With globalization and increased financial mobility, many Indians are looking to send money abroad—whether for investing in international stocks, real estate, foreign education, medical treatment, or travel. However, outward remittances from India are regulated by the Reserve Bank of India (RBI) under its Liberalized Remittance Scheme (LRS).
Understanding RBI’s LRS rules is crucial for individuals looking to legally remit money abroad while maximizing their financial benefits. This guide explains the LRS framework, eligibility, permitted transactions, new updates, and how to transfer funds overseas seamlessly.
Understanding RBI’s Liberalized Remittance Scheme (LRS)
What Is LRS?
The Liberalized Remittance Scheme (LRS) is an initiative by the Reserve Bank of India (RBI) that allows resident individuals, including minors, to remit up to USD 250,000 per financial year for various purposes, such as:
- Investing in foreign stocks, bonds, or real estate
- Funding education and medical expenses abroad
- Supporting family members overseas
- Travel and leisure spending in foreign countries
Eligibility Criteria for LRS
The LRS scheme applies to:
✅ Indian residents (including minors, countersigned by a guardian)
✅ Individuals transferring money for permissible current or capital account transactions
However, it does not apply to:
❌ Non-Resident Indians (NRIs)
❌ Companies, partnership firms, or HUFs
❌ Residents remitting funds for purposes prohibited under FEMA regulations
Key Features of LRS
| Feature | Details |
|---|---|
| Annual Remittance Limit | USD 250,000 per financial year (April–March) |
| Permitted Transactions | Education, medical treatment, investment, travel, gifts, and donations |
| Prohibited Uses | Buying lottery tickets, gambling, margin trading, or capital account transactions not permitted under FEMA |
| Mode of Transfer | INR to USD (or other foreign currencies) via authorized banks and dealers |
| Tax Deducted at Source (TDS) | Applicable under LRS taxation rules (varies based on purpose) |
How to Remit Money Abroad Under LRS
Step 1: Choose a Purpose for Remittance
Decide on the purpose of sending money abroad—whether it’s for investment, education, medical needs, or personal expenses. Ensure that the transaction falls under the permissible LRS categories.
Step 2: Open an International Account
If you plan to invest in foreign stocks or assets, you will need an international brokerage or foreign bank account. Many global trading platforms provide seamless access to US, UK, and European markets for Indian investors.
Step 3: Convert INR to Foreign Currency
Indian residents must purchase foreign exchange from RBI-authorized dealers or banks. Once the funds are converted, they can be transferred abroad for the intended use.
Step 4: Complete LRS Documentation
You must submit:
✅ A2 Form (Mandatory for all remittances under LRS)
✅ PAN Card Copy
✅ KYC Documents (as per bank requirements)
✅ Declaration of remittance purpose
Step 5: Transfer the Funds
Once your bank processes the request, the amount is transferred overseas via wire transfer, SWIFT, or through an international bank.
LRS Remittance Strategy: Maximize the Limit Before March 31
A smart way to leverage LRS is by splitting remittances across two financial years.
🔹 If an individual remits USD 250,000 before March 31, they can send another USD 250,000 in early April, allowing them to transfer USD 500,000 within a few days—useful for high-value investments or major foreign transactions.
🔹 For example, at an exchange rate of ₹86 per USD, the maximum remittance per year is:
USD 250,000 × ₹86 = ₹2.15 crore
This strategy is particularly beneficial for:
- Students paying tuition fees for multiple years
- Investors purchasing foreign real estate or assets
- Individuals making large financial investments abroad
Investing in Foreign Stocks Through LRS
One of the most popular uses of LRS is investing in international stocks and assets.
How to Invest in US Stocks From India
1️⃣ Open an international trading account with a foreign brokerage (e.g., Interactive Brokers, Vested, INDmoney).
2️⃣ Complete RBI’s LRS formalities, including KYC verification.
3️⃣ Convert INR to USD through an authorized dealer.
4️⃣ Fund the international brokerage account and begin trading in global stocks, ETFs, or bonds.
Growing Trend of Overseas Investments
Data from October 2024 shows a 78% year-on-year increase in equity and debt investments by Indians under LRS, reflecting growing confidence in global financial markets.
New RBI Rule: Mandatory Repatriation of Unused Forex
RBI has introduced a new rule stating that any unused or unspent foreign exchange must be repatriated within 180 days of its acquisition.
🔹 Rule in Effect Since August 24, 2022
🔹 Applies to funds not invested, spent, or used for the original purpose
🔹 Non-compliance may result in penalties under FEMA
This ensures that foreign exchange is not hoarded abroad, maintaining India’s forex reserves and preventing illegal money transfers.
Frequently Asked Questions
1. Who is eligible to send money abroad under the LRS scheme?
Indian resident individuals, including minors (with guardian’s consent), can remit up to USD 250,000 per financial year under LRS. NRIs and businesses are not eligible.
2. Can I invest in US stocks using LRS?
Yes, Indian residents can invest in US and global stocks, ETFs, and bonds by opening an international trading account and converting INR to USD through an authorized dealer.
3. What transactions are not allowed under LRS?
The scheme prohibits remittances for gambling, lottery purchases, margin trading, or illegal transactions under FEMA regulations.
4. How does the LRS remittance limit reset each year?
The USD 250,000 limit resets on April 1 of every financial year. If you remit funds before March 31, you can send another USD 250,000 after April 1, effectively transferring USD 500,000 in a short period.
5. What happens if I don’t use my foreign exchange within 180 days?
As per the new RBI rule, unspent or unused foreign exchange must be returned to India within 180 days to avoid penalties under FEMA.
The RBI’s Liberalized Remittance Scheme (LRS) provides Indian residents with a structured way to send money abroad for investments, education, travel, and personal expenses. Understanding LRS rules and smartly timing remittances can help individuals maximize financial opportunities while staying compliant with RBI regulations.
As global financial markets evolve, international investing and remittance planning will play a key role in wealth diversification. By staying informed and following the right processes, Indians can legally and efficiently manage their global financial transactions.
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