Liberalised Remittance Scheme: Forex Facilities for Individuals (FEFI)

The liberalised remittance scheme is the single most important window through. A resident individual in India can legally send money abroad. And it sits at the heart of the IIBF Forex Facilities for Individuals (FEFI) certification. Introduced by the Reserve Bank of India under the Foreign Exchange Management Act.

1999. The liberalised remittance scheme lets every resident individual. Including minors.

Remit up to a prescribed annual limit for a basket of permitted current. Capital account purposes. For bankers handling retail forex.

A precise grasp of this scheme. Its limits. And the tax collected at source on it is essential.

Because almost every individual forex query at a branch counter maps back to these rules.

What the Liberalised Remittance Scheme Covers

Under the liberalised remittance scheme, a resident individual may freely remit up to USD 250,000 per financial year (April to March) for any permissible current or capital account transaction, or a combination of both. The facility is available to all resident individuals, including minors, in which case the form must be countersigned by the minor's natural guardian. It is not available to corporates, partnership firms, HUFs, trusts or other entities. Remittances can be made for purposes such as private travel, gifts and donations, employment abroad, emigration, maintenance of close relatives, education and medical treatment, and on the capital account for opening foreign currency accounts overseas, purchasing property abroad, and investing in shares, debt instruments and units of mutual funds. To use the facility, the individual must have a PAN and must have maintained the bank account with the remitting bank for at least one year; where the account is newer, the bank must complete due diligence and Know Your Customer checks before processing. Importantly, the scheme cannot be used for prohibited purposes such as remittance for margin trading, lottery or gambling, or to countries identified as non-cooperative by the Financial Action Task Force. Bankers should treat the annual cap as a consolidated ceiling across all authorised dealers. The official master direction governing this facility is published on the Reserve Bank of India website, and you can track current policy rates on our RBI rates tracker.

Permissible Current and Capital Account Transactions

FEMA classifies every foreign-exchange dealing as either a current account transaction or a capital account transaction, and the liberalised remittance scheme spans both. Current account transactions are those that do not alter the assets or liabilities of the remitter outside India — they cover day-to-day needs such as travel, education fees, medical expenses, maintenance of relatives, and business travel. Many of these are freely permitted, while a few are restricted by schedules to the Current Account Transaction Rules and require prior approval. Capital account transactions, by contrast, change the remitter's overseas assets or liabilities; these include acquiring immovable property abroad, holding foreign securities, and opening and maintaining foreign currency accounts with overseas banks. For a resident individual, the LRS limit acts as the umbrella under which most of these capital-account activities are conducted without separate RBI permission. A key examination point is that facilities such as forex for travel, gifts and education available under earlier schedules are now subsumed within the overall annual ceiling, so a customer who has exhausted the limit on overseas investment cannot separately claim a fresh travel quota in the same year. Authorised dealer banks must obtain a declaration in Form A2 and ensure the cumulative total across purposes stays within the cap. Understanding this current-versus-capital split is frequently tested and underpins every counter conversation about individual forex. Reinforce it with structured study on the CAIIB and forex course and time-bound practice on our mock tests.

Forex for Travel, Education and Medical Treatment

The most common branch requests under the scheme relate to travel. Education and medical treatment, and each has its own practical nuances. For private and business travel (other than to Nepal and Bhutan).

Foreign exchange can be drawn within the overall annual limit. And a traveller may carry up to USD 3,000 in cash per visit. With the balance issued as a forex card or travellers cheques.

For studies abroad. Remittances toward tuition. Living expenses are permitted up to the LRS ceiling.

If the institution demands more. The excess can be released against documentary evidence such as an invoice or admission letter from the foreign university. For medical treatment abroad.

An individual may remit up to the annual limit. And amounts beyond it can be released on the strength of an estimate from a hospital or doctor in India or overseas. A patient may also carry an additional sum for maintenance of an accompanying attendant.

In each case the authorised dealer must satisfy itself about the bona fides of the transaction. Collect the Form A2 declaration, and verify the PAN. These purpose-specific facilities make individual forex a high-frequency.

Exam-relevant topic for FEFI candidates. And getting the documentation right protects both the customer. The bank from compliance lapses.

TCS on LRS Remittances

Tax Collected at Source has become a defining feature of the liberalised remittance scheme. The Finance Act amendments. And FEFI candidates must know the thresholds. For most LRS remittances.

No TCS applies on the first slab of spending in a financial year. Beyond. A percentage is collected by the authorised dealer at the point of remittance.

Reflected in the remitter's Form 26AS. Where it can be claimed as a credit against income tax. Remittances for the purpose of overseas education or medical treatment attract a concessional.

Lower rate above the threshold. And where the education remittance is funded by an education loan from a notified financial institution. An even more favourable treatment applies.

Remittances for other purposes such as overseas investment. Gifts or foreign travel arranged as a package attract a higher rate once the annual threshold is crossed. The bank.

As the collecting agent. Is responsible for deducting the correct amount. Depositing it with the government, and issuing the relevant certificate.

Because rates and thresholds are periodically revised by the Ministry of Finance. Bankers should always confirm the current figures against official notifications rather than relying on memory. For exam preparation.

Focus on the principle — different purposes carry different TCS treatment. And education and medical remittances are favoured. Rather than on memorising numbers that change.

Frequently Asked Questions

Conclusion

The liberalised remittance scheme is the foundation of every individual forex facility a banker handles, tying together the FEMA distinction between current and capital account transactions, the USD 250,000 annual cap, purpose-specific rules for travel, education and medical needs, and the TCS regime layered on top. Learn it as one connected framework rather than scattered limits, and FEFI questions become far easier to answer. Ready to convert this into marks? Attempt a full-length FEFI mock test and explore more exam-ready notes on our banking exam blog today.