KYC & AML Guidelines Under the Liberalised Remittance Scheme (LRS)
India’s Liberalised Remittance Scheme (LRS) is the framework that lets a resident individual send money out of India for a defined set of purposes each financial year. It sits under the Foreign Exchange Management Act (FEMA) and is administered by the Reserve Bank of India (RBI). The rulebook is short in headline terms, but the compliance layer around it, the Know Your Customer (KYC) and Anti-Money Laundering (AML) checks that an authorized dealer applies at every step, is where most of the real work happens.
If you have ever wired tuition to a US university from an Indian account, funded a family maintenance transfer to a relative abroad, or sent travel money before a trip, an LRS-compliant KYC and AML pass is why the transfer was accepted. A cross-border platform like Sliq Pay operates inside the same framework. This guide walks through the LRS overview, how KYC links into it, how AML monitoring runs on top, and the reporting norms that pull the whole thing together.
LRS Overview
The LRS was introduced in 2004 to give resident individuals a clean channel to move money abroad without a case-by-case RBI approval. The current annual limit is USD 250,000 per individual per financial year (April to March), aggregated across all permitted purposes.
The permitted uses cover most of the everyday reasons a household sends money abroad:
- Private visits (travel other than to Nepal or Bhutan)
- Gifts and donations
- Employment abroad or emigration
- Maintenance of close relatives outside India
- Medical treatment abroad
- Studies abroad (tuition and living costs)
- Investment in permissible foreign assets (equity, debt, real estate, subject to RBI schedules)
A few uses are off-limits under LRS regardless of amount, including remittance for lottery or racing schemes, purchase of foreign currency convertible bonds issued abroad by Indian companies, and any purpose specifically prohibited by RBI or FEMA.
Every LRS transfer flows through an Authorized Dealer (AD) bank or an authorized remitter. The AD is the entity RBI holds responsible for compliance, and it is where KYC and AML actually get applied.
Reality Check: The USD 250,000 Cap Is per Individual, per Financial Year
A common misread is that the LRS cap is per transaction or per calendar year. It is neither. It is USD 250,000 per resident individual across the whole financial year (April 1 to March 31), aggregated across every purpose and every AD you use. If you send USD 40,000 for tuition and USD 10,000 for family maintenance from two different banks, both sit inside the same annual bucket.
KYC Linkage
Every LRS remittance has a KYC layer stacked underneath it. There are two levels of KYC most senders will run into.
Baseline KYC at account opening. Before any LRS transfer, the underlying bank or fintech account has to be KYC-compliant under RBI’s master KYC direction. This means identity and address verification, PAN linkage, and, for higher-value flows, enhanced due diligence.
Transaction-level KYC at each LRS request. For each remittance, the AD collects a Form A2 (declaration cum application) that captures the purpose of remittance (mapped to a purpose code), the amount, and the beneficiary details. The AD reviews the purpose against permitted uses, checks the cumulative LRS utilization for the financial year, and screens the beneficiary. A retail remitter typically fills the digital equivalent of Form A2 inside the bank app or the remitter’s platform.
The purpose code deserves its own note. LRS remittances are mapped to a specific RBI purpose code (for example, S0305 for tuition), and the code chosen shapes both the compliance treatment and the tax withholding. Sliq Pay’s LRS product, which is launching soon, is being built to make it easier for customers to pick the right purpose code. The customer is still selecting the code themselves.
AML Monitoring
KYC alone does not satisfy the AML expectation. The AD (or authorized remitter) has to layer transaction monitoring on top.
Under FEMA and RBI’s AML/KYC master direction, AML monitoring for LRS covers a familiar toolkit:
- Sanctions and PEP screening on the remitter and the beneficiary, at signup and on every transfer, against UN, OFAC, EU, and Indian government lists.
- Adverse media checks on the remitter’s profile and, in higher-risk cases, on the beneficiary.
- Transaction monitoring rules for common laundering typologies: rapid movement of funds in and out of the account, splitting one large transfer into several under-the-cap amounts (structuring), sudden purpose changes, and payments to jurisdictions on FATF’s grey or high-risk lists.
- Cumulative LRS tracking so that a remitter cannot inadvertently or intentionally cross the USD 250,000 cap by moving money through multiple ADs. RBI’s central database, which each AD reports to, is what closes this loophole.
A useful mental model is that KYC establishes who the customer is, while AML monitoring watches what they do afterward. Both are required. Skipping either is a violation.
