Liberalised Remittance Scheme USD 250,000: Why NRIs Cannot Use LRS While Resident Individuals Can

A resident Indian can send up to USD 250,000 abroad in every financial year under the Reserve Bank of India's Liberalised Remittance Scheme (LRS). A non-resident Indian (NRI) cannot use that window at all. The reason is definitional: the RBI's Master Direction on the LRS, last updated on 6 September 2024, is written for resident individuals, while the RBI defines an NRI as "a person resident outside India who is a citizen of India". This guide sets out that split under the Foreign Exchange Management Act, 1999 (FEMA), the tax collected on LRS remittances now that the Income-tax Act, 2025 applies from 1 April 2026, and the NRE, NRO and FCNR(B) routes NRIs use instead.

The split decides who can move which money. A resident parent may send foreign currency to a child working abroad within the parent's own USD 250,000, but the NRI child cannot use the LRS to send Indian savings out and relies instead on account-level rules, including a USD 1 million annual ceiling on NRO balances.

FEMA / DTAA Position

FEMA came into force on 1 June 2000 and splits foreign-exchange transactions into current account and capital account. Section 5 lets persons resident in India buy or sell foreign exchange for current account transactions other than those prohibited or restricted under Schedules I and II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, while Section 6 requires RBI permission for capital account transactions unless they are specifically permitted. The LRS lets authorised dealer banks freely allow an individual to do both within one annual ceiling.

The scheme began on 4 February 2004 under A.P. (DIR Series) Circular No. 64 with a limit of USD 25,000. The RBI has revised the ceiling six times since, including a cut to USD 75,000 in August 2013, and the present USD 250,000 has applied since 26 May 2015.

Eligibility is the crux. The Master Direction opens the scheme to all resident individuals, including minors, whose Form A2 must be countersigned by a natural guardian, and closes it to companies, partnership firms, HUFs and trusts. Section 2(v) of FEMA treats a person as resident in India after more than 182 days here in the preceding financial year, but excludes anyone who has gone abroad for or on taking up employment, to carry on a business or vocation, or in circumstances indicating an intention to stay outside India for an uncertain period. An NRI therefore falls outside the scheme and cannot remit under it.

The scheme still reaches NRIs through resident relatives. Paragraphs 18 and 19 of the Master Direction let a resident make a rupee gift, or an interest-free rupee loan with a minimum maturity of one year, to an NRI or PIO relative as defined in Section 2(77) of the Companies Act, 2013, credited to the relative's NRO account and counted within the donor's USD 250,000. The loan cannot be remitted outside India or used for activities such as a chit fund, a Nidhi company or real estate business. A resident may also remit foreign currency, within the same ceiling, as a gift to a person living outside India or for the maintenance of relatives abroad.

Some uses are barred whoever the remitter is. The RBI's LRS FAQ, updated on 6 April 2023, excludes items prohibited under Schedule I, such as lottery tickets; margins or margin calls to overseas exchanges; foreign-exchange trading abroad; and capital account remittances to countries the Financial Action Task Force (FATF) lists as non-cooperative.

A Double Taxation Avoidance Agreement (DTAA) does not widen any of these FEMA limits, because a treaty allocates taxing rights over income rather than permission to move capital. For an NRI it caps the Indian tax on Indian income: interest is capped at 15% for residents of the United States, United Kingdom, Canada, Singapore and Australia and at 12.5% for residents of the UAE, while India keeps its right to tax capital gains on Indian shares under each of these treaties.

Tax Treatment in India

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026, having been passed by Parliament on 12 August 2025 and given assent on 21 August 2025; a Press Information Bureau release of 1 April 2026 also records that the Income-tax Rules, 2026 were notified on 20 March 2026. FY 2025-26 income is still assessed under the 1961 Act as assessment year 2026-27, while income from 1 April 2026 falls in tax year 2026-27 under the new Act.

The remitting bank collects tax at source (TCS) on LRS remittances, formerly under Section 206C(1G) of the 1961 Act and now under Section 394(1) of the 2025 Act, Table Sl. No. 7, according to the memorandum explaining the Finance Bill, 2026. The Union Budget 2026-27, presented on 1 February 2026, cut the TCS rate on LRS remittances for education and medical treatment from 5% to 2% and left other purposes at 20%, in both cases where a year's LRS remittances exceed Rs 10 lakh; the memorandum gives 1 April 2026 as the effective date.

The threshold is recent. A Press Information Bureau release of 28 June 2023 restored a Rs 7 lakh annual threshold per individual for every LRS purpose, so the first Rs 7 lakh attracted no TCS, and deferred the higher 20% rate for other purposes to 1 October 2023. The Union Budget 2025-26, presented on 1 February 2025, raised the threshold to Rs 10 lakh.

TCS can be claimed back: the return forms notified by the CBDT in 2026 carry a Schedule TCS in which the tax collected, as shown in Form 26AS and the collector's Form 27D, is claimed. PAN is a precondition of the remittance itself, mandatory for every LRS transaction since 19 June 2018 under the Master Direction.

NRIs face a different question. The RBI's FAQ on accounts held by non-residents, as on 16 January 2025, states that income earned in NRE accounts and FCNR(B) deposits is exempt from income tax, while NRO income is taxable. Section 195 of the 1961 Act required tax on payments to non-residents to be withheld at the DTAA rate or the domestic rate, whichever was lower; the 2025 Act places TDS in Section 393, and the memorandum states that TDS rates for FY 2026-27 remain those of FY 2025-26.

