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A guide to LRS limits and ways to navigate it

Summary: The Reserve Bank of India introduced the concept of LRS limits with a view to simplify and liberalize foreign exchange facilities available to resident individuals. Transfers or payments within the LRS limits do not require RBI consent and are generally easy and quick. If you want to send funds abroad, understand how LRS works.

15 Jul 2024 by Team FinFIRST
LRS limits
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Which of the following categories do you fall into?

  • Parents sending funds to their children studying abroad
  • Resident Indian individuals looking to invest in international markets
  • Resident Indians sending funds abroad to NRIs

Whichever the category, one thing is common – LRS limit.

Confused? Let’s simplify.

READ MORE

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Stay on top of your finances while studying abroad: Benefits of an NRI Account
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What is the LRS limit?
 

Introduced by the Reserve Bank of India in 2004, the Liberalised Remittance Scheme (LRS) is a foreign exchange policy which applies to international fund transfers, forex card loading, international spends on debit cards, payments to tour operators for international tours, foreign currency cash, etc.

Under the LRS scheme, if you are a resident individual who is sending funds abroad, a limit on the transfer would apply. The LRS  limit is $2.5 lakh per financial year.

For instance, if you want to send money to your NRI child studying abroad, you can do so freely up to $250,000 in a financial year.

This limit gets reset at the end of the financial year and any spillover cannot be carried forward to the next year. If you have a high foreign remittance requirement, it is advisable to plan your remittances well in advance.

Rules under LRS
 

Some of the important rules under LRS are as follows –

  • The scheme applies to resident Indians, both adults and minors
  • The scheme is applicable to foreign remittances, forex card loading, purchase of forex cash, payments for international tours, international spends on debit cards and gifts/loans to a close relative (Non-Resident)
  • The funds remitted under LRS cannot be used for lottery tickets or margin trading, etc.
  • There’s no restriction on the frequency of remittances as long as the aggregate value stays within the LRS limits
  • Foreign remittances can be for international vacations, gifts, employment abroad, maintenance of NRIs who are close relatives, studies, medical treatments, overseas investments, etc.
  • TCS (Tax Collected at Source) would apply on remittances exceeding ₹7 lakh. The rate of TCS depends on the purpose of remittance.

Purpose

Exemption up to cumulative txn value

Rate applicable

Education (Own Fund) or Medical

₹7,00,000

5%

Education (Education Loan)

₹7,00,000

0.5%

Payments to Travel Agent

No Exemption (5% up to ₹7,00,000)

20% over ₹7,00,000

All Other Purposes

₹7,00,000

20%

 

  • A PAN Card is a must for outward remittances under Liberalized Remittance Scheme

LRS limits in NRI banking
 

Since the LRS scheme is meant for resident individuals, it does not affect NRIs considerably. However, if NRIs have an NRO bank account in India, resident relatives making a deposit in the NRO account under gift/loan purpose would fall under the purview of LRS.

For instance, if a resident individual makes a rupee deposit in the NRO account of an NRI, the maximum deposit would be permitted up to the LRS scheme limit of $250,000. Plus, rupee loans or gifts exceeding ₹7 lakh would also attract a 20% TCS.

Also read - Discover IDFC FIRST Bank NRI Banking Service under 3 minutes!

Navigating LRS limits
 

Understanding LRS limits is essential for effective financial management. It determines the maximum limit for foreign transfers. So, if you are looking to invest internationally for portfolio diversification or want to send funds abroad to your relatives, know and comply with the LRS limits for individuals.

For hassle-free remittances choose IDFC FIRST Bank and transfer funds in various categories, that too, at competitive rates.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank 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 mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

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