AML Signals That Get Flagged Under LRS
| Signal type | Example | Why it flags |
|---|---|---|
| Structuring | Multiple LRS transfers just below round-number caps in a short window | Common structuring pattern |
| Purpose mismatch | Purpose code says “tuition” but beneficiary is a personal account | Mismatch between stated and observed use |
| High-risk jurisdiction | Beneficiary in a FATF grey-list country | Higher country risk requires EDD |
| Sanctions hit | Beneficiary name matches a sanctions list | Regulatory hold and review required |
Reporting Norms
LRS remittances feed into two reporting streams: internal reports the AD files with RBI, and tax reporting attached to the remittance itself.
RBI reporting. ADs report LRS transactions to RBI through the FLASH (Foreign Liabilities and Assets) reporting infrastructure and the LRS specific dashboards. The reports capture the remitter, the amount, the purpose code, and the running annual utilization. This is how RBI enforces the cumulative cap across ADs.
Suspicious Transaction Reports (STRs). Under India’s Prevention of Money Laundering Act (PMLA), any entity offering LRS remittance has to file an STR with the Financial Intelligence Unit (FIU-IND) whenever it identifies a suspicious transaction. Structuring, purpose mismatch, and unexplained volume spikes are common STR triggers. The customer is not informed when an STR is filed.
Tax Collected at Source (TCS). LRS remittances above certain thresholds are subject to TCS under the Income Tax Act. The applicable rate depends on purpose (education-related purposes funded through an education loan are taxed differently from unrelated travel or gift remittances) and is collected at the point of remittance. The TCS is not an extra tax cost in the long run because the remitter can claim credit against their income tax liability, but it does show up as a deduction on the transfer.
Form 15CA / 15CB. For certain non-LRS remittances the payer files Form 15CA (self-declaration) and, in some cases, a chartered accountant issues Form 15CB. Most retail LRS remittances flow through the AD’s digital process and the equivalent declarations are captured inside the platform.
What Senders Should Know
If you are sending money out of India under LRS, a few things worth keeping in mind:
Your cumulative LRS usage is tracked across every AD. Moving between banks or platforms does not reset the counter.
Choose the purpose code carefully. It affects TCS treatment and the compliance path. The customer picks the code, but a well-built platform makes it easier to pick correctly.
Answer the purpose of transfer accurately. A mismatch between the stated purpose and observed activity is one of the most common AML flags.
Structuring, splitting one transfer into several smaller ones, will attract more scrutiny than sending a single clean transfer, even if the total amount is well within the cap.
Keep documentation for the purpose: invoices, admission letters, medical estimates, and beneficiary details. Higher-value transfers, and higher-risk purposes, may require the AD to ask for them.
Where Sliq Pay Fits
Sliq Pay is a US-licensed money transmitter (NMLS ID 2714589, MSB Registration 31000298221871). The Sliq Pay LRS product, which lets Indian residents send money to the US for permitted current-account purposes like tuition, medical treatment, family maintenance, travel, and donations, is launching soon. It is being built to run a fully digital KYC, provide clear purpose-code selection, and handle TCS on-flow. Investment and capital-account flows (foreign stocks, ETFs, mutual funds, property purchase abroad) are not supported.
FAQ
What is the annual LRS limit? USD 250,000 per resident individual per financial year (April to March), aggregated across all permitted purposes and all Authorized Dealers.
Which purposes are allowed under LRS? Private travel, gifts and donations, maintenance of close relatives abroad, medical treatment, studies abroad, employment or emigration, and permitted investments in foreign assets. Some purposes are specifically prohibited (for example, lottery or racing-scheme remittances).
Does the LRS cap reset if I use multiple banks? No. The USD 250,000 cap is per individual across the financial year and is tracked across every Authorized Dealer through RBI’s central reporting.
What KYC do I need to complete before an LRS transfer? Baseline KYC (identity, address, PAN linkage) at the account level, and transaction-level KYC (Form A2 declaration cum application, purpose code, beneficiary details) at each remittance.
Are LRS transfers monitored for money laundering? Yes. Every AD applies sanctions and PEP screening, adverse media checks, and transaction monitoring, and reports suspicious activity to FIU-IND under PMLA.
What is TCS on LRS remittances? Tax Collected at Source under the Income Tax Act. The rate depends on purpose and threshold. It is collected at the point of remittance and can be claimed back as a credit against annual income tax liability.
Can Sliq Pay be used for LRS remittances today? The Sliq Pay LRS product is launching soon. It is being built to support permitted current-account purposes like tuition, medical treatment, family maintenance, travel, and donations. Join the waitlist at sliq-pay.com to be notified when it is live.
Can I send money to buy foreign stocks or property under LRS through Sliq Pay? Investment and capital-account flows (foreign stocks, ETFs, mutual funds, real estate purchase abroad) are not supported by Sliq Pay’s LRS product.
Before You Go
LRS is a well-defined lane. Once the KYC and AML layers are cleared, the actual remittance is usually straightforward. If you are looking for a cleaner LRS experience for permitted purposes, join the Sliq Pay 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.
