Wire Transfers Under the Liberalised Remittance Scheme (LRS)
For Indian residents sending money abroad, the Liberalised Remittance Scheme is the framework that quietly sits underneath almost every legitimate wire. Whether the money is going to a US university for tuition, a hospital abroad for treatment, a child living overseas, or a foreign trip, the transfer is happening under LRS whether the sender knows it or not. Understanding how LRS actually works turns a nervous first wire into a routine one.
This guide walks through what LRS permits, what it prohibits, the annual cap and how it’s tracked, and the reporting obligations that follow the transfer.
LRS at a Glance
The Liberalised Remittance Scheme was introduced by the Reserve Bank of India (RBI) to give resident individuals a simple way to move money abroad without applying for prior approval each time. The scheme is available to all resident individuals, including minors (with a guardian’s declaration), and the annual limit currently sits at USD 250,000 per individual per financial year across all permitted current and capital account transactions combined.
The financial year that matters here is the Indian one: April 1 through March 31. Unused headroom does not carry forward. If you send USD 100,000 in October, the remaining USD 150,000 is available only until the following March 31.
The scheme is administered through Authorized Dealer (AD) banks. Your Indian bank is the gatekeeper. They accept the LRS declaration (Form A2), verify the purpose, apply TCS if applicable, and report the transaction to the RBI. There is no separate application to make on the sender’s side beyond that.
Permitted Transactions
LRS supports both current account and capital account transactions, and knowing the difference matters for how the funds can be used on the other side.
Current account uses include private travel outside India (except to Nepal and Bhutan), business travel, gifts and donations to relatives abroad, employment abroad (initial expenses), emigration, medical treatment abroad, studies abroad (tuition and living costs), maintenance of close relatives abroad, and expenses related to attending an international conference or specialist training. These are the flows most people associate with LRS.
Capital account uses include the acquisition of immovable property outside India, investment in foreign shares, mutual funds, ETFs, and debt instruments, opening a foreign currency account with a bank abroad, and setting up a wholly owned subsidiary or joint venture abroad (subject to separate conditions).
The USD 250,000 cap applies to the combined total across both categories in a financial year. If you spend USD 50,000 on a family trip abroad and want to invest USD 220,000 in foreign equities in the same year, you’re over the cap and one of those has to wait.
Uses That Fall Outside LRS
Some transactions are explicitly prohibited under LRS and cannot be funded through this route regardless of how much cap you have available.
Remittance for margin trading, or for any purpose specifically prohibited under Schedule I or restricted under Schedule II of the FEMA current account transactions rules, is not permitted. Remittance to countries identified as non-cooperative by the Financial Action Task Force (FATF) is not permitted. Remittance to entities that appear on a specific-mention list issued by the Ministry of External Affairs is not permitted. Purchase of lottery tickets, sweepstakes, and similar prohibited items is not permitted. Remittance for margin or margin calls to overseas exchanges and counterparties is not permitted.
Trade transactions (buying goods for resale, paying a foreign vendor for a business inventory) do not fall under LRS. Businesses use separate FEMA-compliant routes for those flows.
The Annual Limit and How It Gets Tracked
USD 250,000 per financial year sounds simple, but the accounting has a couple of quirks worth knowing.
The cap applies per individual, not per household. A family of four adults can collectively remit up to USD 1,000,000 in a financial year using LRS across their individual limits, as long as each transfer is genuinely on behalf of that specific individual.
The cap is tracked by the AD bank, and every LRS transfer you make through any Indian bank gets logged against your PAN in the LRS reporting system. Switching banks doesn’t reset the counter. If you sent USD 100,000 through Bank A in June and try to send USD 200,000 through Bank B in November, Bank B’s system will flag that you have only USD 150,000 of headroom left.
Reality Check: the USD 250,000 figure is denominated in US dollars, but the equivalent in other currencies (EUR, GBP, CAD, etc.) is calculated at prevailing exchange rates on the date of the transfer. A EUR-denominated transfer to a European university counts against the same cap in USD equivalent.
Form A2, PAN, and Tax Collected at Source
For every LRS transfer, the sender fills out Form A2 at the AD bank. It is a short declaration of the purpose of the remittance, the beneficiary details, and a confirmation that the total LRS usage in the financial year (including this transfer) stays within the USD 250,000 cap. PAN is mandatory. Aadhaar-linked accounts speed the process.
Tax Collected at Source (TCS) applies on LRS transfers above certain thresholds, at rates that depend on the purpose of the remittance. For education loans through approved banks, TCS is lower. For education funded from own sources, the rate steps up above a threshold. For medical treatment, the rate is comparable. For most other purposes, the TCS rate is higher above the applicable threshold. Because these rates and thresholds are revised in Finance Bills and RBI circulars from time to time, always confirm the current figure with your AD bank before initiating the transfer.
