Sending money abroad? Know remittance limits, tax rules & disclosure norms

Check the annual remittance limit, when tax is collected or deducted at source, and when you must disclose foreign assets

The Income Tax Department’s verification exercise covering 394 entities and 36 professionals over suspected irregularities in large overseas remittances has put the spotlight on how money sent abroad is monitored. While the exercise focuses on entities and professionals, it also serves as a reminder for individuals that overseas remittances are subject to a range of foreign exchange, tax and reporting rules. Resident Indians can send money abroad under the Liberalised Remittance Scheme (LRS) for several purposes, but they must comply with prescribed limits, documentation and tax obligations. Here are the key rules individuals need to know before they remit money overseas.

 

Who can remit?

 

LRS is available only to resident individuals. Corporates, partnership firms, Hindu undivided families (HUFs), trusts and other non-individual entities cannot remit money under the scheme.

 

“For LRS purposes, residential status is determined under the Foreign Exchange Management Act, 1999 (FEMA), and not under the Income-tax Act. Broadly, an individual is considered a person resident in India if they have stayed in India for more than 182 days during the preceding financial year, subject to certain exceptions,” says Riaz Thingna, partner, Grant Thornton Bharat.

 

The scheme is also available to minors. The LRS limit for a minor is separate from that of the parent or guardian, subject to the prescribed conditions.

 

LRS remittance limit

 

A resident individual can remit up to US$250,000 per financial year (April–March) under LRS for permitted current and capital account transactions, or a combination of both. This is an overall aggregate limit across all authorised dealer banks, foreign currencies and permitted purposes.

 

The US$250,000 LRS limit covers both current and capital account transactions.

 

“Current account transactions include overseas travel, gifts/donations, employment, emigration, maintenance of relatives, business trips, medical treatment and education, while capital account transactions include opening foreign currency accounts abroad, overseas direct investments (ODI) and overseas portfolio investments (OPI), buying immovable property abroad and extending loans to eligible non-resident Indian (NRI) relatives, subject to prescribed conditions,” says Thingna.

 

Permitted purposes 

 

Resident individuals can use the LRS for education, medical treatment, business or personal travel, maintenance of relatives abroad, and gifts or donations. For education and medical treatment, banks may permit remittances above the US$250,000 limit based on supporting estimates. Up to US$250,000 can also be remitted for an attendant accompanying a patient.

 

“The LRS can also be used for overseas investments, including ODI, OPI, opening foreign currency accounts and buying property abroad, subject to applicable rules. Up to US$250,000 per financial year may be remitted as gifts to individuals or donations to organisations outside India,” says Thingna.

 

Documents needed 

 

Before making an overseas remittance, an individual must submit Form A2/application-cum-declaration to the authorised dealer (AD) bank and provide details such as Permanent Account Number (PAN), amount, purpose, source of funds, beneficiary and remittances already made during the financial year. PAN is mandatory, while the bank must complete know-your-customer (KYC) checks and comply with applicable anti-money laundering (AML) requirements.

 

“The remitter must declare the purpose and purpose code, account to be debited and beneficiary details, and confirm that the transaction is within the LRS limit and is not for a prohibited purpose. Depending on the transaction and the bank’s KYC/AML assessment, supporting documents such as bank statements, income or tax records and investment documents may also be required,” says Abheet Sachdeva, partner, Nangia Global.

 

When does TCS apply?

 

Under Section 394(1) of the Income-tax Act, 2025 (erstwhile Section 206C(1G)), TCS applies when aggregate LRS remittances exceed ₹10 lakh in a tax year. From April 1, 2026, the rate is 2 per cent on the amount exceeding ₹10 lakh for education or medical treatment, while 20 per cent applies to the amount exceeding ₹10 lakh for other purposes. For overseas tour programme packages, TCS is 2 per cent on the entire amount, without the ₹10 lakh threshold.

 

“The ₹10 lakh threshold is combined across LRS remittances and does not apply separately to each purpose. TCS does not apply to education-related remittances funded through a loan from a specified financial institution,” says Sachdeva.

 

The tax collector deposits the TCS collected on an overseas remittance with the government. The amount is available as a tax credit to the resident individual who made the remittance.

 

“The tax collector must issue a TCS certificate in Form No. 133 (erstwhile Form 27D under the Income-tax Act, 1961), as prescribed under Section 395(4)(a) of the Income-tax Act, 2025. The certificate contains details of the tax collected and enables the taxpayer to claim the corresponding TCS credit,” says Sachdeva.

 

When does TDS apply?

 

TCS under Section 394 applies to LRS remittances exceeding ₹10 lakh in a tax year, while TDS under Section 393 applies separately when the underlying payment to a non-resident is taxable in India. Form 145 is prescribed for specified payments to non-residents.

 

“For taxable payments exceeding ₹5 lakh, tax liability can be determined through an Assessing Officer’s certificate/order or a chartered accountant (CA) certificate in Form 146—these are alternative routes. Form 146 also covers the applicability of tax treaties. Where a double taxation avoidance agreement (DTAA) applies, the taxpayer can claim the more beneficial treatment under domestic law or the treaty, subject to eligibility and required documents such as a Tax Residency Certificate,” says Shubham Jain, director, SVAS Business Advisors LLP.

 

Consequences of violating rules

 

Violating FEMA provisions—such as exceeding the US$250,000 LRS limit, making prohibited remittances or providing incorrect information—can attract penalties of up to three times the amount involved, or ₹2 lakh where the amount is not quantifiable. Continuing contraventions may attract an additional penalty of up to ₹5,000 per day.

 

Jain notes that for TDS defaults, interest can apply at 1 per cent per month for failure to deduct and 1.5 per cent for failure to deposit tax after deduction. Business expenditure may also be disallowed if applicable TDS requirements are not met. Delayed ODI reporting can attract a Late Submission Fee, while eligible FEMA contraventions may be compounded under Section 15.

 

Remittances must align with income

 

The remittance should have a legitimate, identifiable source of funds supported by documents such as bank statements, income-tax returns (ITRs), loan or gift records and investment documents. A remittance that exceeds one’s annual income is not, by itself, unlawful or taxable, as the funds could come from accumulated savings, sale proceeds, loans or genuine gifts.

 

“However, a significant unexplained disparity can trigger tax scrutiny and source-of-funds verification. Failure to establish the source or disclose foreign assets or income, where required, can lead to tax additions, penalties and, depending on the circumstances, FEMA or foreign-asset consequences,” says Jain.

 

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The writer is a Delhi-based independent journalist

 

Compliances after acquiring foreign assets

 

•    File annual performance report by December 31 each year until disinvestment

•    Report disinvestment within prescribed timelines

•    Repatriate dues and proceeds to India within FEMA timelines

•    Delayed reporting may attract a Late Submission Fee

•    Ordinarily resident taxpayers must disclose foreign assets and income in schedules FA and FSI 

•    Claim foreign tax relief through Schedule TR

•    FA, FSI and TR schedules don’t apply to RNORs and non-residents