If you are an Indian looking to send money abroad, the Liberalised Remittance Scheme (LRS) is the framework that makes it possible. Set up by the Reserve Bank of India, it allows every resident individual to legally remit up to USD 250,000 per financial year (April–March) for permitted purposes.
These purposes cover almost every need, from education and travel to medical treatment, property purchase, global investments, family maintenance, and even gifts or donations.
In 2026, while the overall USD 250,000 cap is unchanged, the TCS thresholds, tax treatment, and reporting obligations have evolved. Which means it’s no longer just about how much you remit, but whether you’re using the right purpose code, reporting correctly, and staying compliant.
Table of Contents
- Key LRS Updates for 2026
- Why Understanding LRS Matters
- LRS Use-Cases
- What’s Not Allowed under LRS
- TCS and Taxation
- Common Mistakes to Avoid
- Frequently Asked Questions (FAQs)
- Conclusion
Key LRS Updates for 2026
Starting 1st April 2025, the rules around TCS (Tax Collected at Source) on LRS remittances have been revised. The overall annual limit of USD 250,000 per individual remains the same, but the TCS thresholds and slabs have changed:
1) New ₹10 lakh threshold
- The exemption limit has been raised from ₹7 lakh to ₹10 lakh per financial year, per individual.
- This threshold applies across all purposes combined and across all authorised dealers.
2) Category-wise TCS rates (w.e.f. April 1, 2025):
Purpose of Remittance | Normal PAN | Inoperative PAN |
Education (via loan from a specified institution) | Nil | Nil |
Education (other than above) or Medical treatment | Up to ₹10 lakh: Nil Above ₹10 lakh: 5% | Up to ₹10 lakh: Nil Above ₹10 lakh: 10% |
Any other purpose (investments, travel, property, gifts, etc.) | Up to ₹10 lakh: Nil Above ₹10 lakh: 20% | Up to ₹10 lakh: Nil Above ₹10 lakh: 20% |
3) Key clarifications from banks:
- The ₹10 lakh threshold is PAN-based, not bank-based. If you use multiple banks, the total across them counts toward your limit.
- All payments routed through Authorised Dealers (ADs) are covered, whether for travel, education, or investments.
- Misclassification (using the wrong purpose code) can lead to compliance queries.
4) Capital account restrictions remain:
You cannot use credit cards, prepaid cards, or debit cards for opening overseas bank accounts, setting up entities, or direct property investment. These must go through proper LRS remittance channels.
Why Understanding LRS Matters
On the surface, LRS looks simple, one annual limit of USD 250,000 that you can use for multiple purposes. But in practice, the details matter a lot. Missteps often lead to:
- FEMA violations and blocked transfers if you pick the wrong purpose code or route money incorrectly.
- Unexpected TCS deductions if you don’t track your total remittances across banks.
- Penalties and compliance queries when education, maintenance, or gift remittances are misclassified.
At Paasa, we help Indian families and investors go beyond simple remittances, enabling them to invest in global markets like the US, UK, Europe, China, Japan, Singapore and more, while staying fully compliant with RBI and FEMA rules.
We also help protect wealth by solving advanced tax challenges, for example saving on US state taxes by moving RSUs into UCITS equivalents, and providing clean, tax-ready reporting in India.
LRS Use-Cases
Purpose codes are RBI-assigned classifications that identify the reason for your remittance under LRS. Banks and authorised dealers require you to declare the correct code at the time of transfer.
