The Liberalised Remittance Scheme (LRS) is a foreign exchange policy scheme introduced by the Reserve Bank of India (RBI) in 2004. Its origin lies in the need to simplify and streamline the process of remitting funds outside India, thereby liberalising the restrictions previously set by the Foreign Exchange Management Act (FEMA), 1999. The LRS is a provision under the broader framework of FEMA, 1999.
The scheme allows all resident individuals, including minors, to freely remit up to USD 250,000 or its equivalent per financial year (April to March). This limit, which was last increased in June 2015, applies to a combination of permissible current account transactions, such as education, travel, and medical treatment, and capital account transactions, like investing in foreign stocks or property. The LRS was implemented by inserting a proviso under Regulation 4(a) of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.
A significant recent change involves the Tax Collected at Source (TCS) provisions, which were revised by the Finance Act, 2023. Effective from October 1, 2023, the TCS rate for overseas tour packages and other remittances (excluding education and medical treatment) was increased to 20% for amounts exceeding ₹7,00,000. However, remittances for education and medical treatment continue to attract a lower TCS rate. Furthermore, while the use of international credit cards while overseas was initially brought under the LRS ambit, subsequent clarifications indicated that payments up to ₹7,00,000 per financial year via international credit/debit cards are not considered under LRS.