Liberalized Remittance Scheme

Resident Indians were facing hardships for effecting legitimate foreign exchange transactions. To facilitate this and to permit partial free flow of funds, RBI introduced Liberalized Remittance Scheme (LRS) on Feb 4th 2004 with a limit on 25000 USD. This limit has been revised to 250000 USD per individual per financial year as on date. Reserve Bank of India allows remittance by a resident individual for permitted current account transaction or capital account transaction or both.

The remittances can be made in any freely convertible foreign currency.


Authorized dealer (AD) banks allow remittances by a resident individual up to USD 250,000 per financial year. Resident Individuals can make the remittance in different tranches throughout the financial year, however the same should not exceed the limit of USD 250000. The remittance can be made through different bank accounts of the Resident individual. Minors can also make the remittance under LRS.

The said Scheme is not available to corporate, partnership firms, HUF, Trusts etc. It is exclusively available only to resident individuals.

Permitted current account transactions:

The permitted current account transactions under LRS are as under:

  • Private visits to any country (except Nepal and Bhutan)
  • Gift or donation
  • Going abroad for employment
  • Maintenance of close relatives abroad
  • Travel for business, or attending a conference or specialized training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up
  • Any other current account transaction

Release of foreign exchange exceeding USD 2,50,000, requires prior permission from the Reserve Bank of India.

However, it is worthwhile to note that for the following transactions, the individual may avail of exchange facility for an amount in excess of the limit prescribed under the LRS if it is so required by a country of emigration, medical institute offering treatment or the university, respectively.

  • Emigration
  • Expenses in connection with medical treatment abroad
  • Studies abroad

Gift in Indian Rupees by resident individuals to NRI relatives as defined in the Companies Act, 2013 shall also be subsumed under the LRS limit.

Remittance for all residual current account transactions are permitted without RBI’s permission which are not prohibited/ restricted transactions subject to satisfaction of the Bank about the genuineness of the transaction.

Permitted capital account transactions:

The permissible capital account transactions by an individual under LRS are:

  • opening of foreign currency account abroad with a bank
  • purchase of property abroad
  • making investments abroad
  • setting up Wholly Owned Subsidiaries and Joint Ventures outside India for bonafide business.
  • extending loans including loans in Indian Rupees to relative NRIs.


Resident Individual is required to submit Form A2 which includes Application cum Declaration for purchase of foreign exchange to AD.

AD shall after verifying the details in the form and after satisfaction of the genuineness of the transaction, undertake the remittance.

Prohibited transactions:

All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the LRS.

LRS cannot be used for making remittances for any prohibited or illegal activities such as margin trading, lottery, etc.

Remittance under LRS is not permitted to countries notified as non-cooperative countries and to territories as listed by the Financial Action Task Force (FATF).

Few interesting situations :

# An interesting question arises – what if one has to make the payment of USD 1000000 for a permissible current transaction? Can this be made from one account or multiple accounts?

In the above scenario, family members of the resident individual can make the payment under LRS on an individual basis. Thus, 4 members of the family can make individual remittance of USD 250000 resulting in payment of USD 1000000.

# Is clubbing permitted?

It should be noted that clubbing is not permitted by other family members for capital account transactions such as opening a bank account; investment; purchase of property, if they are not the co-owners or co-partners of the overseas bank account/ investment/property.

# Can a resident Indian advance a loan to his NRI relative in NRI’s home country?

Yes. A resident Indian can advance rupee loan to a close relative NRI in his home country by way of crossed cheque/ electronic transfer subject to conditions.

# A resident Indian has two daughters residing overseas. Can he gift both of them 250k each?

No. He cannot gift 250k to each of his daughters as the limit prescribed under the Scheme is restricted to 250k in toto in a financial year.


Content Source – Sanjeev Kamdar – KDP Accountants (NRI advising),

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