A complete guide to the LRS scheme and foreign investments
More Indians today are looking beyond domestic borders to grow their wealth. Whether it’s buying US stocks, investing in overseas real estate, or funding a child’s education abroad, global financial access is no longer limited to a select few. What's helping fuel this shift is a supportive regulatory setup—one that makes international investing possible while still protecting individual finances.
But navigating this space isn’t always straightforward. How do you legally move money abroad? What are the limits? Are you even allowed to invest overseas? These are common doubts that stop many from taking the next step. India’s foreign exchange regulations, though designed to maintain economic balance, can feel complex when you're just starting to explore offshore options.
That’s where the LRS scheme comes in. Short for the Liberalised Remittance Scheme, it’s an initiative by the Reserve Bank of India that gives Indian residents the ability to remit money abroad up to a specified limit every financial year. The LRS scheme has become the go-to pathway for individuals who want to legally invest, study, or even travel overseas using their own income.
In this blog, we’ll break down everything you need to know about the Liberalized Remittance Scheme: what it is, how it works, how you can start investing abroad under it, why it matters for your global investment strategy, and what limitations you need to keep in mind. If you’re curious about expanding your financial horizon, keep reading—you’ll find clear answers and practical tips that can help you make informed decisions.
Understanding the LRS scheme and how it works
What is the Liberalised Remittance Scheme?
The Liberalised Remittance Scheme (LRS) is a framework set by the Reserve Bank of India in 2004. It allows resident individuals to freely remit money abroad for permitted current or capital account transactions. Under the liberalised remittance scheme, you can send up to USD 250,000 per financial year without needing RBI approval.
This scheme is part of India's gradual foreign exchange liberalisation. Before LRS, sending money overseas involved complex paperwork and restrictions. But with LRS, individual Indian residents now have a defined route to fund international education, travel, gifts, and more importantly—foreign investments.
Purpose and uses under LRS
The liberalised remittance scheme permits a wide range of foreign currency uses. Aside from investing, this includes spending on your child’s college tuition abroad, booking international vacations, or even gifting money to family overseas.
- Investing in foreign stocks, mutual funds, ETFs, and startups
- Purchasing property abroad (non-repatriable and within RBI rules)
- Paying for international education and living expenses
- Funding medical treatment outside India
- Supporting family members with financial gifts
However, certain uses like gambling or buying lottery tickets are strictly prohibited. We'll cover more on the restrictions in a later section.
Who is eligible to use LRS?
The scheme is designed only for resident individuals. If you’re living in India and earning locally, you likely qualify. But there are limits.
- LRS is not available to NRIs, corporates, partnership firms, or HUFs
- You must complete basic KYC and have a valid PAN number
- Banks process your request based on your residential status and documentation
So, if you're an Indian resident looking to invest or spend abroad legally, the LRS scheme gives you a clear, RBI-backed route. Next, let’s look at how you can actually invest under this scheme.
How to invest abroad under the LRS scheme
Types of investments allowed
Under the liberalised remittance scheme LRS, you can invest in a variety of overseas assets. This offers flexibility for building a diversified global portfolio. Most commonly, individuals use LRS to buy:
- Listed foreign equities and ETFs via platforms like Winvesta or Interactive Brokers
- Units of mutual funds and bonds registered abroad
- Shares in foreign startups or companies under private placements
- Property outside India (as long as it’s non-repatriable)
You can’t invest in leveraged derivative products, lottery-based products, or margin trading platforms. But for long-term, direct ownership assets, the scheme creates safe legal access. Always check if the investment vehicle is permitted by the RBI under LRS.
How to remit funds under LRS
To send money under LRS, you’ll go through an authorised dealer bank (usually your main savings bank). Many now offer online portals for LRS remittances. Here’s how it usually works:
- Log in to your bank’s online platform or visit a branch
- Fill Form A2, stating the purpose as investment
- Submit KYC documents and PAN card
- Enter the beneficiary’s foreign bank details and transfer amount
Banks then process the remittance via SWIFT to the foreign institution. Some investment platforms, like Winvesta, directly integrate with banks to streamline the process, reducing paperwork and delays for recurring investors.
