiary name, account number, IBAN or SWIFT code, and the bank’s SWIFT BIC. You choose an amount in INR or the destination currency. The bank quotes an FX rate, computes any Tax Collected at Source, adds a service fee, and gives you a total INR debit amount. You sign Form A2, provide the supporting documents if the purpose or amount requires them, and the transfer is queued.
The two costs to watch are the FX markup and the flat wire fee. Most Indian banks add 1.5 to 3 percent above the mid-market rate on the FX conversion, plus a flat outward remittance fee that typically runs INR 1,000 to INR 1,500. On a USD 10,000 transfer, that FX markup alone is USD 150 to USD 300 that never reaches the beneficiary. On smaller remittances the flat fee dominates; on larger ones the markup does.
At Sliq Pay we are building an LRS remittance product that uses mid-market Google FX rates with zero markup and a transparent per-transfer fee, with TCS handled on-flow so there is no separate banking trip to reconcile at year end. It is a couple of months out; if it maps to what you need, you can join the waitlist at sliq-pay.com.
Reality Check: What Most Remitters Get Wrong About LRS
LRS is not a tax-free scheme. The USD 250,000 headroom refers to the RBI’s cap on how much foreign currency can leave the country per person per year. Tax Collected at Source under Section 206C(1G) of the Income Tax Act sits on top of this, and is a separate rule administered by the tax department, not the RBI. Staying within the LRS cap does not exempt you from TCS.
A rejected transfer still uses your limit until it is reversed. If your beneficiary bank returns funds because of a name mismatch or a wrong IBAN, your AD bank has to actively update your utilised limit after the reversal settles. Follow up in writing; it does not always happen automatically.
Not every “current account” purpose is LRS. Salary paid by an overseas employer received abroad, or reimbursements from a foreign business trip settled by the employer, are outside the scheme. LRS is a resident-individual outward remittance scheme; employer-driven flows follow different FEMA regulations.
Comparison: LRS Transfer Routes
| Route | Speed | Typical Cost | Best For |
|---|---|---|---|
| Bank wire (SWIFT via AD bank) | 1 to 3 business days | 1.5 to 3 percent FX + INR 1,000 to 1,500 flat | Large one-off transfers with a physical branch relationship |
| Online AD bank remittance | Same day to next day | 1 to 2.5 percent FX + INR 500 to 1,000 flat | Regular users of net banking who prefer the branch’s rails |
| Digital cross-border providers | Minutes to hours | Varies; some at or near mid-market | Frequent, smaller transfers where FX markup dominates cost |
Choose based on what you are optimising for. On a USD 500 transfer to a family member, the flat fee often matters more than the FX. On a USD 100,000 tuition payment, the FX markup dwarfs everything else.
FAQs
Is the LRS limit per person or per family? Per resident individual, per financial year. Each family member with a PAN has their own USD 250,000 allowance.
Does the LRS limit reset every year? Yes, on April 1. Unused limit does not carry forward.
Can I use LRS to invest in US stocks? Yes. Investment in overseas equity, ETFs, and mutual funds is a permitted capital-account use under LRS, subject to the overall annual cap.
Can I send money to a friend abroad as a gift under LRS? Yes. Gifts and donations to individuals or organisations outside India are a permitted current-account use.
What documents do I need for an LRS transfer? At minimum, PAN and a completed Form A2. For amounts above USD 25,000 or for specific purposes like tuition, medical treatment, or overseas property, banks will ask for purpose-specific supporting documents.
Do I have to declare LRS transfers in my ITR? LRS transactions above prescribed thresholds appear in your Annual Information Statement and should reconcile with what you report. Speak to a tax professional about how a particular remittance interacts with your return.
Which bank should I use for LRS remittances? Any AD Category-I bank in India can process LRS transfers. Compare FX markup, flat fee, and online workflow rather than defaulting to your salary account. If you are planning a large or recurring outbound transfer, the total cost difference between AD banks and newer providers can be meaningful; if you want an alternative that publishes its FX and fees upfront, Sliq Pay’s LRS product waitlist is open at sliq-pay.com.
Can I send more than USD 250,000 in a year? Only in very specific cases such as approved medical treatment or education, and only with the AD bank’s approval against documentary evidence.
Before You Go
The LRS is one of the most-used and least-explained pieces of Indian financial regulation. If you plan to send money abroad for anything more than a small transfer, take fifteen minutes to write down what you expect to remit through the year, split by purpose. That single sheet of paper is what stops you from running out of headroom in March, mislabelling a purpose code, or getting caught out by TCS at year end.
For updates on our LRS product and to be first in line when it goes live, join the waitlist at sliq-pay.com.
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.
