The Liberalised Remittance Scheme (LRS) opens opportunities for Indian residents to send money abroad for personal needs like education, medical treatment, and investments. Whether you're planning to study overseas, invest in foreign markets or cover travel expenses, understanding LRS is essential.
What is LRS?
The Liberalised Remittance Scheme (LRS), introduced by the Reserve Bank of India, allows residents to remit funds abroad for personal purposes. It simplifies global transfers for activities like supporting family, making donations, or investing in foreign assets while ensuring regulatory compliance.
LRS promotes financial inclusivity by enabling access to global opportunities, from education and medical treatment to business investments and entrepreneurship.
What is the LRS limit?
As of the current financial regulations, the LRS limit permits residents to remit up to USD 250,000 per financial year. This limit covers a range of activities, including travel, education, and business investments. It’s essential to understand that this ceiling applies to an individual and not to a family as a whole, meaning each family member is entitled to the same annual remittance limit under the LRS scheme.
How does LRS work?
1. You submit an application to Axis Bank, detailing the amount you wish to remit and the purpose of the remittance.
2. Once approved, the funds can be transferred to your overseas beneficiary.
3. The remitted amount is deducted from the total limit of USD 250,000 for the financial year.
The scheme is user-friendly, and the funds can be used for various purposes, including foreign education, medical treatment, and investments. However, LRS does not cover certain expenses such as lottery tickets, banned items and activities in countries identified by the Financial Action Task Force (FATF) as high-risk.
Tax on Liberalised Remittance Scheme
Any remittance under LRS is subject to Tax Collected at Source (TCS). As of October 1, 2023, a 5% TCS is applicable for remittances exceeding ₹7 lakh in a financial year for education (funded by self) or medical purposes. In case of education remittances that are funded through an Education Loan, a 0.5% TCS is applicable for education remittances exceeding ₹7 lakh in a financial year. A higher rate of 20% applies to all other remittances exceeding ₹7 lakh, regardless of purpose.
The tax collected can be adjusted against your total income tax liability at the end of the financial year, making it important to keep records of all remittances and taxes paid.
Benefits of Liberalised Remittance Scheme
- Diversification of investment: Enables investments in foreign assets like stocks and real estate, helping diversify your portfolio beyond domestic markets.
- Medical treatment: Covers hospital bills and expenses for treatment abroad, ensuring timely care.
- Overseas education: Supports tuition, accommodation, and student expenses for higher studies abroad.
- Travel: Funds international travel costs, including accommodation and local expenses.
- Start-ups and business investments: Facilitates investments in overseas ventures and businesses for entrepreneurs.
- Gift and donations: Permits gifting and donations abroad, supporting loved ones and global causes.
What does LRS mean for NRIs and their bank accounts?
Liberalised Remittance Scheme doesn't apply directly to NRIs but benefits their families in India. NRIs typically remit funds through NRO and NRE Accounts, and while their resident family members can use LRS for personal expenses like education, medical treatment or travelling abroad.
Also Read: What is a wire transfer?
Conclusion
Liberalised Remittance Scheme (LRS) offers a seamless way for Indian residents to remit funds abroad for various personal and investment purposes. Whether it's for education, medical treatment, or global investments, LRS provides flexibility and convenience.
With Axis Bank’s comprehensive remittance services, you can easily use LRS to manage your international financial needs. Take advantage of Axis Bank’s secure and efficient solutions to make global transfers simple and hassle-free.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