Compliance and documentation
Investing overseas under the LRS scheme begins with having your documentation in order. Banks require:
- Permanent Account Number (PAN)
- Completed Form A2 with your investment purpose mentioned
- Updated KYC as per your bank’s requirements
You may also need to declare the source of funds and confirm you're within the USD 250,000 annual limit. Some banks conduct additional checks, such as income verification or past remittance history.
Maintaining proper records helps with tax reporting and avoids issues with the RBI. So, staying organised ensures your foreign investments under the liberalised remittance scheme LRS stay compliant and hassle-free.
Why the LRS scheme is crucial for global investors
Facilitating portfolio diversification
One of the biggest strengths of the liberalised remittance scheme LRS is how it enables Indian investors to diversify their portfolios. You're no longer tied to domestic market cycles, currency performance, or sector availability. Investing abroad allows exposure to global sectors like technology, clean energy, and healthcare—many of which are underrepresented in Indian markets.
For example, buying U.S.-listed ETFs offers access to globally recognised companies like Apple, Google, and Tesla. It also spreads your risk across different economies and currencies. So even if the Indian market underperforms, global assets may balance it out. Many investors use LRS to allocate a portion of their long-term assets overseas, aiming for stability and improved returns.
Strengthening India’s financial openness
The liberalised remittance scheme LRS is also part of a broader push by the RBI to gradually globalise India’s capital flows. By allowing individuals to move up to USD 250,000 annually abroad, the scheme encourages integration with global financial systems. This measured liberalisation builds trust with foreign markets without draining domestic reserves.
It also reduces dependency on indirect routes or grey channels by offering a transparent, regulated path for outward investment. Over time, this supports a more balanced and open capital account—a key step toward India being treated as a mature economy in global investing circles. The more Indian residents invest abroad through legal channels, the more credibility the system gains.
Growing investor interest and awareness
Awareness and use of the LRS scheme are rising quickly. Platforms like Winvesta, INDmoney, and Vested have simplified access to foreign markets. You no longer need large sums or complex corporate structures to buy global assets. Even retail investors can begin with amounts as low as $100.
In FY 2022–23, outward remittances under LRS for investments alone crossed $1.6 billion—almost double compared to two years prior. Clearly, more Indians see global investing as practical and necessary. This reflects not just wealth growth but a shift in mindset. People want more control over what, where, and how they invest.
Limitations and regulatory considerations of the LRS scheme
Annual limits and prohibitions
While the liberalised remittance scheme of RBI provides significant access to global investments, there are important restrictions to keep in mind. The most notable is the annual remittance ceiling of USD 250,000 per individual per financial year. This limit applies to the total of all permitted uses under the LRS, not just investments.
Certain categories are strictly prohibited. For example, you can't use LRS funds for margin trading, derivatives, or leveraged instruments abroad. Overseas lottery, betting, and gambling activities are also not allowed. Plus, while you can invest in foreign real estate, buying property with the intent of repatriation or commercial use could land outside the permissible scope.
- Limit: $250,000 per person per financial year
- Prohibited: Margin trading, lottery, gambling, derivatives
- Real estate: Allowed but subject to end-use and repatriation rules
Reporting and tax implications
Investing under the LRS means you must comply with both RBI and income tax regulations. All remittances require your PAN and the filing of Form A2 along with an LRS declaration. Banks report these transactions to the RBI.
From a tax perspective, foreign capital gains and income (like interest or dividends) must be declared in your Indian tax return. If your annual foreign transfers exceed INR 7 lakh, a tax collected at source (TCS) of 5% applies—although it can be claimed as a credit while filing ITR. So, while the LRS offers access, it also requires diligent compliance.
