What Exactly Is the LRS?
The Liberalised Remittance Scheme (LRS) is a set of guidelines from the RBI that allows resident Indians to transfer funds abroad without needing prior approval for each transaction. Introduced in 2004, it simplifies the process for various personal needs,
from education and medical treatment to travel and, importantly, overseas investments. The scheme provides a specific annual limit for each individual, making global financial activities more accessible. The current LRS limit is USD 250,000 per person for each financial year, which runs from April 1 to March 31. This limit is for an individual, not a family, meaning a family of four could theoretically remit up to USD 1 million annually.
Permitted Investments Under the Scheme
The LRS framework has directly shaped the way Indians build global portfolios. It explicitly permits a range of capital account transactions, enabling investors to diversify beyond domestic markets. Popular permitted investments include purchasing foreign stocks and ETFs listed on recognized exchanges like the NYSE and NASDAQ, investing in overseas mutual funds, and buying foreign bonds. Indians can also use the LRS to purchase immovable property abroad for personal use or rental income and open foreign currency accounts with overseas banks. Essentially, if you've ever thought about buying shares in a global tech giant or investing in a US-based index fund, the LRS is the regulatory gateway that makes it possible.
What's Not Allowed? The Prohibited List
Just as the LRS opens doors, it also firmly closes others to prevent speculation and misuse. The framework strictly prohibits certain types of transactions. Remittances cannot be used for any form of margin trading, speculative forex trading, or for purchasing lottery tickets. Furthermore, investing in cryptocurrency and other virtual digital assets is not a permitted use of LRS funds, and most banks will reject transfers intended for crypto wallets or exchanges. Capital account remittances are also barred to countries identified by the Financial Action Task Force (FATF) as “non-cooperative.” These restrictions guide investors towards more conventional and regulated asset classes.
Understanding the Tax Implications (TCS)
A crucial aspect of remitting money under LRS is the Tax Collected at Source (TCS). This is not an additional tax but an advance tax collected by the bank processing the remittance. As of 2026, for investments, gifts, and other general purposes, there is no TCS on total remittances up to ₹10 lakh in a financial year. For any amount exceeding this ₹10 lakh threshold, a TCS of 20% is applied. For example, if you remit ₹13 lakh for an overseas investment, TCS at 20% would apply only to the excess ₹3 lakh, meaning the bank would collect ₹60,000 as TCS. This amount is credited against your PAN and can be claimed back as a credit or refund when you file your income tax returns.
