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Overview of Liberalised Remittance Scheme in India

Overview of Liberalised Remittance Scheme in India

Before Liberalised Remittance Scheme in India, permission had to be compulsorily taken from the RBI to send money abroad, which took a lot of time and formalities. Keeping this in mind, the Reserve bank of India (RBI) introduced the Liberalized Remittance Scheme in India (LRS) for everyone on 4 February 2004.

What is Liberalized Remittance Scheme (LRS) in India?

Liberalized Remittance Scheme of India is a scheme that is governed by the Reserve Bank of India (RBI) for those who are willing to go abroad except in the countries of Nepal and Bhutan for requirements such as medical treatment, holidays, study, business meeting, etc. After the Liberalized Remittance Scheme, a person can freely remit up to $2,50,000 per financial year. However, the Liberalised Remittance Scheme cannot be availed by corporates, partnership firms, HUF, Trusts, etc. and it is only available to individuals.

The approval of RBI is not required under the Liberalised Remittance Scheme, and these facilities are provided by the Authorized Dealer and FFMC, through which money can be sent effortlessly abroad. When the scheme was introduced, the RBI fixed a limit of USD 25,000 which was later revised to a higher amount. The Liberalized Remittance Scheme limit has been revised in stages consistent with contemporary macro and microeconomic conditions in India. Since February 4, 2004, the LRS limit has been changed as under:

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Date 4 Feb 2004 20 Dec 2006 8 May 2007 26 Sep2007 14 Aug2013 3 June 2014 26 May 2015
LSR limit(USD) 25,000 50,000 1,00,000 2,00,000 75,000 1,25,000 2,50,000

Capital Account Transactions Allowed for an Individual under LRS

The below-mentioned capital account transactions are permitted for an individual under LRS:

  • To purchase of property in overseas.
  • For investment in units of Mutual Funds, Share etc
  • To establish a Wholly Owned Subsidiaries and Joint Ventures
  • Loans to Non-resident Indians (NRIs)/ Person of Indian Origin (PIO) who are relatives as defined in Companies Act, 2013
  • To open a foreign currency account abroad.

Purposes for Which LRS Scheme Can Be Used Abroad

The Liberalised Remittance Scheme in India can be availed for the following purposes:

Medical Treatment Abroad

Healthcare facilities are better in developed countries. Developed nations have better and advanced techniques and technology and this is why people like to go overseas for their medical treatment, but treatment in overseas is very expensive, and adding the travelling cost to it increases the total amount spent on the treatment. When the limit of USD 2,50,000 has been exhausted, the authorised dealer can release foreign exchange after received the general permission from an Indian doctor or hospital/doctor abroad.

For Pursuing Studies Abroad

A student interested in studying overseas can also avail Liberalised Remittance Scheme in India. AD category I and AD category II bank can release-Foreign Exchange up to $250000 without taking any estimate from the foreign university. However, AD Category I bank and AD Category II may allow remittances exceeding USD 2,50,000 based on the evaluation received from the institution abroad.

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Private Visits

Any individual resident can obtain foreign exchange up to an amount of USD 2,50,000 from an FFMC in one financial year. He can take any number of overseas trips, but he can use foreign currency up to $250000 only.


A resident individual in India can send up to USD 2,50,000 to a person residing outside India as a gift or donate the amount to this limit to an overseas organization.

Maintenance of Close Relative

When a close relative of an Indian resident like son, daughter, etc. live in a foreign country; then the resident can send money up to USD 2,50,000 for their maintenance or livelihood.

Eligibility for Remittance for Funds

The Liberalised Remittance Scheme in India is available to all Indian resident individuals, including minors. A resident here means a person who has lived in India. An Indian resident who is under the age of 18 years is considered as a minor for all intents and purposes.

Who Is Ineligible Under Liberalised Remittance Scheme in India?

This scheme is not available for those countries which are considered as non-cooperative countries according to the FATF or on which RBI has passed a notification. Organisations identified by the RBI that promote terrorism or separatism; have also been kept outside the ambit of scheme. A list of non-cooperative countries and territories is available on the web site of Financial Action Task Force (FATF).

Prohibited Purposes in Liberalized Remittance Scheme

Under the Liberalized remittance scheme, the remitted amount cannot be used to buy lottery/sweep stack tickets, prescribed magazines, etc. Also, the funds cannot be remitted directly or indirectly to countries such as Bhutan, Nepal, Mauritius or Pakistan.

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Documents Required to Avail Liberalized Remittance Scheme

A remitting person can nominate an AD bank to handle all the documentation requirements and complete the entire process under the Liberalised Remittance Scheme in India. The documents needed to avail the LRS include:

  • PAN Card is a mandatory document for LRS scheme.
  • In case the residential individual is a minor, FORM A2 must be counter-signed by the minor’s natural guardian.

Facility to Grant Loan in Rupees to NRIs

A resident person is allowed to give loan to a close relative living in a foreign country. Father, mother, brother, sister, son and daughter are considered as close relatives of a person under the scheme. Crossed check and electronic transfer can be used to transfer the amount. There are certain conditions of lending which have to be followed, such as the loan that is given must be interest-free, and its maturity period must be more than one year. The remitter is needed to confirm that whatever credit is given is within the limit of $250000. The borrowers can use the loan only for their personal needs or for business.

Authorised Dealer

Authorized person should carefully read and understand all regulations and guidelines of FEMA. To process the remittance, the authorized dealer should keep all the necessary documents with him. The authorised dealer is required to make sure that the payment is received out of the funds possessed by the person who wishes to make the remittance. The authorised dealer is required to confirm that the remittance is not made directly or indirectly by/or to inappropriate entities and that the remittance made is as per the guidelines. An authorized dealer is also required to ensure that the instructions of ‘Know Your Client’ are followed adequately for the bank account. It is also important to ensure that the Money Laundering Act is appropriately followed.


A detailed study of the Liberalized Remittance Scheme in India established by the Reserve Bank proves that the scheme is highly beneficial. Many people have taken advantage of the Liberalized Remittance Scheme. The Reserve Bank has made the authorized dealer and FFMC license holder a part of the process which will be monitored by the Reserve Bank like a regulator. Liberalized Remittance Scheme encourages people who want to invest their money overseas.

Also, Read: NBFC Registration Procedure with Reserve Bank of India .

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