The Liberalised Remittance Scheme (LRS) is one of the most important and widely used provisions under FEMA for resident individuals in India. It allows residents to freely remit up to USD 250,000 per financial year for various permitted current and capital account transactions. This article presents a detailed, long-form, fully updated explanation of key concepts related to LRS, due diligence, gift rules, donations, schedules, travel rules, medical and educational remittances, business visits, and documentation.
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1. Due Diligence by Authorised Dealers (Banks)
Before approving any foreign exchange remittance under LRS, Authorised Dealer (AD) banks must conduct thorough due diligence as part of regulatory compliance under FEMA, RBI guidelines, AML rules, and FATF standards.
1.1 Verification of Income and Bank Records
- Income Tax Returns (ITRs)
- Bank statements
- Nature of credits and account activity
- Verification of source of funds
1.2 AML, CFT & FATF Compliance
- KYC compliance
- Sanctions list screening
- End-use verification
- Checking FATF compliance standards
1.3 Suspicious Transaction Reporting (STR)
Banks must file STR with FIU-India within 7 days of identifying suspicious activity.
Customers cannot be informed about STR filing.
2. Gift Transactions Under LRS
2.1 Gift Permitted Under LRS
A resident can remit foreign exchange abroad as a gift within the LRS limit of USD 250,000.
2.2 Definition of “Relative” (Companies Act)
- Husband and Wife
- Father / Stepfather
- Mother / Stepmother
- Son / Stepson
- Daughter (not stepdaughter)
- Daughter’s husband
- Brother / Stepbrother
- Sister / Stepsister
- Members of HUF
2.3 Resident-to-Resident Foreign Currency Gift Not Allowed
A resident individual cannot gift foreign currency or foreign securities to another resident.
3. Donations Under LRS
3.1 Permitted Donations
- Foreign charities
- International NGOs
- Educational institutions abroad
- Relief organizations
3.2 Prohibited Donations
Donations are not allowed if the recipient appears on any sanctions list such as UN, OFAC, or EU.
3.3 Required Documentation
- Purpose of donation
- Details of the organization
- Registration or legitimacy proof
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4. FEMA Schedules: Prohibited, Approval-Based & Permissible
4.1 Schedule 1 – Prohibited Transactions
- Margin trading
- Call-back services
- Banned magazines or publications
- Lottery winnings
- Betting or gambling activities
- Investment in FCCBs
4.2 Schedule 2 – Transactions Requiring Prior Approval
- Cultural tours
- Advertisements in foreign print media
- Chartered vessel hiring
- Prize money above USD 100,000
- CIF import payments by PSUs
4.3 Schedule 3 – Freely Permissible Transactions
- Travel
- Education
- Medical treatment
- Gifts and donations
- Investments abroad
5. Travel Under LRS – Cash Limits & Special Rules
| Destination | Cash Limit |
|---|---|
| General Countries | USD 3000 |
| Iraq / Libya | USD 5000 |
| Haj & Religious Pilgrimage | No Limit |
| Iran / Russia | No Limit |
5.1 Surrender of Unused Currency
Unused foreign currency must be surrendered within 180 days of return.
6. Employment and Immigration Abroad
Residents may remit up to USD 250,000 for employment or immigration expenses. Higher amounts
may be approved upon submission of proof from foreign authorities.
7. Medical Treatment Abroad
7.1 Standard Limit
Up to USD 250,000 per financial year.
7.2 If Medical Estimate Exceeds Limit
Higher amounts allowed with a doctor’s estimate.
7.3 Attendant Expenses
An additional USD 25,000 is permitted for an attendant.
8. Higher Studies Abroad
- Education fees and related expenses allowed under LRS.
- Higher remittances allowed with fee structure proof.
- Student becomes NRI for FEMA purposes.
- NRO account becomes taxable.
- Up to USD 1 million can be repatriated annually from NRO.
9. Purchase of Art, Antiques & Collectibles
Residents may remit funds for purchasing art, antiques, and collectibles with required
documentation such as authenticity certificates and invoices.
10. Business Travel Under LRS
10.1 Self-Funded Business Travel
Falls under LRS and counts toward the USD 250,000 limit.
10.2 Employer-Funded Travel
Not counted under LRS as the expenses are borne by the employer.
11. Documentation Required for LRS
- PAN Card
- Form A2
- FEMA declaration
- Passport
- Visa (if applicable)
- Air ticket
- Income proof
- Bank statements
- Purpose documents (fee schedule, invoice, etc.)
12. Summary for Quick Revision
- LRS limit: USD 250,000 per financial year
- Applicable for current and capital account transactions
- Suspicious transactions must be reported within 7 days
- Resident-to-resident foreign currency gift not allowed
- Medical attendant allowed USD 25,000
- Students treated as NRIs under FEMA
- NRO repatriation limit: USD 1 million per year
- Schedule 1 prohibits several transactions
- Schedule 2 requires prior approval
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