The LRS USD 250,000 Window: What Resident Individuals Can Remit Abroad Each Year and How It Interacts With NRI Status

The Liberalised Remittance Scheme (LRS) is the single most important door through which a resident individual in India can legally move money out of the country. Under Reserve Bank of India Master Direction No. 7/2015-16 (RBI/FED/2017-18/3, dated 1 January 2016 and last updated on 6 September 2024), an Authorised Dealer bank may freely allow a resident individual to remit up to USD 250,000 per financial year (April to March) for any permitted current or capital account transaction. The scheme is built on Section 6 of the Foreign Exchange Management Act 1999, which treats most capital account movements as restricted unless specifically permitted.

The word that does the heavy lifting in that sentence is resident. The LRS belongs to resident individuals alone. The day your residential status shifts to Non-Resident Indian, the USD 250,000 window quietly closes for you and a different rule-book governs how your money crosses borders. This article walks through the FEMA position, the tax treatment in India and abroad, and the repatriation mechanics that replace LRS once you become an NRI. Use our NRI tax calculator alongside to see how the numbers land on your own facts.

FEMA / DTAA Position

The statutory architecture begins with Section 6 of FEMA 1999, under which capital account transactions need RBI permission unless specifically permitted. The LRS is precisely that specific permission: RBI Master Direction No. 7/2015-16 lets a resident individual remit up to USD 250,000 in a financial year without any further approval, and that single ceiling is reduced by amounts already remitted earlier in the same year. There is no separate sub-limit for spending versus investing; travel, education, medical treatment, gifts and overseas investments all draw from the same USD 250,000 pool.

The scheme is available only to individuals, including minors (whose Form A2 must be countersigned by a guardian), and cannot be used by companies, partnership firms, Hindu Undivided Families or trusts. Crucially, the RBI Master Direction (updated 6 September 2024) confines LRS to resident individuals, which is why the eligibility question turns entirely on residential status under Section 6 of FEMA read with the Income-tax Act 1961.

When a person becomes an NRI, the relationship with a tax treaty becomes central. A Double Taxation Avoidance Agreement (DTAA) does not switch off Indian tax on Indian-source income; it allocates taxing rights and caps certain withholding rates. A common and costly myth is that capital gains become "exempt" under a DTAA. They do not. Under both the India-USA treaty (in force from 12 September 1991) and the India-UAE treaty (in force from 22 September 1993), India retains the right to tax gains on Indian assets, and long-term capital gains are charged at 12.5% before surcharge and cess. The table below sets out the headline treaty rates that an NRI most often encounters.

Under Article 10 of the India-USA treaty, the 15% dividend rate applies only where the recipient holds at least 10% of the voting stock in a direct parent-subsidiary relationship; ordinary portfolio investors face the 25% column. The India-UAE treaty additionally requires a valid Tax Residency Certificate evidencing a UAE establishment before treaty benefits can be claimed, and it confirms that gains on shares of an Indian company remain taxable in India.

Tax Treatment in India

The LRS remittance itself is not an income event; it is a transfer of your own already-taxed money, so it does not attract income tax on the way out. What attracts attention is the income that the remitted capital later earns abroad for a resident, and the Indian-source income that an NRI continues to earn after leaving. Capital gains on Indian listed equity are taxed under the rates introduced by Budget 2024 with effect from 23 July 2024: long-term gains above the Rs 1,25,000 annual exemption are charged at 12.5%, while short-term gains on securities transaction tax-paid equity are charged at 20% under Section 111A (raised from 15% by Budget 2024).

Property and gold sold by an NRI follow a parallel Budget 2024 structure. Assets acquired on or after 23 July 2024 are taxed at 12.5% without indexation, while assets acquired before that date are grandfathered into a 20% rate with indexation, giving the taxpayer the better of the two on older holdings. Rental income from Indian property remains taxable in India under the head income from house property; our NRI rental income tax calculator models the 30% standard deduction and the net liability.

On top of base tax, NRIs face the same surcharge and cess ladder as residents. The surcharge slabs and the 4% health and education cess are summarised below, drawn from the FY 2025-26 configuration.

Note the deliberate cap: under the new tax regime the maximum surcharge is 25%, even above Rs 5 crore, whereas the old regime still reaches 37%. A 4% cess applies on tax plus surcharge in every case. Withholding is the practical pressure point for NRIs: under Section 195 of the Income-tax Act 1961, the payer deducts TDS at the rate in the Act or the applicable DTAA rate, whichever is lower, and any excess is recovered by filing a return. Section 195 is the reason an NRI selling a flat often sees a large slice withheld before the sale proceeds even reach the bank account.