Understanding these limitations helps you plan better and stay on the right side of regulations. Up next, we address some common questions investors have around the LRS scheme to make things even clearer.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
More Indians today are looking beyond domestic borders to grow their wealth. Whether it’s buying US stocks, investing in overseas real estate, or funding a child’s education abroad, global financial access is no longer limited to a select few. What's helping fuel this shift is a supportive regulatory setup—one that makes international investing possible while still protecting individual finances.
But navigating this space isn’t always straightforward. How do you legally move money abroad? What are the limits? Are you even allowed to invest overseas? These are common doubts that stop many from taking the next step. India’s foreign exchange regulations, though designed to maintain economic balance, can feel complex when you're just starting to explore offshore options.
That’s where the LRS scheme comes in. Short for the Liberalised Remittance Scheme, it’s an initiative by the Reserve Bank of India that gives Indian residents the ability to remit money abroad up to a specified limit every financial year. The LRS scheme has become the go-to pathway for individuals who want to legally invest, study, or even travel overseas using their own income.
In this blog, we’ll break down everything you need to know about the Liberalized Remittance Scheme: what it is, how it works, how you can start investing abroad under it, why it matters for your global investment strategy, and what limitations you need to keep in mind. If you’re curious about expanding your financial horizon, keep reading—you’ll find clear answers and practical tips that can help you make informed decisions.
Understanding the LRS scheme and how it works
What is the Liberalised Remittance Scheme?
The Liberalised Remittance Scheme (LRS) is a framework set by the Reserve Bank of India in 2004. It allows resident individuals to freely remit money abroad for permitted current or capital account transactions. Under the liberalised remittance scheme, you can send up to USD 250,000 per financial year without needing RBI approval.
This scheme is part of India's gradual foreign exchange liberalisation. Before LRS, sending money overseas involved complex paperwork and restrictions. But with LRS, individual Indian residents now have a defined route to fund international education, travel, gifts, and more importantly—foreign investments.
Purpose and uses under LRS
The liberalised remittance scheme permits a wide range of foreign currency uses. Aside from investing, this includes spending on your child’s college tuition abroad, booking international vacations, or even gifting money to family overseas.
- Investing in foreign stocks, mutual funds, ETFs, and startups
- Purchasing property abroad (non-repatriable and within RBI rules)
- Paying for international education and living expenses
- Funding medical treatment outside India
- Supporting family members with financial gifts
However, certain uses like gambling or buying lottery tickets are strictly prohibited. We'll cover more on the restrictions in a later section.
Who is eligible to use LRS?
The scheme is designed only for resident individuals. If you’re living in India and earning locally, you likely qualify. But there are limits.
- LRS is not available to NRIs, corporates, partnership firms, or HUFs
- You must complete basic KYC and have a valid PAN number
- Banks process your request based on your residential status and documentation
So, if you're an Indian resident looking to invest or spend abroad legally, the LRS scheme gives you a clear, RBI-backed route. Next, let’s look at how you can actually invest under this scheme.
How to invest abroad under the LRS scheme
Types of investments allowed
Under the liberalised remittance scheme LRS, you can invest in a variety of overseas assets. This offers flexibility for building a diversified global portfolio. Most commonly, individuals use LRS to buy:
- Listed foreign equities and ETFs via platforms like Winvesta or Interactive Brokers
- Units of mutual funds and bonds registered abroad
- Shares in foreign startups or companies under private placements
- Property outside India (as long as it’s non-repatriable)
You can’t invest in leveraged derivative products, lottery-based products, or margin trading platforms. But for long-term, direct ownership assets, the scheme creates safe legal access. Always check if the investment vehicle is permitted by the RBI under LRS.
How to remit funds under LRS
To send money under LRS, you’ll go through an authorised dealer bank (usually your main savings bank). Many now offer online portals for LRS remittances. Here’s how it usually works:
- Log in to your bank’s online platform or visit a branch
- Fill Form A2, stating the purpose as investment
- Submit KYC documents and PAN card
- Enter the beneficiary’s foreign bank details and transfer amount
Banks then process the remittance via SWIFT to the foreign institution. Some investment platforms, like Winvesta, directly integrate with banks to streamline the process, reducing paperwork and delays for recurring investors.
