Liberalised Remittance Scheme
The Liberalised Remittance Scheme (LRS) is a key policy by the Reserve Bank of India (RBI) that allows Indian residents to remit funds abroad. As of 2025, the annual limit for remittance is set at USD 250,000. This scheme facilitates various overseas payments including education, medical treatment, travel, and investments. Recent amendments in the 2025 budget increased the tax collection at source (TCS) free limit from ₹7 lakh to ₹10 lakh for most transactions.
About the Liberalised Remittance Scheme
The LRS enables residents to send money abroad for specific purposes. These include education fees, medical expenses, travel, gifts, and investments. The scheme aims to simplify the process of remitting funds and to promote international financial transactions.
Recent Policy Changes
Recently, the RBI is reviewing the LRS due to outflows of around USD 30 billion in the previous financial year. The review focuses on the legal framework, annual limits, and permitted purposes. The RBI is committed to rationalising the scheme to enhance the use of the Indian rupee in international transactions.
Tax Collection at Source (TCS) Adjustments
The 2025 budget raised the TCS-free limit for remittances. This adjustment is designed to ease the financial burden on individuals remitting funds. The increase from ₹7 lakh to ₹10 lakh allows more transactions to occur without the additional tax.
Rupee Internationalisation Efforts
The RBI is actively working on the internationalisation of the rupee. This includes reviewing existing regulations on external commercial borrowings and cross-border settlements. The aim is to facilitate trade in local currencies and reduce dependency on foreign currencies.
Cross-Border Settlement Agreements
To promote rupee liquidity in international transactions, the RBI has signed local currency settlement agreements with various countries. These agreements enable trade invoicing and settlements in local currencies, enhancing the use of the rupee in international trade.
Technological Integration in Payments
The RBI is supporting the integration of payment systems such as UPI QR codes and RuPay cards with other countries. This initiative aims to streamline cross-border payments and promote the use of the rupee internationally.
Future Directions
The RBI’s ongoing reviews and reforms are part of a broader strategy to enhance the resilience of the financial sector. This includes addressing risks from technology, cyber threats, and climate change. The RBI aims to create a more robust regulatory framework to support these objectives.
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