Tax Treatment Abroad

For a resident still inside the LRS window, money invested abroad does not escape Indian tax: a resident and ordinarily resident individual is taxed in India on worldwide income, so foreign dividends, interest and capital gains on LRS-funded investments are reportable on the Indian return, with credit for any foreign tax paid. The LRS remittance is also subject to tax collected at source under Section 206C(1G) of the Income-tax Act 1961, which the remitter adjusts against final tax liability when filing the return; it is a cash-flow timing cost, not an extra tax.

Once a person is an NRI, the analysis flips to the country of residence. Article 24 of the India-USA treaty (and the equivalent article in the India-UAE treaty) provides a foreign tax credit in the country of residence for tax paid in India. This is the mechanism that prevents the same capital gain from being taxed twice: India taxes the Indian-source gain at 12.5%, and the residence country grants a credit for that Indian tax against its own liability. The credit is a relief, not an exemption, and it is capped at the residence country's own tax on that income.

The practical paperwork is unforgiving. To claim the lower DTAA withholding rate under Section 195, an NRI must furnish a Tax Residency Certificate from the country of residence together with Form 10F filed electronically on the income-tax portal. Without these, the payer is obliged to deduct at the higher domestic rate, and the NRI must wait until the annual return to reclaim the difference. For UAE residents in particular, the treaty's Tax Residency Certificate condition requires proof of a genuine UAE establishment, a point the treaty notes explicitly.

Repatriation Mechanics

This is where the resident-versus-NRI distinction becomes concrete. A resident uses LRS to send up to USD 250,000 out; an NRI uses a different set of accounts to bring money back. The three NRI banking instruments each carry their own repatriation rule, and choosing the wrong one is an expensive mistake.

The NRE account holds money earned abroad, its interest is exempt from Indian income tax, and both principal and interest are fully repatriable, as covered in our explainer on NRE accounts and full repatriation. The FCNR(B) deposit lets an NRI hold the balance in foreign currency to sidestep rupee depreciation, and it too is fully repatriable, a structure we detailed in our piece on FCNR(B) deposits and currency risk.

The NRO account is the one with the cap. Indian income such as rent, dividends and the proceeds of selling Indian property flows into the NRO account, and an NRI may repatriate up to USD 1 million per financial year from it after meeting the tax and documentation conditions, as we explained in detail in our article on the NRO USD 1 million repatriation limit. The mechanics require Form 15CA and a chartered accountant's Form 15CB certifying that applicable taxes have been paid. Our repatriation calculator helps map out how much of a given balance can move within the USD 1 million annual ceiling. The symmetry is worth holding in mind: a resident sends out up to USD 250,000 under LRS, while an NRI brings back up to USD 1 million from NRO, plus unlimited repatriation from NRE and FCNR(B) accounts.

One transitional rule catches people who change status. On becoming an NRI, existing resident savings and fixed-deposit accounts must be redesignated as NRO accounts, and resident holdings cannot continue under LRS. Conversely, returning Indians lose access to fresh NRE and FCNR(B) credits once they become resident again, though existing FCNR(B) deposits may run to maturity per RBI rules.

FAQ

Can an NRI remit USD 250,000 a year under LRS?

No. The LRS under RBI Master Direction No. 7/2015-16 is reserved for resident individuals. The day your residential status becomes NRI, the LRS window closes. An NRI instead repatriates up to USD 1 million per financial year from an NRO account and freely from NRE and FCNR(B) accounts.

Does the USD 250,000 limit cover both my spending and my investments abroad?

Yes. The single USD 250,000 ceiling per financial year covers permitted current account transactions (travel, education, medical care, gifts, maintenance of relatives) and permitted capital account transactions (overseas shares, property and deposits) combined, and it is reduced by amounts already remitted in the same April-to-March year.

Are my capital gains on Indian shares exempt because I live in the USA or UAE?

No. India retains taxing rights over Indian-source capital gains. Under both the India-USA and India-UAE treaties, long-term gains are taxable in India at 12.5% plus surcharge and 4% cess. Your country of residence then grants a foreign tax credit for the Indian tax under Article 24, which is relief, not exemption.

What documents reduce the TDS on my Indian income?

Under Section 195 of the Income-tax Act 1961, furnishing a valid Tax Residency Certificate and Form 10F lets the payer apply the lower of the Act rate or the DTAA rate. Without them, tax is deducted at the higher domestic rate and you must reclaim the excess by filing an Indian return.

How much can I repatriate from my NRO account?

An NRI may repatriate up to USD 1 million per financial year from an NRO account after paying applicable Indian taxes and filing Form 15CA along with a chartered accountant's Form 15CB. NRE and FCNR(B) balances, by contrast, are fully repatriable without this annual cap.

What happens to my LRS investments if I move back to India?

Investments already made abroad under LRS may be held, reinvested or repatriated. The RBI requires that foreign income or sale proceeds not reinvested be repatriated to India within 180 days, per Master Direction No. 7/2015-16. On becoming resident again, you can no longer make fresh NRE or FCNR(B) credits, though existing FCNR(B) deposits may run to maturity.