Vridhi & Associates

Sending money abroad from India—whether for a child’s education, an overseas vacation, or global investments—is governed by the Reserve Bank of India (RBI). The framework that makes this possible is called the Liberalised Remittance Scheme (LRS).

While the rules are designed to make foreign transactions smooth, recent Union Budget updates to the Tax Collected at Source (TCS) limit and rates have shifted how taxpayers need to plan.

To help you navigate the process, we have compiled a comprehensive FAQ based purely on official RBI and Income Tax guidelines.

(Note: Use the interactive calculator above to check exactly how much TCS applies to your specific transfer!)

1. What is the Liberalised Remittance Scheme (LRS)?

Introduced in 2004 by the RBI, the LRS is a foreign exchange policy that allows resident individuals to freely remit a specific amount of money out of India in a given financial year. You can use this money for permissible current account transactions, capital account transactions, or a combination of both.

2. What is the maximum amount I can send abroad?

Under current RBI guidelines, a resident individual can remit up to $250,000 per financial year (which runs from April 1st to March 31st).

This USD limit must be converted into INR based on the prevailing exchange rate on the date of remittance.

3. Who is eligible to use the LRS?

The scheme is available to all resident individuals.

• Minors: Minors can also utilize the LRS limit, provided the declaration form is countersigned by their natural guardian.
• Who is excluded: The scheme is not available to corporates, partnership firms, Hindu Undivided Families (HUFs), Trusts, or Non-Resident Indians (NRIs).

4. What are the new 2026 TCS (Tax Collected at Source) rules on LRS?

Following recent budget updates, the government has provided significant relief by raising the exemption threshold to ₹10 Lakhs per financial year for most purposes.

Here is the official breakdown for amounts exceeding the ₹10 Lakh limit:

• Education (Financed by an Education Loan): Fully Exempt (0%).
• Education (Self-funded) & Medical Treatment: 2% on the amount above ₹10 Lakhs.
• Overseas Tour Packages: 2%
• All Other Purposes (Investments, Gifts, General Travel): 20% on the amount exceeding ₹10 Lakhs.

Important Note on the Exemption Limit: The threshold limit of ₹10 lakh per FY for LRS is a combined limit qua PAN on all categories of LRS remittance, through all modes of payments across all the Authorised Dealers, regardless of the purpose. This means you cannot claim a separate ₹10 lakh limit at Bank A and another ₹10 lakh limit at Bank B.

5. What happens if my PAN is Inoperative?

Under Section 206CC/206CCA of the Income Tax Act, if your PAN is not linked to your Aadhaar (making it “inoperative”) or you fail to provide a PAN, you will face steep penalties. The bank is required to collect TCS at the higher of twice the normal rate or 5%, capped at a maximum of 20%.

For example, a remittance for medical treatment that normally attracts a 2% TCS rate above the threshold will immediately jump to 5% if your PAN is inoperative.

6. Do international credit card swipes count toward the LRS limit?

Using an international credit card for expenses while you are physically traveling outside India does not currently fall under the LRS limit and is exempt from TCS.

However, drawing foreign exchange through international debit cards, forex cards, or bank wire transfers does count toward your $250,000 limit and will attract TCS.

7. What happens if I buy foreign exchange but end up not using it?

You cannot hold onto unused foreign exchange indefinitely. The RBI mandates that any unspent foreign currency must be repatriated and surrendered to an authorized bank within 180 days from the date you purchased it or the date you returned to India.

Disclaimer: This blog is for informational purposes only. Foreign exchange rules and tax limits are subject to change by the RBI and the Government of India. Always consult your bank or a certified tax professional before making large international transfers.

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