Surcharge and cess sit on top. According to the memorandum, surcharge for tax year 2026-27 is 10% where total income exceeds Rs 50 lakh, 15% above Rs 1 crore and 25% where income other than dividends and capital gains exceeds Rs 2 crore, and health and education cess is 4% of tax plus surcharge, including on tax deducted from payments to non-residents. For a worked estimate on NRO income, see the NRI tax calculator.

Tax Treatment Abroad

Money sent abroad under the LRS leaves a tax trail in India. The Income Tax Department's guide to the FSI, TR and FA schedules asks a resident to report foreign-source income in Schedule FSI, summarise country-wise relief for foreign tax in Schedule TR under section 90, 90A or 91, and disclose foreign assets held at any time in the calendar year ending 31 December in Schedule FA, which ITR-1 and ITR-4 lack. Schedule FA need not be completed by a taxpayer who is not ordinarily resident or non-resident.

Where tax was withheld abroad, the guide ties the Indian credit to Form 67, where the foreign income and tax must be reported for the credit to be claimed. That covers FY 2025-26 returns under the 1961 Act; returns for tax year 2026-27 will follow the Income-tax Rules, 2026. The foreign tax credit calculator is a starting point for estimating that relief.

For an NRI the direction of relief reverses. India taxes Indian-source income first, at the lower of the treaty and domestic rates under the Section 195 rule above, and the country of residence then gives relief under its own law and the treaty. Treaty positions for six countries are summarised below.

These caps are ceilings rather than fixed rates, and the UAE's 12.5% interest cap is the lowest of the six. For scenarios, see the DTAA benefit calculator.

Repatriation Mechanics

Because NRIs cannot use the LRS, what they can send abroad depends on the account holding the money. The RBI's FAQ lists three main non-resident accounts: the NRE account and the FCNR(B) deposit, whose balances are repatriable, and the NRO account, whose balances cannot be repatriated beyond current income except up to USD 1 million per financial year under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

Two further points in the FAQ shape planning: current income credited to an NRO account can be remitted abroad, and NRO funds can move to an NRE account only within the same USD 1 million facility. The repatriation calculator and remittance cost calculator help plan a transfer, and our explainers on NRO accounts, NRE accounts and FCNR(B) deposits cover each account in depth.

The tax paperwork changed on 1 April 2026. According to the Income Tax Department's Form 145 user manual, Form 145 replaces Form 15CA and must be filed before the money is sent. Part A covers taxable remittances aggregating up to Rs 5 lakh in the tax year; Parts B and C cover larger taxable remittances backed by an Assessing Officer's certificate under section 395(1) or 395(2), or by a chartered accountant's certificate in Form 146, the former Form 15CB; Part D covers remittances not taxable under the Act.

Banks enforce this sequence. The Master Direction records that the RBI issues no FEMA instructions on deducting tax at source from remittances to non-residents and that authorised dealers must comply with the tax laws, a position the LRS FAQ traces to A.P. (DIR Series) Circular No. 151 of 30 June 2014.

Residential status decides which regime applies. Under Section 2(v), a person who has gone abroad for or on taking up employment is not resident even after more than 182 days in India in the preceding financial year, and the RBI FAQ says the existing resident account of someone who becomes a person resident outside India should be designated as an NRO account. On return for employment or on a change in status, NRE balances may be designated as resident accounts or moved to a Resident Foreign Currency (RFC) account, FCNR(B) deposits may run to maturity at the contracted rate, and NRO accounts may be designated as resident accounts.

Only then does the LRS become available again, and for capital account remittances the bank expects an account maintained for at least one year or, for a new customer, the previous year's bank statement or the latest income-tax return or assessment order. Residents who use the LRS also face a return rule: under paragraph 17 of the Master Direction, foreign exchange that is received, realised, unspent or unused and not reinvested must be repatriated and surrendered to an authorised person within 180 days.

FAQ

Can an NRI send money abroad under the LRS?

No. The LRS is open only to resident individuals, and an NRI is a person resident outside India. NRIs repatriate NRE and FCNR(B) balances, which are repatriable, and NRO balances up to USD 1 million per financial year.

How much can a resident individual remit under the LRS in 2026-27?

Up to USD 250,000 per financial year, April to March, in any freely convertible currency, with no limit on the number of remittances. Once the full amount is used, no further LRS remittance is allowed that year, even if investment proceeds return to India.

What TCS applies to LRS remittances from 1 April 2026?

Where a year's LRS remittances exceed Rs 10 lakh, TCS is 2% for education or medical treatment and 20% for other purposes, the rates announced in the Union Budget 2026-27 for Section 394(1) of the Income-tax Act, 2025. The tax collected is claimed in the return.

Can a resident parent fund an NRI child?

Yes, within the parent's own USD 250,000 a year, by remitting foreign currency as a gift or for maintenance, or by a rupee gift or interest-free rupee loan with a minimum one-year maturity credited to the child's NRO account.

When does someone moving abroad lose access to the LRS?

When they cease to be a person resident in India under Section 2(v) of FEMA, for instance by going abroad to take up employment. The existing resident account should then be designated as an NRO account.

Which forms apply to an NRO repatriation after 1 April 2026?

Form 145, which replaces Form 15CA, filed before the remittance. Once taxable remittances in the tax year exceed Rs 5 lakh, Part C needs a chartered accountant's certificate in Form 146, which replaces Form 15CB, unless an Assessing Officer's certificate is used under Part B.

Does a DTAA let an NRI use the LRS?

No. A treaty caps Indian tax, for example at 15% on interest for a US resident and 12.5% for a UAE resident, but does not change who may remit under Sections 5 and 6 of FEMA.