The TCS is not a tax you owe extra. It is a prepayment against your annual income tax liability that shows up on your Form 26AS and is credited when you file your Indian income tax return.
Reporting Norms and Documentation
The AD bank reports every LRS transaction to the RBI. On your side, keep three things in order.
The Form A2 declaration you signed at the time of the transfer, along with any supporting documentation the bank asked for (admission letter for a university transfer, medical documentation for a treatment transfer, etc.). Your bank statement showing the debit and any TCS withheld. The Foreign Outward Remittance Certificate (FORC) or equivalent document your bank issues confirming the transfer, which is useful for the recipient’s records abroad and for your own tax filings.
For capital account transactions (foreign property or investments), additional reporting kicks in when you file your annual Indian income tax return. Foreign assets and foreign income are declared in specific schedules of the ITR, and misses on those schedules attract penalties.
Travel Tip: What Speeds Up an LRS Wire
The compliance side is fixed, but the speed and cost sides are not. Most delays on LRS wires come from bank-side paperwork or from picking a rail that settles slowly. A few practical adjustments help:
Line up the beneficiary details, purpose, and supporting documentation before you walk into the bank or start the online transfer. Uncertainty at the AD bank counter turns a 15-minute transaction into a return trip.
Confirm the FX quote at the moment of the transfer, and check it against the mid-market rate on Google. Banks typically add a spread of a low single-digit percent on top of mid-market. Knowing the gap helps you decide whether to proceed or use a specialist rail with a tighter spread.
Ask your bank in advance about the settlement time. Bank wires under LRS typically take one to three business days on the traditional SWIFT rail. Faster rails exist for certain corridors, and knowing which the bank will use avoids surprises for the recipient.
A Faster and Cheaper LRS Rail (Coming Soon)
Sliq Pay is a cross-border payments app for the India-to-abroad corridor, and its LRS product is currently in development. When it launches, it will support the permitted LRS use cases (tuition, medical treatment abroad, family maintenance and gifts, travel, donations to foreign nonprofits) with mid-market FX rates at zero markup, transfer fees in a fraction of a percent range, and TCS handled on-flow so you don’t need a separate banking trip. Investment in foreign stocks and ETFs, foreign property, and business or trade transactions fall outside the scope of that product.
Join the waitlist to be notified when it launches.
What Most Indian Residents Get Wrong About LRS
Two patterns come up a lot. The first is treating the USD 250,000 cap as a per-transaction cap rather than an annual per-person cap. A single wire below the cap doesn’t mean you have unlimited more to send. The second is forgetting that TCS is a credit rather than a lost fee. Not claiming it on the annual ITR leaves money on the table.
Closing Thought
LRS makes sending money abroad meaningfully simpler than the pre-2004 regime that required RBI approval for most transfers. Once you know the annual cap, the purpose codes, the Form A2 process, and the TCS mechanics, an LRS wire becomes routine. Whether you use a traditional bank wire today or a specialist rail like Sliq Pay when its LRS product launches, the paperwork and compliance framework is the same.
FAQ
What is the annual LRS limit for an Indian resident? USD 250,000 per individual per financial year (April 1 to March 31) across all permitted current and capital account transactions combined.
Can I use LRS to invest in US stocks or ETFs? Yes. Investment in foreign shares, mutual funds, ETFs, and debt instruments is a permitted capital account use under LRS, subject to the annual cap.
Can I use LRS to pay a foreign supplier for my business? No. Trade transactions do not fall under LRS. Businesses use separate FEMA-compliant routes for imports and business payments abroad.
What is TCS and do I get it back? Tax Collected at Source is a prepayment of income tax that the AD bank collects at the time of an LRS transfer above the applicable threshold. It appears on your Form 26AS and is credited when you file your Indian income tax return. It is not an extra fee.
Does the USD 250,000 cap reset when I switch banks? No. The cap is per PAN and is tracked across all AD banks through the LRS reporting system.
Can minors use LRS? Yes, subject to a declaration by the guardian.
Do I need to declare LRS transfers in my annual tax return? Yes. Foreign assets acquired using LRS (property, investments, bank accounts abroad) and any income earned on them must be declared in the relevant schedules of your Indian income tax return.
What if I need to send more than USD 250,000 in a financial year? Amounts above the LRS cap require separate RBI approval and are handled outside the LRS framework. Most individual senders should not be running into this in practice unless the underlying transaction is unusual.
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.
