The scheme and its limit
The rules are in RBI's Master Direction on the Liberalised Remittance Scheme (LRS), updated as on 6 September 2024. Authorised dealers may freely allow remittances by resident individuals of up to USD 250,000 per financial year (April to March) for any permitted current or capital account transaction, or a combination of both. The main conditions:
- Individuals only. The scheme is not available to companies, partnership firms, HUFs or trusts. They use the overseas investment routes instead (see Indian groups setting up IFSC units).
- One limit for everything. The USD 250,000 covers current account spending too: travel, gifts, studies, medical treatment and maintenance of relatives. Investment headroom is what is left after those.
- Minors may use the scheme; the natural guardian countersigns Form A2.
- Family members may consolidate remittances only if each complies with the terms. Clubbing is not permitted for capital account transactions such as an investment unless they are co-owners.
- PAN and Form A2 are mandatory, and all remittances go through one designated branch of an authorised dealer.
- No borrowed money. Banks must not extend credit to facilitate capital account remittances, and the payment must come from the remitter's own funds.
What the scheme allows in the IFSC
Paragraph 11 of the Master Direction, as inserted by A.P. (DIR Series) Circular No. 15 of 10 July 2024, lets authorised persons facilitate remittances to IFSCs in India for all permissible LRS purposes, for:
- availing financial services or financial products, as per the IFSCA Act, 2019, within IFSCs; and
- all current or capital account transactions in any other foreign jurisdiction (other than IFSCs), through a foreign currency account held in an IFSC.
Resident individuals may open a foreign currency account (FCA) in an IFSC for these purposes. They must not use it to settle domestic transactions with other residents.
In practice this covers, for example:
- a foreign currency account with an IFSC Banking Unit (see resident accounts);
- units of IFSC funds: Schedule V of the Overseas Investment Rules, 2022 treats a resident's contribution to an investment fund or vehicle set up in an IFSC as overseas portfolio investment;
- securities on the IFSC exchanges, which are treated as recognised stock exchanges outside India for those Rules;
- portfolio management and other services of IFSCA-regulated entities.
Family investment funds can receive LRS contributions from resident family members. See family investment funds.
Direct investment and repatriation
Investment through LRS must also fit the Overseas Investment Rules, 2022. Under Schedule III, a resident individual's overseas portfolio investment and overseas direct investment sit within the LRS ceiling. Schedule V adds an IFSC-specific route: a resident individual may make overseas direct investment in a foreign entity in an IFSC, including one engaged in financial services (except banking and insurance), if that entity has no subsidiary or step-down subsidiary outside the IFSC where the individual has control.
Income earned on LRS investments may be retained and reinvested. Foreign exchange that is received, realised, unspent or unused, and not reinvested, must be repatriated and surrendered to an authorised person within 180 days (paragraph 17 of the Master Direction). Overseas direct investment by an individual follows the separate provisions of the Overseas Investment Rules, Regulations and Directions, 2022.
The scheme is not available for capital account remittances to countries identified by the FATF as non-co-operative. Remittances to persons identified as posing a significant risk of terrorism are not permitted either.
Tax
- Tax collected at source. Under section 394 of the Income-tax Act, 2025, the authorised dealer collects tax at source on LRS remittances once the amount or aggregate in the year exceeds ten lakh rupees. For purposes other than education or medical treatment, which includes investment, the rate in the Act is 20 per cent. The Finance Act, 2026 cut the rate for education and medical treatment to 2 per cent from 1 April 2026. Check the current table before each remittance.
- Income tax. A resident is taxed in India on worldwide income, including income from IFSC investments. The reliefs for non-residents investing in GIFT IFSC do not help a resident investor. See tax for investors.
Matters to settle early
- Work out the year's remaining LRS headroom, after travel, studies and gifts, before committing to an IFSC product with a minimum ticket.
- Confirm that the product is a financial product or service offered under the IFSCA framework, and that the investment fits the Overseas Investment Rules.
- Fund the remittance from your own money, through your designated bank branch, with PAN and Form A2.
- Keep the IFSC foreign currency account for permitted purposes only. Do not use it to pay other residents in India.
- Diarise the 180-day repatriation rule for proceeds that will not be reinvested.
- Plan for tax collected at source and for reporting the income in your Indian return.