Master Direction — Liberalised Remittance Scheme (LRS) USD 250,000 (Updated Sep 06, 2024)

This Master Direction consolidates RBI instructions on the Liberalised Remittance Scheme (LRS). It describes who may use the scheme, the current limit (USD 250,000 per financial year), permitted purposes, documentation requirements (including Form A2 and PAN), prohibitions and operational points for Authorised Persons (including FFMCs and AD banks). It also notes subsequent updates and related reporting requirements.

What the document is about

The Direction sets out the scope and operational rules for LRS. Under LRS, resident individuals (including minors) may freely remit up to USD 250,000 per Financial Year (April–March) for permitted current or capital account purposes or a combination thereof. The Master Direction also consolidates RBI clarifications and amendments up to the latest update.

Key requirements and rules (plain language)

• Who can use LRS: Resident individuals only (including minors). NOT available to corporates, firms, HUFs, trusts, etc.
• Limit: USD 250,000 per financial year per individual. This limit covers all permitted current and capital account remittances combined.
• Permitted purposes: Private visits, gift/donation, education, medical treatment, employment, emigration, business trips, maintenance of relatives abroad, opening/holding foreign currency accounts abroad, certain capital transactions (including acquisition of immovable property abroad and overseas investment activities as per Overseas Investment Rules/Regulations/Directions), loans to NRI relatives (per Companies Act definition of relative).
• Minors: Form A2 must be countersigned by the minor’s natural guardian.
• Documentation: Resident must submit Form A2 (Annex) and provide PAN—PAN is mandatory for all LRS remittances.
• Family consolidation: Remittances can be consolidated for family members subject to each individual complying with LRS. Clubbing of capital-account remittances by other family members is not allowed unless they are co-owners/co-partners.
• No bank credit for LRS: Banks must not extend credit facilities to resident individuals to facilitate capital account remittances under LRS.
• Prohibitions: Transactions prohibited under FEMA (Schedule I) or restricted under Schedule II are not allowed. Remittances to countries on FATF non-cooperative lists or to persons/entities flagged by RBI for terrorism risk are prohibited.
• IFSC accounts: Resident individuals may remit to and open foreign currency accounts in International Financial Services Centres (IFSCs) for permissible LRS purposes. Domestic transactions between residents through such FCA in IFSCs are not permitted.
• Travellers & DDs: LRS can be used to issue demand drafts in the individual’s name or beneficiary’s name for permissible purposes (self-declaration required). Tour-related expenses are subsumed within the LRS limit.

Practical action points for a money changer / FFMC

1. Verify customer eligibility: ensure customer is a resident individual (not a company/firm/HUF/trust). For minors, obtain guardian countersignature on Form A2.
2. Collect mandatory documents before remittance: completed Form A2 (as per Annex), valid PAN (mandatory), KYC / identity and address proof as per usual AML/KYC norms.
3. Record the designated AD branch: the resident must designate the AD branch through which all LRS remittances will be made — record this in your files.
4. Check cumulative limit: confirm the customer’s total remittances in the current Financial Year do not exceed USD 250,000 across all permitted purposes. If remittance exceeds the limit, advise that RBI prior approval is required.
5. Prohibit credit: do not provide loans, overdrafts or other credit to enable LRS capital remittances.
6. Screen sanctions and FATF lists: before processing, ensure beneficiary country and counterparty are not on FATF non-cooperative lists and not on RBI-advised prohibited lists (e.g., terrorism-related lists).
7. Accept travel/service aggregates: when issuing foreign currency or DDs for travel-related expenses, ensure these are included under the customer’s LRS limit and retain supporting declarations/receipts.
8. IFSC transactions: if facilitating remittances to IFSC FCAs, verify purpose is LRS-permitted and ensure customers understand they cannot use those FCAs for domestic transactions with other residents.
9. Maintain records and reporting: retain Form A2 and supporting documents; follow RBI reporting requirements as per the Master Direction on Reporting.
10. Train front-line staff: update staff on mandatory PAN submission, Form A2 procedures, FATF screening, and the USD 250,000 FY aggregation rule.

Notes and compliance reminders

• All tour and travel related costs (transport, accommodation, Euro Rail passes, etc.) are included within the LRS limit.
• If a customer needs amounts > USD 250,000 in a FY, advise them to apply to RBI for prior approval — do not process beyond the limit without such approval.
• Keep updated with RBI circulars/amendments and the Master Direction on Reporting for any procedural or reporting changes.

This summary reflects the Master Direction text and related inserts up to the update referenced. Follow your institution’s compliance unit and the RBI’s Reporting Master Direction for detailed reporting formats and timelines.