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🌐 Liberalized Remittance Scheme (LRS): 2025 FAQs for Resident Indians & Compliance Teams

  • Writer: GIFT CFO
    GIFT CFO
  • Jul 18
  • 3 min read

Updated: Jul 24


🧾 Introduction: What Is LRS and Why Does It Matter?


India’s Liberalized Remittance Scheme (LRS) under FEMA allows resident individuals to remit money abroad freely — up to USD 250,000 per financial year. Whether it’s for education, investment, gifting, or travel, LRS empowers individuals to engage globally — legally and transparently.

This 2025 FAQ blog covers the latest FEMA directions, RBI updates, and practical compliance questions on using, documenting, and reporting LRS transactions.


Secure and accessible transactions made easier with the Liberalized Remittance Scheme.
Secure and accessible transactions made easier with the Liberalized Remittance Scheme.

💰 Q1. Who can use the LRS?

Only resident individuals — including:

  • Indian citizens

  • Minors (through natural guardians)

📌 Not allowed:

  • Companies

  • Partnership firms

  • Trusts

  • HUFs

📊 Q2. What is the current LRS limit?

✅ USD 250,000 per financial year (April–March)

  • For all purposes combined

  • Applies per individual, not per remittance

🌍 Q3. What are permissible LRS uses?

LRS covers both current and capital account transactions, including:

✅ Permitted under LRS:

  • Education abroad

  • Medical treatment

  • International travel (personal/leisure)

  • Gift or donation to non-residents

  • Investment in:

    • Foreign equity, debt, mutual funds

    • Immovable property abroad

  • Opening and maintaining foreign bank accounts

  • Maintenance of close relatives abroad

🚫 Q4. What’s not allowed under LRS?

❌ Not permitted:

  • Margin trading or leveraged products (e.g., CFDs, options)

  • Remittances to countries identified as non-cooperative jurisdictions by FATF

  • Direct/indirect investments in foreign entities engaged in real estate business or gambling

  • Trading in foreign currency or cryptocurrency outside India

👨‍👩‍👧 Q5. Can minors use LRS?

✅ Yes, through a natural guardian. The guardian must sign the A2 form and other LRS declarations on behalf of the minor.

🔁 Q6. Can residents club LRS limits?

❌ No. The USD 250,000 limit is per person — even within a family or corporate group.

💸 Q7. What if the remitted amount is unused?

  • The individual can retain the amount abroad or

  • Repatriate the unutilized portion back to India

    • Within 6 months from the date of remittance

🧾 Q8. Is income earned abroad through LRS investments repatriable?

✅ Yes. Any dividend, interest, or capital gains can be:

  • Reinvested abroad or

  • Repatriated to India (subject to Indian tax compliance)

🏦 Q9. Do remitters need PAN?

✅ Yes, PAN is mandatory for:

  • All LRS remittances

  • Even for minors (can use guardian’s PAN)

📄 Q10. What documentation is needed to use LRS?

  • A2 form (with purpose code)

  • LRS declaration form

  • PAN copy

  • KYC-compliant bank account

  • In some cases:

    • Invoice, admission letter, property agreement, etc.

💹 Q11. How is LRS taxed?

Under Finance Act 2020 and latest amendments:

Purpose

TCS (Tax Collected at Source) Rate

Education (loan-financed)

0.5% on amount > ₹7 lakh

Education (non-loan), medical

5% on amount > ₹7 lakh

Others (travel, investment, gift, etc.)

20% from July 1, 2023 onwards

📌 TCS is adjustable against your income tax liability.

🏛️ Q12. Can the LRS limit be enhanced?

No automatic increase. RBI may revise the limit periodically, but for now: USD 250,000 is fixed.

📤 Q13. What happens if you exceed the LRS limit?

Exceeding the limit without RBI approval may lead to:

  • Compounding penalties

  • Show cause notices

  • Blacklisting by AD banks

Banks must report LRS usage to RBI via daily reporting in XBRL.

🌐 Q14. Can LRS be used to invest in startups abroad?

✅ Yes — provided:

  • The startup is not in real estate, gambling, or leveraged products

  • The investment is direct (equity) or indirect (via mutual fund)

  • FEMA reporting is done, if applicable

📌 Conclusion: LRS Is Liberal — But Also Regulated

India’s LRS regime offers global financial freedom — if you stay within limits and follow the rules. With increasing cross-border flows for education, startups, and investments, knowing the boundaries and documentation helps avoid compliance issues and tax surprises.

📩 Need help structuring LRS remittances, tax declarations, or FEMA disclosures? Contact GIFT CFO — trusted experts in LRS advisory, TCS reconciliation, and global investment support.

 
 
 
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