LRS Limit for Investing Abroad: $250,000, TCS and Form A2

Before a single dollar reaches your US brokerage account, two quiet pieces of paperwork happen at your bank: a Form A2 declaration and a purpose code. Most investors never read either — the platform's app fills them in. But when a remittance is held up, or an unexpected TCS debit shows up, the fix depends on knowing exactly what these forms say. Here is the whole machinery, in plain language.

What the Liberalised Remittance Scheme actually is

The Liberalised Remittance Scheme (LRS) is the RBI's umbrella permission that lets every resident individual — including minors, through a guardian — send up to $250,000 abroad per financial year for a list of permitted current and capital account transactions. Buying shares and exchange-traded funds on US exchanges is a permitted capital account use. (Source: RBI Master Direction on Liberalised Remittance Scheme; RBI LRS FAQ page)

The scheme runs on authorised dealer banks: the private or public sector banks licensed to deal in foreign exchange. When you fund Vested, INDmoney, Groww's global arm or Interactive Brokers India, your rupees actually move through one of these banks. The platform is the interface; the bank is the legal remitter.

Two dates matter. The limit resets every financial year — April to March. And the TCS threshold is also measured per financial year, per person. Neither carries forward: if you remit nothing this year, you cannot send $500,000 next year.

What you can and cannot do with LRS money

Allowed: buying listed stocks and ETFs, investing in overseas mutual funds, buying foreign property (separately restricted for some categories), funding education, medical treatment, gifts to relatives and maintenance of close relatives.

Not allowed: margin trading, buying on leverage, or anything your platform offers that involves borrowing at the foreign broker. RBI explicitly bars LRS-funded margin or leveraged positions. Overseas futures and options beyond hedging your existing foreign holdings are also out. FEMA penalties for misuse are real — up to three times the amount involved — so let the platform's compliance screen do its job rather than working around it.

How the $250,000 limit is actually counted

The limit is per remitter, per financial year, across all purposes and all banks. Your bank reports each LRS transaction through RBI's reporting system keyed to your PAN, so a Rs 5 lakh forex card load for a holiday eats into the same headroom as your stock remittance.

The counting unit is the US dollar equivalent. Whatever currency you actually remit — USD, or SGD while funding a Singapore brokerage — is converted and deducted from the $250,000 pot at the time of the transfer.

Families multiply. A couple remitting $250,000 each has $500,000 of combined headroom; add two adult children and the household touches $1 million. Parents can also remit under LRS on behalf of a minor child as the guardian. This is the simplest, fully legal way to scale the route beyond a single person's cap.

One more count-keeping rule: remittances you make for education (with or without a loan) and medical treatment also draw from the same $250,000. The TCS treatment differs, but the limit is one shared pool.

TCS on investment remittances: nil to Rs 10 lakh, 20% above

Section 206C(1G) of the Income-tax Act makes your bank collect tax at source on LRS remittances. The current structure, in force since 1 April 2025: no TCS on the first Rs 10 lakh of remittances in a financial year, and 20% on the amount above it for general purposes — which includes buying shares, bonds and property abroad. (Source: Income Tax Department TCS guidance on section 206C(1G))

The 20% applies only to the excess, not the whole amount. Remit Rs 10 lakh and you pay nothing. Remit Rs 15 lakh and the bank collects 20% of Rs 5 lakh — Rs 1 lakh — at the time of the transfer. Your broker receives the full Rs 14 lakh equivalent.

Special rates apply elsewhere in the table: remittances for education funded by a section 80E loan carry no TCS at all; self-financed education and medical treatment attract 2% above the threshold (reduced from 5% by the Finance Act 2026, effective 1 April 2026). Overseas tour packages also sit at 2% since that date. (Source: authorised dealer bank TCS rate schedules as advised by CBDT, effective 1 April 2026)

The most common panic in an investor's inbox: the bank debited Rs 1 lakh extra — where did it go? Nowhere lost. TCS is a pre-payment of your own tax. It appears in your Form 26AS and your annual information statement, and it adjusts against your total income-tax liability when you file your return. If your salary TDS already covers the year, the TCS comes back as a refund. It is a cash-flow cost — the money is locked from remittance date to refund date — not a permanent one.

