Planning to send money abroad from India for education, travel, medical treatment, or even investment? If so, you need to understand a crucial guideline from the Reserve Bank of India (RBI) called the Liberalised Remittance Scheme (LRS).
For many Indian residents, the LRS scheme can seem complex, but grasping its fundamentals is essential for anyone dealing with international financial transactions. At MyForexer, we believe in empowering our clients with clear, actionable information. This guide will demystify the RBI’s LRS, helping you navigate your international financial needs with confidence.
What is the Liberalised Remittance Scheme (LRS)?
The Liberalised Remittance Scheme (LRS) is a facility established by the Reserve Bank of India (RBI) that allows Indian resident individuals to freely remit (send) money abroad for various permissible current or capital account transactions. Simply put, it’s the framework that governs how much money an Indian resident can send out of the country.
Introduced in 2004, the LRS has evolved to facilitate legitimate foreign exchange transactions while ensuring financial stability.
Key Points about the Limit:
Per Financial Year: : The limit resets on April 1st of each year.
Per Individual: The limit applies to each resident individual, not per family or per transaction.
Aggregate Limit: This USD 250,000 limit is an aggregate for all permissible transactions combined within that financial year.
What Can You Use the LRS For? (Permissible Transactions)
The LRS covers a wide range of purposes, making it incredibly flexible for various needs. Some of the most common permissible transactions include:
Overseas Education: Paying tuition fees, hostel fees, examination fees, and living expenses for students studying abroad.
Foreign Travel: Funding personal travel expenses, accommodation, sightseeing, and purchasing foreign currency notes/Forex Cards.
Medical Treatment Abroad: Covering medical expenses, hospital bills, and associated travel costs.
What is Prohibited Under LRS?
While broad, the LRS does have specific prohibitions:
Remittance for margin trading in derivatives abroad.
Remittance for the purchase of Forbidden or other activities.
Sending money to countries identified by the Financial Action Task Force (FATF) as non-cooperative.
Any transaction that is otherwise prohibited under FEMA (Foreign Exchange Management Act).
The Importance of Documentation
To ensure compliance with RBI guidelines, all LRS remittances require proper documentation and adherence to KYC (Know Your Customer) norms. When you initiate a transfer with an Authorized Dealer (like MyForexer), you will typically need to provide:
PAN Card: Your Permanent Account Number is mandatory.
Form A2: A declaration cum application form specifying the purpose of the remittance.
Supporting Documents: Depending on the purpose (e.g., university admission letter for education, visa/air ticket for travel, medical bills for treatment).
Your Authorized Dealer will guide you through the precise documentation required for your specific purpose.