Compliance and documentation
Investing overseas under the LRS scheme begins with having your documentation in order. Banks require:
- Permanent Account Number (PAN)
- Completed Form A2 with your investment purpose mentioned
- Updated KYC as per your bank’s requirements
You may also need to declare the source of funds and confirm you're within the USD 250,000 annual limit. Some banks conduct additional checks, such as income verification or past remittance history.
Maintaining proper records helps with tax reporting and avoids issues with the RBI. So, staying organised ensures your foreign investments under the liberalised remittance scheme LRS stay compliant and hassle-free.
Why the LRS scheme is crucial for global investors
Facilitating portfolio diversification
One of the biggest strengths of the liberalised remittance scheme LRS is how it enables Indian investors to diversify their portfolios. You're no longer tied to domestic market cycles, currency performance, or sector availability. Investing abroad allows exposure to global sectors like technology, clean energy, and healthcare—many of which are underrepresented in Indian markets.
For example, buying U.S.-listed ETFs offers access to globally recognised companies like Apple, Google, and Tesla. It also spreads your risk across different economies and currencies. So even if the Indian market underperforms, global assets may balance it out. Many investors use LRS to allocate a portion of their long-term assets overseas, aiming for stability and improved returns.
Strengthening India’s financial openness
The liberalised remittance scheme LRS is also part of a broader push by the RBI to gradually globalise India’s capital flows. By allowing individuals to move up to USD 250,000 annually abroad, the scheme encourages integration with global financial systems. This measured liberalisation builds trust with foreign markets without draining domestic reserves.
It also reduces dependency on indirect routes or grey channels by offering a transparent, regulated path for outward investment. Over time, this supports a more balanced and open capital account—a key step toward India being treated as a mature economy in global investing circles. The more Indian residents invest abroad through legal channels, the more credibility the system gains.
Growing investor interest and awareness
Awareness and use of the LRS scheme are rising quickly. Platforms like Winvesta, INDmoney, and Vested have simplified access to foreign markets. You no longer need large sums or complex corporate structures to buy global assets. Even retail investors can begin with amounts as low as $100.
In FY 2022–23, outward remittances under LRS for investments alone crossed $1.6 billion—almost double compared to two years prior. Clearly, more Indians see global investing as practical and necessary. This reflects not just wealth growth but a shift in mindset. People want more control over what, where, and how they invest.
Limitations and regulatory considerations of the LRS scheme
Annual limits and prohibitions
While the liberalised remittance scheme of RBI provides significant access to global investments, there are important restrictions to keep in mind. The most notable is the annual remittance ceiling of USD 250,000 per individual per financial year. This limit applies to the total of all permitted uses under the LRS, not just investments.
Certain categories are strictly prohibited. For example, you can't use LRS funds for margin trading, derivatives, or leveraged instruments abroad. Overseas lottery, betting, and gambling activities are also not allowed. Plus, while you can invest in foreign real estate, buying property with the intent of repatriation or commercial use could land outside the permissible scope.
- Limit: $250,000 per person per financial year
- Prohibited: Margin trading, lottery, gambling, derivatives
- Real estate: Allowed but subject to end-use and repatriation rules
Reporting and tax implications
Investing under the LRS means you must comply with both RBI and income tax regulations. All remittances require your PAN and the filing of Form A2 along with an LRS declaration. Banks report these transactions to the RBI.
From a tax perspective, foreign capital gains and income (like interest or dividends) must be declared in your Indian tax return. If your annual foreign transfers exceed INR 7 lakh, a tax collected at source (TCS) of 5% applies—although it can be claimed as a credit while filing ITR. So, while the LRS offers access, it also requires diligent compliance.
Understanding these limitations helps you plan better and stay on the right side of regulations. Up next, we address some common questions investors have around the LRS scheme to make things even clearer.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
