What is the Liberalised Remittance Scheme: Its Limits and Rules

Updated on Thursday, October 22nd, 2026 | By IndusInd Bank

Summary

• The LRS is a liberalised system for resident individuals to send outward remittances.
• It allows each resident remitter to send up to US$2.5 lakh per financial year.
• LRS covers both capital and current account transactions subject to restrictions and prohibitions under FEMA.

The Reserve Bank of India (RBI) allows resident individuals to purchase foreign exchange for specified purposes without any prior approval. This facility has been aptly named the Liberalised Remittance Scheme (LRS) due to its simpler procedure than the previous outward remittance system. This article explains how LRS works, including its limits, rules, procedures, eligibility criteria and permitted transactions.

What is LRS and How Does it Work?

The LRS is a simplified version of the outward remittance system for resident individuals, including minors, which allows them to purchase foreign exchange for specified purposes without seeking any prior approval. The RBI launched this scheme on February 4, 2004, under the Foreign Exchange Management Act (FEMA), 1999.

Under this process, a remitter approaches a bank or another entity recognised as an authorised dealer by the RBI. Remitters must submit an application form, Form A2, a PAN card copy and additional document(s) to verify the genuineness of their remittance purpose. Once the authorised dealer approves the application, it will release the foreign exchange to the remitter.

What are the LRS Limits, Rules and Permitted Transactions?

Annual LRS Limits for each resident individual

The RBI has set an upper limit of US$2.5 lakh per financial year for each remitter. This limit is inclusive of all eligible purposes under the LRS. Close family members can club their LRS limits for current account transactions subject to the compliance of LRS rules by the individual family members. However, such clubbing of limits is not allowed for capital account transactions except for overseas properties, investments or bank accounts in which the close family members are co-owners/co-partners.

Transactions permitted under LRS

The RBI allows the LRS window for both capital and current account transactions. The lists of eligible capital account and current account transactions are as follows;

List of eligible capital account transactions eligible for LRS

Some of the capital account transactions allowed under LRS include:

• Opening of foreign currency bank accounts outside India
• Purchase of immovable property overseas
• Providing interest-free loans up to 1 year to NRI/PIO relatives
• Overseas Direct Investment (ODI) through purchase of equity shares of an unlisted foreign entity
• ODI through acquisition of 10% or more of the paid-up equity capital of a listed foreign entity
• ODI through purchase of less than 10% of the paid-up capital of a listed foreign entity to acquire its controlling stake
• Overseas Portfolio Investments (OPI) — purchase of foreign securities (including shares, mutual funds, listed debt instruments and alternative investment funds), which do not qualify as ODI

List of eligible current account transactions for LRS

Some of the current account transactions allowed under LRS include:

• Spends incurred on personal trips to other countries (except Nepal and Bhutan),
• Spends incurred on overseas business trips
• Expenses incurred for receiving medical treatment outside India
• Making a gift to a person residing outside India
• Donation to an organisation outside India
• Spends for going overseas for employment
• Spends for emigration to another country
• Spends towards maintenance of relatives (as defined under Companies Act, 2013) in another country
• Remittances to students pursuing overseas education
• Remittances to International Financial Service Centres (IFSC) in India for purchasing securities issued by companies not resident in India
• Payment of course fees to recognised foreign universities or institutions in Indian IFSCs

 List of transactions not allowed under LRS

Some of the remittance purposes not eligible for LRS are as follows:

• Sending income earned from lottery winnings, racing, riding, etc. to other countries
• Payments for purchasing banned/proscribed magazines, lottery tickets, football pools, sweepstakes, etc
• Remittance of interest income earned from deposits held in Non-Resident Special Rupee Account Scheme
• Any other purposes or items specifically listed in Schedule-I & Schedule-II of Foreign Exchange Management (Current Account Transactions) Rules, 2000
• Payment for margin calls or margins to overseas exchanges or counterparties
• Payment for trading of foreign exchange outside India
• Purchase of Foreign Currency Convertible Bonds (FCCB) issued by Indian companies or entities in overseas secondary markets
• Capital account remittances to countries identified as non-cooperative countries or territories by the Financial Action Task Force (FATF)
• Remittances to individuals and entities, directly or indirectly, identified as posing significant terror risks by the RBI
• Gifting of foreign currency to the overseas foreign currency account of another resident held under the LRS

Who are eligible to avail the LRS?

Resident individuals, including minors, can avail the LRS facility to purchase foreign exchange. For minors availing the LRS facility, Form A2 must be counter-signed by the minor’s natural guardian. Partnership firms, HUFs, companies, Trusts, etc. cannot avail this facility for outward remittance.

Conclusion

Although the LRS has simplified overseas remittances for many important purposes, it is still subject to certain rules and restrictions. A fair understanding of these rules can help resident individuals to check whether their intended transactions are eligible for LRS and plan their remittances accordingly.

Also Read: Reasons to opt for Outward Remittance by IndusInd Bank

Frequently Asked Questions

1. How do I check my LRS limit?

While there is no centralised portal to check one’s residual LRS limit, resident individuals can contact their banks and authorised dealers to check it.

2. Can NRIs avail LRS to send outward remittances?

No, NRIs cannot avail LRS to send outward remittances or purchase foreign exchange, as this facility is only available to resident individuals in India.

3. Which documents are mandatory for sending remittances under the LRS?

Resident individuals must submit Form A2 and their PAN card copies to banks and other authorised dealers for availing the LRS facility. Authorised dealers often require additional documents to establish the purpose of remittance.

 
4. Which transactions are permissible under LRS?

LRS allows all resident individuals to purchase foreign exchange for both capital and current account transactions, subject to the FEMA rules. Click here to know more about the permitted and prohibited transactions under LRS.