The Liberalised Remittance Scheme (LRS) is a facility introduced by the Reserve Bank of India (RBI) that allows resident individuals in India to legally send money abroad for specific permitted purposes. Under this scheme, an Indian resident can remit up to USD 250,000 per financial year for purposes such as education, travel, medical treatment, business trips, investments in foreign stocks or property, and even gifts or donations.
The key benefit of LRS is that it simplifies foreign remittances for individuals without requiring prior approval from RBI, as long as the remittance falls within the specified limit and complies with the set guidelines. However, all remittances must be made through authorised dealers (banks) and reported appropriately.
From a compliance and taxation perspective, individuals remitting funds under LRS are required to provide their Permanent Account Number (PAN) and submit Form A2 along with necessary declarations. Additionally, Tax Collected at Source (TCS) may be applicable on the amount remitted, depending on the nature and value of the transaction.
For small business owners and first-time investors, understanding LRS is important when planning to:
- Invest in foreign startups or stocks,
- Fund overseas education for children,
- Pay for international conferences or training programs.
Proper reporting of such transactions also ensures compliance with Indian income tax laws, and helps avoid penalties or notices from the tax department. For guidance on reporting foreign remittances and managing income tax filings, visit FinTax24’s income tax solutions.
In summary, the Liberalised Remittance Scheme offers a structured and legal way for resident Indians to engage in international financial transactions, provided they adhere to the rules and maintain transparency with tax authorities.