Platforms keep reminding you to deposit in bulk for this reason. Twelve remittances of Rs 1 lakh each keep you TCS-free all year; a single Rs 20 lakh remittance locks up Rs 2 lakh until your refund lands. Plan the lumpsum in April if you expect to cross the threshold.

Purpose codes: the S-number on your remittance

Every outward remittance carries an RBI purpose code that tells the regulator why the money left the country. For an individual's LRS investment remittance, the code your bank files is S0023 — remittances made under the Liberalised Remittance Scheme by individuals. Bank rate-card tables group S0023 with remittances for bonds, shares, real estate and gifts. (Source: RBI purpose code list for outward remittances; authorised dealer bank TCS schedules)

You rarely choose the code yourself — the platform or the bank's form does. But it is worth checking, because a wrong code changes your TCS rate and can invite a FEMA query. Codes in the S0011 to S0013 range relate to loans to and from non-residents, not portfolio investment. If your bank statement shows a loan-related code on a stock purchase remittance, ask the bank to correct it.

The Form A2, step by step

Form A2 is the cumulative application-cum-declaration you submit for every purchase of foreign exchange. It is a FEMA document — it exists so that you, the remitter, declare the purpose and confirm you are within your entitlement. Your bank files it with the remittance; the platform usually pre-fills it and asks you to review, sign digitally and move on.

What it captures: your name and PAN, the amount and currency, the beneficiary's bank details (your brokerage account — IBAN or account number, SWIFT code, bank name and address), and the purpose of remittance with its code. For LRS, it also carries declarations — that the remittance complies with FEMA, is not for prohibited purposes such as margins or gambling, and that you have not exceeded your entitlement for the year.

The flow in practice: you add funds in the platform's app; it generates a request to your bank; you approve it through net banking; the bank debits your rupee account, converts at its rate, deducts TCS if you are past the threshold, files Form A2 and wires the dollars. First remittances to a new beneficiary can take a day or two while the bank validates the foreign account; subsequent ones are usually same-day.

Keep the A2 confirmation and the SWIFT copy in one folder. When you later sell and repatriate, your CA will want proof of the original remittance for the capital-gains cost base — and the Form 26AS entries for the TCS you are claiming.

Charges you will actually pay

Three costs sit between your rupee account and your dollar balance: the bank's foreign exchange conversion rate (a mark-up over the interbank rate, typically 0.5% to 2% depending on the bank and the arrangement), a flat wire or processing fee, and GST on the commission component. None of these is the TCS. Shop by total cost, not by headline fee — a bank that claims zero wire charges but adds a 1.5% mark-up is more expensive than the reverse on a Rs 5 lakh transfer.

Small print that catches people out

The entitlement is not a target. You cannot split a Rs 30 lakh lumpsum across 30 April-and-May remittances to dodge the threshold — the bank aggregates your remittances for the year before applying TCS, and artificially structured transactions invite scrutiny.

Gifting to relatives works, with a clubbing asterisk. You can remit under your own LRS and gift the dollars to a resident spouse, parent or adult child, who then invests. But income from investments funded by your gift to a spouse is clubbed with your income under section 64 of the Income-tax Act — the route moves the TCS, not the tax.

Minors: a guardian can remit under the child's own $250,000 entitlement, but income is clubbed with the parent's under section 64(1A) until the child turns 18.

And the reset date is 31 March, not a rolling year. Big-ticket plans are best executed in April, when the full-year headroom and the fresh Rs 10 lakh TCS-free band are both available.

Conclusion

LRS is not complicated — it is just poorly summarised. One limit ($250,000), one threshold (Rs 10 lakh), one code (S0023), one form (A2), and a tax that comes back when you file. Understand those five things once, and the remittance layer of US investing stops being a mystery.

This is educational content, not investment or tax advice — confirm your specific case with your bank and a qualified tax adviser.