RBI Guidelines for Foreign Exchange
Plain-language guide to FEMA, LRS, FFMC, authorised dealers, TCS rates for 2026, cash limits, PAN requirements, and Form A2. Everything a resident Indian needs to know about foreign exchange rules.
FEMA: The Governing Law
All foreign exchange transactions in India are governed by the Foreign Exchange Management Act, 1999 (FEMA). FEMA replaced the older FERA law and takes a more liberal approach: most current account transactions (travel, education, medical) are permitted freely, while capital account transactions (investment, property abroad) require compliance with specific limits and procedures.
Authorised Dealers: Who Can Do What
Only RBI-authorised entities can deal in foreign exchange. Authorised Dealer Category I (AD-I) are banks with the broadest permissions. AD Category II includes non-bank entities permitted for specific trade transactions. Full Fledged Money Changers (FFMC) are RBI-licensed dealers authorised to buy foreign currency from residents and tourists, and sell forex for permitted purposes like travel, education, and medical.
LRS: USD 250,000 per Year
The Liberalised Remittance Scheme allows any resident individual to remit up to USD 250,000 per financial year (April to March) for any permitted current or capital account purpose. Minors can also remit under the same limit with a guardian countersigning. The limit resets on April 1 each year and cannot be carried forward.
TCS Rates from April 2026
Below Rs. 10 lakh LRS usage per year: zero TCS on all purposes. Above Rs. 10 lakh: education and medical remittances attract 2% TCS; overseas tour packages attract a flat 2% TCS with no threshold; investment-related transfers attract 20% TCS. TCS is creditable against your income tax liability when filing returns.
Permitted Purposes Under LRS
Current account uses: private travel, education abroad, medical treatment, gifts, maintenance of relatives abroad, emigration expenses. Capital account uses: overseas investment in equity or debt, purchase of foreign property, setting up foreign business accounts. Business-related current account transactions are handled through AD-I banks, not FFMCs.
What Is Form A2?
Form A2 is a mandatory RBI declaration required for all outward remittances under LRS. It captures your identity details, beneficiary details, the amount, the currency, the purpose, and your self-declaration that the transaction is within the LRS limit. It must be submitted for every remittance transaction regardless of amount.
Key Rules You Should Know
PAN Card Is Mandatory Above Rs. 25,000
For any foreign exchange purchase above Rs. 25,000 (or its equivalent), submitting your PAN card is mandatory. For forex card loads, wire transfers, or traveller's cheque purchases above this threshold, your PAN details are required by the authorised dealer and reported to the Income Tax department.
Cash Purchases Capped at Rs. 50,000
You can purchase foreign exchange in cash (INR) up to Rs. 50,000 per transaction. For amounts exceeding Rs. 50,000, payment must be made via bank transfer (NEFT, RTGS), a crossed cheque, or a demand draft from your savings account. Cash is never accepted for outward remittances (wire transfers).
Carry USD 3,000 Maximum in Cash Abroad
When travelling internationally, you can carry a maximum of USD 3,000 (or equivalent) in foreign currency cash per trip. Remaining travel forex must be in the form of a forex card, traveller's cheques, or a bank draft. If you carry over USD 5,000 in cash alone or USD 10,000 in total forex, you must declare it to customs at the airport.
Unused Forex Must Be Returned Within 60 Days
After returning from abroad, any unspent foreign currency cash must be surrendered to an authorised dealer within 60 days. Unused foreign exchange on a forex card must be encashed or re-deposited within the same period. Holding foreign currency beyond 60 days of return without valid reason is a FEMA violation.
Common Questions
What is the difference between an FFMC and a bank for forex?
An FFMC (Full Fledged Money Changer) and a bank are both RBI-authorised to deal in foreign exchange, but they operate under different licences. Banks (AD Category I) have the broadest permissions, including outward remittances, forex derivatives, and all capital account transactions. An FFMC is specifically licensed for retail forex: buying foreign currency from residents and tourists, and selling forex for specified purposes like travel, education, and medical. FFMCs often offer more competitive rates than banks for cash currency and forex card transactions because forex is their core business, not a side product.
What does the LRS limit of USD 250,000 mean in practice?
It means a resident Indian can send or spend up to USD 250,000 worth of foreign exchange per financial year (April 1 to March 31) across all permitted purposes combined. This is not per-purpose: if you load a forex card worth USD 5,000 for travel and also wire USD 20,000 for your child's education, both count toward the same annual limit. For most individuals, USD 250,000 per year is more than sufficient. The limit resets to zero at the start of each new financial year.
Is it legal to hold foreign currency at home in India?
Yes, within limits. Resident Indians can hold up to USD 2,000 (or equivalent) in foreign currency cash at home without any specific reason. Foreign exchange obtained for a trip that was cancelled can be held for 60 days after the original travel date or the date of return. Beyond these limits and periods, unspent foreign currency must be sold back to an authorised dealer. Forex cards are treated differently from cash: balances on a valid forex card can be retained until the card's expiry date.
What happens if I exceed the LRS limit of USD 250,000?
Remitting beyond USD 250,000 in a financial year without prior RBI approval is a FEMA violation and can attract significant penalties. If you have a genuine need to remit more, for example for a large overseas investment or medical emergency, you can apply to the RBI for a specific approval. In practice, the USD 250,000 limit is rarely a constraint for most individuals.
Do students need to pay TCS when loading a forex card for education?
From April 2026, if a student's total LRS usage in a financial year stays below Rs. 10 lakh, no TCS is deducted on forex card loads. Most students who are loading a few thousand dollars for living expenses will be well under this threshold. If total LRS usage crosses Rs. 10 lakh, 2% TCS is collected at source on the excess amount for education purposes. This TCS is not a penalty: it is a tax credit that can be claimed when filing income tax returns.
Can a company or business entity use LRS?
No. LRS applies only to resident individuals (including minors with guardian consent). Companies, LLPs, HUFs, trusts, and partnership firms are not eligible to use LRS. Businesses needing to make foreign payments for imports, services, or overseas expenses must go through Authorised Dealer Category I banks with appropriate documentation and purpose codes under the current account transaction rules.
Have a forex transaction in mind?
Visit our RBI-licensed FFMC branch in Nerkundram, Chennai. We handle forex for travel, education, and wire transfers with full compliance and transparent rates.