Category | Purpose Code | Popular Doubts (Common Questions) | Link to detailed guides |
Travel | S0301 | • Can I carry both cash and forex card? • How do I reclaim TCS on travel? • Is travel insurance included? • Can family pool their limits for one trip? | |
Education | S0305 | • Can parents combine their LRS limits to pay fees? • Which documents are required at the bank? • Is living expense remittance allowed? • What if the course fee exceeds $250,000? | |
Healthcare | S0304 | • What qualifies as “medical” vs “personal” expense? • Is overseas health insurance covered? • Can I remit for a parent’s surgery abroad? • Is there TCS on small emergency transfers? | |
Investments | S0001 / S0002 | • Can I invest in US ETFs under LRS? • Are UCITS funds allowed for estate-tax protection? • Can I invest in startups or VC funds abroad? • What about remitting into multiple brokers? | |
Property Purchase | S0005 | • Can I take a mortgage abroad under LRS? • How is inheritance of property treated? • What happens when I sell and repatriate funds? • Can multiple family members pool for one property? | |
Maintenance of Family | S1301 | • What counts as maintenance vs gift? • Is there TCS on family support transfers? • Can I send money monthly for my child’s living costs? • What if my dependent is not a blood relative? | |
Gifts & Donations | S1302 / S1303 | • Is gift above ₹10 lakh taxable? • Can I gift to a non-relative abroad? • Are donations to foreign universities allowed? • How do FEMA and Indian tax rules apply? |
What’s Not Allowed under LRS
While LRS covers a wide range of needs, there are clear restrictions on where money cannot be sent. These include:
- Cryptocurrencies and virtual assets – buying, selling, or investing in crypto tokens is not permitted.
- Margin trading or derivatives – leveraged products, futures, and options abroad are prohibited.
- Lottery, betting, or gambling – including online casinos and sweepstakes.
- Transactions without a valid purpose code – remittances must always be tagged correctly under RBI’s official codes.
- Ineligible overseas entities – setting up offshore companies, opening foreign bank accounts, or remitting to jurisdictions flagged by RBI.
TCS and Taxation
Under LRS, your remittances may attract Tax Collected at Source (TCS), and the rate depends on the category:
- Education & Medical Expenses:
- No TCS up to ₹10 lakh per year.
- Above this threshold, 5% TCS applies.
- If paid through an approved education loan, TCS is nill.
- Investments, Property, Travel Packages, and Other Purposes:
- No TCS up to ₹10 lakh per year.
- Above this threshold, 20% TCS applies.
- Refunds / Adjustments:
- The TCS collected is not a final tax. You can claim credit or refund while filing your Indian tax return (ITR).
Note: TCS only covers the remittance collection. The actual tax treatment depends on the use-case, for example, capital gains from overseas stocks, rental income from foreign property, or donations each follow different reporting rules. For exact details, refer to the category-specific guides.
Common Mistakes to Avoid
Even though LRS looks straightforward, many Indians trip up on the finer details. Some of the most common mistakes include:
- Using the wrong purpose code – for example, marking a gift as maintenance or an investment as education. This can trigger compliance queries from your bank.
- Pooling family limits without proper tracking – each person has their own USD 250,000 cap. Mismanaging pooled limits can lead to overshooting and remittance blocks.
- Forgetting to account for TCS while budgeting – families often plan tuition, property, or investments without adding the upfront TCS deduction, leading to shortfalls.
- Assuming tax rules are uniform across categories – the tax treatment of foreign stocks, rental income, or gifts abroad is very different. Misreporting can cause penalties at the time of filing your ITR.
Avoiding these mistakes is the simplest way to ensure your global remittances stay smooth, compliant, and stress-free.
Frequently Asked Questions (FAQs)
LRS can be used to cover your overseas trip expenses such as air tickets, hotel bookings, and forex cards. TCS may apply if your travel spends cross the annual threshold. For a detailed breakdown, see our LRS for Travel Guide.
Can I pay for my child’s education abroad under LRS?
Yes, tuition fees, living expenses, and related costs can be remitted under LRS. Parents can even pool their limits to cover higher fees. Learn more in our LRS for Education Guide.
Is overseas medical treatment allowed under LRS?
Medical expenses like hospital bills, surgeries, and consultations abroad are permitted. TCS applies only above the ₹10 lakh threshold. For full details, refer to our LRS for Healthcare Guide.
Can I invest abroad using LRS?
Yes, you can invest in stocks, ETFs, bonds, global funds, property, or even venture capital abroad under LRS. To understand limits, purpose codes, and tax implications, see our LRS for Investments Guide.
Is buying property abroad allowed under LRS?
Yes, you can purchase residential or commercial property overseas. However, mortgages, inheritance, and repatriation rules need careful handling. For a step-by-step explanation, read our LRS for Property Guide.
Can I send money abroad to support my family?
Yes, family maintenance is a recognised category under LRS. It’s different from a gift and has its own rules on TCS and taxation. To avoid confusion, check our LRS for Maintenance Guide.
