Understanding the Liberalised Remittance Scheme (LRS) for Indian Residents

Introduction

The Liberalised Remittance Scheme (LRS) is a framework established by the Reserve Bank of India that enables Indian residents to remit money abroad within a specified LRS limit. This is especially relevant for students pursuing education overseas and travellers managing expenses internationally. The scheme simplifies foreign transactions for purposes such as tuition, living expenses, or travel bookings. Understanding the LRS and its compliance norms is crucial, as it ensures smooth legal remittances while staying within regulatory boundaries. With growing global aspirations, knowing how the LRS works is more important than ever.

What Is the Liberalised Remittance Scheme (LRS)?

If you’ve ever planned to send money abroad from India—for studying, travelling, or even helping out a family member—you’ve probably come across the term Liberalised Remittance Scheme.

But what is LRS?

The Liberalised Remittance Scheme (LRS) was introduced by the Reserve Bank of India (RBI) in 2004. Its purpose was significant yet straightforward: to allow Indian residents to remit foreign exchange abroad for specific, permitted transactions without needing prior approval from the central bank.

Under this scheme, Indian individuals can remit up to 2.09 Cr (approx.) per financial year across all allowed purposes combined. This amount is known as the LRS limit, and it is set at the individual level based on a valid PAN, not at the household or company level. So, whether you’re a student heading abroad for higher studies, someone travelling internationally, or even sending money to a relative overseas, the LRS defines how much and in what manner you can do so.

It’s essential to note that the scheme is only applicable to individuals. It does not cover corporates, partnership firms, HUFs, or trusts.

In essence, the Liberalised Remittance Scheme offers a structured and transparent route for outward remittances, making international financial planning smoother and more compliant for Indian residents.

Who Can Use the Liberalised Remittance Scheme—and for What?

The RBI introduced the Liberalised Remittance Scheme (LRS) in 2004 to facilitate easier remittance of funds abroad by Indian residents for personal purposes. Previously, even simple international transactions often required special approvals. LRS helped change that by offering a clear, structured way to handle outward remittances.

The liberalised remittance scheme is available to resident individuals in India, allowing them to transfer money abroad for specific purposes without excessive paperwork or delays. Whether it’s paying for university fees, planning a long international trip, or investing in something overseas, the scheme makes sure you can do it within a set of defined rules. It’s not about restricting you—it’s about giving you the freedom to manage your money abroad responsibly and legally.

What makes the scheme especially useful is its ability to strike a balance between flexibility and regulation. You don’t have to deal with endless paperwork, but at the same time, the system ensures that everything stays transparent and within the boundaries set by the law.

In short, the Liberalised Remittance Scheme is a tool that supports the growing needs of globally connected Indian individuals, while ensuring the financial aspect remains safe, simple, and in check.

How Does LRS Work in Practice?

The Liberalised Remittance Scheme helps Indian residents send money abroad with ease, but knowing the steps makes the process even smoother:

• You can transfer funds through your bank or digital platforms, such as Niyo.
• A valid PAN is needed, along with Form A2 and a simple LRS declaration.
• The current LRS limit is 2.09 Cr (approx) per financial year per individual.
• Post-2023 rules introduced TCS on LRS—for FY 2025–26, there’s no TCS on transfers up to ₹10 lakh.
• Most remittances are processed within 1–3 working days.
• Say, paying university fees? This setup makes it hassle-free.

What Are the Recent Changes Under LRS You Should Know?

Recent updates to the Liberalised Remittance Scheme include:

• From April 1, 2025, TCS on LRS is:
  • 5% for education (not funded by loans) and medical expenses above ₹10 lakh
  • 20% for most other remittances above ₹10 lakh
• Education via loans remains exempt from TCS
• RBI now tracks all LRS transactions through authorised dealer (AD) banks and a central monitoring system

LRS Scheme for NRIs & the Applicable Limit

Many people wonder what the Liberalised Remittance Scheme is and whether it applies to NRIs. The answer is straightforward: the Liberalised Remittance Scheme (LRS) is meant only for resident individuals under FEMA. NRIs are not eligible to use this scheme for sending or receiving money abroad.

While resident Indians can remit up to the limit of 2.09 Cr (approx) per financial year for approved purposes, such as education, travel, or investments, NRIs must use designated channels, including NRE, NRO, or FCNR accounts, for any cross-border transactions. These accounts are governed by separate rules and remittance limits that differ from those of LRS.

If an individual becomes a non-resident during a financial year, they must immediately stop using the LRS route. Continuing to do so could result in non-compliance with FEMA regulations. In short, LRS is not available to NRIs, and the LRS limit applies only to Indian residents.

Tax Collected at Source on LRS (2025) & Benefits of Using It in India

With changing global financial trends, it’s essential to understand how Tax Collected at Source (TCS) on LRS affects your international transactions. While the applicable rates vary based on purpose and amount, the broader takeaway is that tax is now a key part of cross-border financial planning. Staying informed helps avoid surprises when remitting large sums abroad.

Despite the tax layer, the Liberalised Remittance Scheme continues to serve as a flexible, government-approved route for sending money overseas. It supports a wide range of goals, such as funding education, covering medical bills, or investing in international assets. You can also send gifts or donations to loved ones abroad.

The scheme doesn’t limit how often you can send money as long as it stays within the 2.09 Cr ( approx) yearly cap. With proper planning, LRS offers freedom and control; however, it’s essential to stay up—to—date with evolving rules around TCS to remain compliant.

How Niyo Makes LRS-Based Spending Smarter and Simpler

• Enables international money transfers under the liberalised remittance scheme with zero forex markup, reducing overall costs
• 100% digital process for completing LRS declarations—no paperwork, no branch visits
• Offers zero forex markup remittance for money transfers abroad
• Supports students with tuition fee payments, international debit/credit cards, and global ATM access
• Real-time Currency Converter tool shows interbank rates and VISA rates for better decision-making
• Transparent view of TCS deductions with alerts to track limits and compliance
• It helps users stay within the guidelines of the liberalised remittance scheme while simplifying complex steps