India remittance rules: LRS limits and tax regulations

Indian residents are subject to specific regulations and tax implications when sending or receiving money from abroad. Under the Liberalised Remittance Scheme (LRS), an Indian resident can transfer up to $250,000 per financial year for purposes such as education, medical treatment, travel, business, or investments.

Tax Collected at Source (TCS) applies to remittances exceeding ₹10 lakh. Starting April 1, 2026, a 2% TCS rate will apply to amounts exceeding this threshold for education and medical expenses, while a 20% rate applies to other categories.

Regarding inward remittances, money received in India from lineal descendants, such as children living abroad, is generally not taxable as a gift. However, recipients must establish the donor’s identity and the source of funds through legitimate banking channels. While the gift itself may be tax-free, any income generated from that money, such as rental income or capital gains, remains subject to applicable tax laws. Compliance with FEMA rules and proper documentation, including RBI purpose codes and Foreign Inward Remittance Certificates (FIRC), is essential.