What about sending gifts or donations abroad under LRS?
You can gift money to relatives or donate to universities and charities abroad. However, large gifts may attract tax implications. For clarity, explore our LRS for Gifts & Donations Guide.
Can multiple family members combine their LRS limits for one big-ticket purchase?
Yes, pooling is allowed. For example, four family members can jointly remit up to USD 1 million in a financial year for buying property or funding education. But each remittance must flow through the individual’s account and correct purpose code. See our LRS for Property Guide for details.
What happens if I exceed the USD 250,000 LRS limit?
Any remittance above the cap requires RBI approval, which is rarely granted for individuals. Exceeding the limit without approval can lead to FEMA violations. Always track your family’s pooled usage carefully.
Can I remit under LRS from multiple banks in the same year?
Yes, but the aggregate across all banks still cannot exceed USD 250,000. Since the TCS threshold of ₹10 lakh is PAN-based, your overall usage will be tracked across institutions.
Are cryptocurrency investments allowed under LRS?
No, RBI prohibits remittances for crypto or virtual assets. Any such attempt will be blocked by banks.
What if I want to repatriate money earned abroad back to India?
Repatriation of sale proceeds (like property or investments) must follow FEMA rules and may be taxed both abroad and in India, depending on treaties. Check our LRS for Property Guide and LRS for Investments Guide for specific scenarios.
Conclusion
Using LRS to send money abroad is fully permitted, but the rules are layered. The annual cap, family pooling, purpose codes, TCS thresholds, and reporting requirements make it very different from a straightforward bank transfer.
Even small errors like using the wrong purpose code, misclassifying a remittance, or forgetting to track pooled family limits, can lead to compliance scrutiny or unnecessary TCS outflows.
If you are planning an overseas remittance, the most important step is to treat it correctly from day one. Choose the right purpose code, keep your documentation airtight, and align every transfer with FEMA and tax rules.
Need clarity on your LRS remittance?
Paasa is a global investing platform for Indian investors, enabling access to equities and strategies across markets such as the US, UK, Europe, China, Japan, Singapore, and beyond. Our clients use Paasa to build globally diversified portfolios — from direct stocks to curated managed strategies.
- Every cross-border allocation is structured within the FEMA and LRS framework, and our team has deep expertise in compliance, documentation, and purpose code selection.
- While we do not facilitate every type of remittance (like paying university fees or booking travel), we regularly guide investors and families on how to structure LRS usage so it remains FEMA-compliant, tax-efficient, and transparent.
If you are planning an overseas remittance — whether for education, investments, property, healthcare, travel, or supporting family — the most important step is to ensure it is tagged correctly, pooled properly across family members if needed, and reported accurately for tax. Our team can help you navigate these rules with clarity and confidence.
You can reach us at support@paasa.com or schedule a consultation with our team.
About Paasa
Paasa is an Indian investor’s gateway to global investing, trusted by HNIs, family offices, and institutions to diversify into markets across the US, Europe, China, Japan, and beyond.
What sets Paasa apart is its India-facing compliance layer:
- FEMA and LRS compliance embedded into every transaction.
- Tax reporting and analytics built for Indian investors (LTCG, STCG, dividend tax, TCS tracking).
- End-to-end support for remittance structuring, reconciliation, and compliance queries.
Whether it’s equities, ETFs, UCITS funds, managed strategies, or even helping you protect your RSUs from estate tax, Paasa provides a single transparent platform for global portfolios with the confidence that India-specific compliance is taken care of.
Disclaimer
This blog is intended solely for informational and educational purposes. It should not be taken as legal, tax, or financial advice. Regulations issued by the RBI, FEMA provisions, and Indian Income Tax rules on outward remittances are subject to change, and authorised dealers may apply their own interpretations in practice.
Before making any remittance, readers are advised to consult their authorised dealer bank, tax advisor, or legal professional for guidance specific to their situation. Paasa does not directly execute property purchases or remittance services. Our role is to help investors understand FEMA and LRS compliance as part of their broader global investment planning.
While every effort has been made to ensure accuracy, Paasa does not guarantee the completeness or applicability of this information. Any reliance on this content is strictly at the reader’s own discretion and risk.
