Liberalised Remittance Scheme (LRS): The Limit, TCS and Rules
Disclaimer: This article is for general information/education and is not investment advice. The information is shared in good faith and for general informational purposes only. Ujjivan SFB does not make any representations or warranties regarding the accuracy, completeness, or reliability of the content.
October 28, 2026
When you send money abroad for education, family support or investments, you need to consider the amount you can transfer and the tax collected when you make the payment. The Liberalised Remittance Scheme (LRS) allows eligible resident individuals to make permitted overseas transfers within a general annual allowance of USD 250,000 per financial year. Separately, most LRS transfers become subject to Tax Collected at Source (TCS) once your relevant annual remittances exceed ₹10 lakh per financial year.
Who Can Use the Liberalised Remittance Scheme?
You can use LRS if you are an individual resident in India under the Foreign Exchange Management Act, 1999 (FEMA). Minors are also eligible, with their natural guardian countersigning Form A2. The scheme does not apply to companies, partnership firms, Hindu Undivided Families or trusts.
Your FEMA residential status determines eligibility. If you are an NRI resident outside India under FEMA, transfers from your NRI bank accounts follow the relevant repatriation rules. You should therefore establish your residential status before selecting a remittance route.
What is the LRS Limit?
Your general LRS allowance is USD 250,000, or its equivalent in another currency, per person during each financial year. Here is how it works:
For example, if you send USD 60,000 for education and USD 40,000 for an eligible investment, you have used USD 100,000. Your remaining general allowance for that year is USD 150,000. Keep a record of your combined usage before arranging another transfer.
What Can You Send Money Abroad For?
LRS covers permitted expenses and financial transactions, including:
An investment must meet the applicable overseas investment requirements as well as the remittance allowance. Check the conditions for the particular asset or transaction before committing funds.
When Does TCS Apply to LRS Remittances?
Your authorised dealer, such as a bank authorised to handle foreign exchange, collects TCS when the relevant conditions apply. For most LRS transfers, collection begins on the amount above your combined ₹10 lakh annual threshold.
This threshold applies per remitter/PAN across relevant purposes and authorised dealers. You do not receive another ₹10 lakh exemption when you use a different bank.
The standard position from 1 April 2026 is:
Purpose | Valid, Operative PAN | Inoperative PAN |
Education funded by a qualifying institutional loan | Nil | Nil |
Education funded through other sources | Nil up to ₹10 lakh; | Nil up to ₹10 lakh; |
Medical treatment | Nil up to ₹10 lakh; | Nil up to ₹10 lakh; |
Other permitted LRS purposes | Nil up to ₹10 lakh; | Nil up to ₹10 lakh; |
The education-loan exemption requires funding from an institution covered by the statutory definition. An inoperative PAN increases the education and medical rate, while the other-purpose rate remains 20%.
PAN is mandatory for LRS remittances. These higher-rate provisions should not be read as permission to transfer money without providing PAN. An inoperative PAN and the absence of PAN are different situations.
Overseas Tour Packages: These purchases follow a separate provision. From 1 April 2026, the seller generally collects 2% on the package amount, without the ordinary ₹10 lakh LRS exemption, where the standard rate applies. Higher-rate PAN provisions may affect this collection too. The authorised dealer should not collect TCS again on an amount on which the package seller has already collected it.
How Is TCS Calculated and Claimed?
The following examples assume that your PAN is valid and operative and you have made no earlier LRS remittances during the financial year.
1. Education Funded From Savings
If you send ₹15 lakh for overseas education:
• Amount above the threshold: ₹15 lakh − ₹10 lakh = ₹5 lakh
• TCS: ₹5 lakh × 2% = ₹10,000
• Amount required before transfer charges: ₹15.10 lakh
If your PAN were inoperative and the 5% rate applied, TCS would instead be ₹25,000
2. Gift Sent Abroad
If you send ₹15 lakh as an eligible gift:
• Amount above the threshold: ₹15 lakh − ₹10 lakh = ₹5 lakh
• TCS: ₹5 lakh × 20% = ₹1 lakh
• Amount required before transfer charges: ₹16 lakh
Earlier transfers affect these calculations. For example, ₹6 lakh sent through one bank and ₹5 lakh through another totals ₹11 lakh. Assuming ordinary non-exempt transfers, the ₹1 lakh above the threshold attracts the rate applicable to the later transfer.
Claiming the Tax Credit
You can claim eligible TCS against your income tax liability. If your total tax payments exceed the amount due, you can claim the resulting refund through your return, subject to processing. Check that the collection appears correctly in your tax credit records. A refund depends on your overall tax position and it is not automatic merely because TCS was collected.
Can You Remit More Than the Annual Allowance?
Specific provisions can allow larger transfers for certain purposes:
These provisions do not create a general higher allowance for every purpose. Ask your authorised dealer which documents and approvals apply before arranging a transfer above USD 250,000. Other cases may require prior RBI permission.
What Documents and Restrictions Should You Know About?
Your authorised dealer needs information to assess the payment and complete the required checks.
Documents and Declarations
You generally need to provide:
The supporting documents depend on the transaction. Confirm the checklist before submitting your request.
Key Restrictions
LRS cannot be used for prohibited transactions, such as buying lottery tickets, or for margin payments to overseas exchanges or counterparties. Restrictions also apply to specified recipients and destinations. Banks cannot extend credit facilities to fund capital account remittances under LRS. This makes the funding source relevant when you plan an overseas investment.
Final Thoughts
Before sending money abroad, review your combined annual remittances, confirm your PAN status and calculate any TCS. Your allowance renews each April, but unused amounts do not carry forward.
Keeping records across banks helps you track both the dollar allowance and the rupee TCS threshold. Along with accurate payment details and supporting documents, this gives you a clearer picture of the amount required before you submit your request.
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