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LRS for sending money abroad from India
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Understanding the limits on outward remittances under LRS
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Knowing the permitted and restricted purposes under LRS
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Applicability of TCS on outward remittance
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of June 15 2024.
The Liberalised Remittance Scheme (LRS) is a set of regulations put forth by the Reserve Bank of India (RBI) that allows Indian residents to remit funds abroad for various permissible transactions. This article delves into the LRS limits, applicability, and relevant provisions for sending money abroad from India.
Limits and applicability for LRS
Under prevailing LRS regulations, you can remit up to USD 250,000 overseas per financial year (April-March). LRS is applicable to resident individuals, including minors. For minors, the remittance is to be made by a parent or guardian.
Please note, there is an exchange rate conversion and/or transaction fee involved for any outward remittance transaction depending upon the chosen transfer method (e.g., branch or online remittance channel). These fees also fall within the specified limit of USD 250,000 set under LRS.
Did you know?
Funds loaded on forex cards are treated as an outward remittance and fall under the purview of LRS. The LRS limit comes into account when the money is loaded into the card and applies to the person who has funded the card and not to the cardholder.
Permitted purpose of remittance under LRS
The table below outlines specific purposes for which outward remittances are allowed under LRS.
Please note, tables are best viewed on desktops and in landscape mode on mobile phones.
Studies abroad |
You can transfer money abroad for the following reasons:
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Maintenance of relatives |
You can send money to your close relatives such as brother (or stepbrother), daughter, son-in-law, father (or stepfather), mother (or stepmother), member of Hindu Undivided Family (HUF), sister, son (or stepson), daughter-in-law and spouse. |
Travel |
You can transfer money for the following travelling expenses
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Gifting |
Money sent as a gift to your family and friends abroad |
Transfer to your own account |
You can deposit to your own bank account abroad |
Others |
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Prohibited purposes under LRS
LRS prohibits the following purposes for outward remittances from India:
- Purchasing lottery tickets/sweepstakes or banned magazines
- Sending remittances from India for margins or margin calls to overseas exchanges or counterparties
- Purchasing Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in the overseas secondary market
- Foreign exchange trading abroad
- Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as "non-cooperative countries and territories
- Remittances, directly or indirectly, to individuals and entities identified as significant risks for committing acts of terrorism, as advised separately by the RBI
- Gifting by a resident to another resident in foreign currency for the credit of the latter's foreign currency account held abroad under LRS
Taxation on outward remittances under LRS
The Finance Act, 2020 amended Section 206C of the Income Tax Act, 1961, and introduced Tax Collected at Source (TCS) on foreign remittance under LRS subject to the applicable threshold limit. This tax tracks and regulates foreign outward remittances and ensure that appropriate taxes are paid on such transactions. It is important for individuals to comply with these regulations when making outward remittances.
Did you know?
Non-Resident Indians (NRIs) cannot remit money under LRS and hence are not liable to pay TCS while remitting money from India.
TCS is applicable at the Permanent Account Number (PAN) level. Any TCS paid can be used to offset your tax liability in India at the time of filing your return. The TCS rate may vary depending on the purpose of the remittance and the total amount being transferred. Please note, under LRS, TCS is exempted up to a limit of ₹7 lakh per financial year per person through all modes of payment regardless of the purpose of remittance. Beyond this threshold, TCS rates will vary depending on the purpose of payment, as tabulated below:
Please note, tables are best viewed on desktop and in landscape mode on mobile phone.
| Purpose | Rate of TCS * |
|---|---|
Education financed by a loan from a financial institution |
0.5% of the aggregate of the amounts more than ₹7 lakh in a financial year |
Education not financed by a loan |
5% of the aggregate of the amounts more than ₹7 lakh in a financial year |
Medical treatment |
5% of the aggregate of the amounts more than ₹7 lakh in a financial year |
Purchase of overseas tour programme package |
In a financial year: 5% of the aggregate of the amounts upto ₹7 lakh and 20% of the aggregate of the amounts in excess of ₹7 lakh |
Any other purpose: (other than those specified above) |
20% of the aggregate of the amounts more than ₹7 lakh in a financial year |
*TCS rates are applicable effective October 1, 2023, according to the Finance Act, 2023.
Let us understand this with an illustration.
Sunita, a resident Indian, is paying the education fee of ₹10 lakh for her daughter studying in the United Kingdom (UK). The payment is being made to a foreign educational institution (not having any kind of presence in India) for a course to be conducted overseas. Hence, TCS will be applicable at 5% for the amount greater than ₹7 lakh per financial year. Since her ₹10 lakh remittance exceeds the threshold by ₹3 lakh, she will incur a TCS of ₹15,000 (taxed at a rate of 5% on ₹3 lakh, which is the amount exceeding the threshold limit).
You must consult with financial experts or tax advisors to understand these regulations effectively and to remain compliant with the latest guidelines.
Conclusion
Under prevailing LRS regulations, Indian residents can remit money abroad within a limit of USD 250,000 per financial year for different permissible purposes such as education, maintenance of relatives, travel, overseas credit card spending, gifting, investment purposes, etc. An understanding of TCS implications on outward remittances is necessary to ensure compliance with current regulations.
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Disclaimer:
The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.
