LRS Permitted and Prohibited Purposes
LRS is purpose-based. Here is what the scheme allows, what it shuts out, and where candidates get it backwards.
LRS is purpose-based. A resident individual can send up to the annual limit, but only for purposes the scheme permits, and the AD bank checks the stated purpose on Form A2 before it releases foreign exchange.
This page lists those purposes in the two groups RBI uses, current account and capital account, then the uses the scheme shuts out. Most LRS questions in CCFE are a purpose question in disguise.
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Permitted Current Account Purposes
All draw on the same USD 250,000 annual LRS limit.
| Purpose | What it covers |
|---|---|
| Private visits | Travel abroad for any personal reason (Rule 3 bars drawing foreign exchange for travel to Nepal or Bhutan) |
| Gift or donation | To a person or organisation outside India |
| Going abroad for employment | Expenses of taking up a job overseas |
| Emigration | Amounts needed to settle in another country |
| Maintenance of close relatives abroad | Living expenses of relatives outside India |
| Business travel | Conferences, specialised training, seminars and similar trips |
| Medical treatment abroad | Treatment or check-up costs; an attendant accompanying the patient also has a limit of USD 250,000 |
| Studies abroad | Tuition, living costs and related expenses |
Three Purposes Can Exceed the Limit
For emigration, medical treatment and studies abroad, Schedule III of the Current Account Transactions Rules lets the individual draw more than the LRS limit if the country of emigration, the medical institution or the university requires it. Every other purpose stops at USD 250,000.
Permitted Capital Account Purposes
- check_circleOpening, holding and maintaining a foreign currency account with a bank outside India.
- check_circleAcquiring immovable property abroad.
- check_circleOverseas direct investment and overseas portfolio investment, under the Foreign Exchange Management (Overseas Investment) Rules, 2022 and its regulations.
- check_circleExtending loans, including rupee loans, to NRI relatives (a rupee loan is credited to the relative's NRO account, interest-free, with a minimum maturity of one year).
- check_circlePurchasing objects of art, subject to other laws such as the Foreign Trade Policy.
Is it allowed under LRS? Scenario questions. No signup.
What LRS Cannot Be Used For
- checkAnything prohibited under Schedule I of the Current Account Transactions Rules: lottery winnings, income from racing or riding, lottery tickets, banned magazines, football pools, sweepstakes and the rest of that list.
- checkAnything in Schedule II, which needs Government of India approval and is outside the scheme.
- checkMargins or margin calls to overseas exchanges or overseas counterparties.
- checkCapital account remittances to countries the FATF identifies as non-cooperative.
- checkRemittances, direct or indirect, to individuals and entities RBI has identified as posing a significant risk of terrorism.
- checkA foreign currency gift from one resident to another resident's foreign currency account abroad.
- checkForex trading on unauthorised electronic trading platforms; RBI has repeatedly warned that residents may deal in forex only with authorised persons and for permitted purposes.
How CCFE Tests This
Questions usually describe a remittance and ask whether LRS covers it. The traps run in both directions. Candidates wrongly exclude purposes that sound unusual but are permitted (objects of art, a foreign currency account abroad) and wrongly include ones that sound ordinary but are barred (a margin call on an overseas trading account).
The other recurring question is the FATF exclusion. It applies to capital account remittances, so a current account remittance to the same country is a different question. Read which side of the account the scenario sits on before choosing.
FAQs
Can I buy property abroad under LRS?expand_more
Yes. Acquiring immovable property outside India is a permitted capital account purpose, within the USD 250,000 annual limit.
Is forex or margin trading allowed under LRS?expand_more
No. Remittances for margins or margin calls to overseas exchanges or counterparties are not permitted, and RBI has warned residents against unauthorised forex trading platforms.
Can I send money to a relative abroad under LRS?expand_more
Yes. Maintenance of close relatives abroad and gifts to persons outside India are permitted current account purposes within the annual limit.
Which countries are excluded under LRS?expand_more
Capital account remittances are not allowed to countries identified by FATF as non-cooperative. Remittances to persons RBI flags for terrorism risk are barred altogether.
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