Liberalised Remittance Scheme (LRS)

Context: RBI is reviewing the Liberalised Remittance Scheme (LRS) in 2025 due to high capital outflows

About LRS

• Full form: Liberalised Remittance Scheme
• Regulator: Reserve Bank of India (RBI)
• Eligibility: Resident individuals (including minors via guardians)
• Annual Limit: USD 250,000 per individual per financial year

Permitted Uses

Residents can remit abroad for:

• Education: Tuition and living expenses abroad
• Travel & Tourism: Holiday or business trips
• Medical Treatment: Personal and family healthcare
• Gifts & Donations: To relatives or charitable organisations abroad
• Overseas Investment: Equity, debt instruments, mutual funds, property
• Business Purposes: Setting up foreign offices or professional obligations
• Foreign Currency Accounts: Within permitted regulatory guidelines

Prohibited / Restricted Uses

• Entities Not Eligible: Corporates, HUFs, firms, trusts
• Speculative Activities: Lottery, gambling, margin trading, forex speculation
• Recent 2025 Restrictions: RBI proposes to ban LRS remittances into offshore time deposits and lock-in interest-bearing foreign accounts, aiming to prevent passive accumulation of foreign assets

Significance

• Ease of outward remittance: Facilitates personal, educational, medical, and investment needs abroad legally
• Global financial integration: Supports Indians in participating in international financial markets
• Macroeconomic stability: RBI oversight ensures foreign exchange reserves protection and capital account management
• Policy balance: Illustrates India’s approach to gradual liberalisation while limiting potential risks from unrestricted capital outflows