You may wish to send money overseas to your children for their education expenses. Sure, you can do foreign currency exchange from the authorized banks and money changer vendors. The Reserve Bank of India has relaxed the regulations surrounding the buying of foreign exchange for acceptable transactions by resident Indians. People do not necessitate the Reserve Bank’s authorization for foreign exchange purchases up to a certain limit that is set by the RBI.
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Important Rules of LRS scheme for Indian Students
A lot of Indian students fly abroad each year to accomplish their university education, and Canada, UK, Australia & United States are definitely some of the most popular countries to pursue your college education. Despite a lot of uncertainty around the rules around immigrations, Indian students still go to the universities abroad to get the right exposure.
In this article, we address all the essential rules set by the Reserve Bank of India (RBI) for students studying at a foreign university under the LRS scheme and how you can do an international money transfer.
Maximum cap on sending money abroad from India
The college fee is normally charged directly to a foreign university before the student can proceed on their adventures. All the resident individuals are permitted to freely transfer up to $250,000 per financial year under the Liberalized Remittance (LRS) Scheme. You can exhaust the limit of USD 250, 000 in a single transaction or carry out multiple transactions in a given financial year. That being said, under special conditions, you may breach the $250,000 foreign exchange limit.
Authorized Dealer (AD-I) and AD II banks do not require any permission from RBI’s end to carry out the transactions. In case, the student’s fees/expenses will be more than the limit set, the foreign university can warrant a document stating the estimated expenses and the student will be able to cross this said limit.
In a scenario where the one who’s sending money abroad is a minor, the minor’s guardian will have to put their signature on a LRS declaration form also known as A2 form.
Crossing the LRS limit of $250,000
Authorized Dealers (AD) Category I and II banks have the power to allow money transfers beyond the LRS limit of $250,000 depending on the report obtained from the university/institution abroad without requesting explicit permission from the Reserve Bank of India (RBI).
An individual may be allowed to use more foreign exchange than their $250,000 cap for expenditures overseas that surpass the LRS limit but are connected to studies and medical care, given that they can provide the necessary document evidence. This can be carried out using money transfer services.
The documents required would be as follows:
Medical expenses in the hospital overseas: A rough estimate of the total amount can be taken by a doctor in India or it can also be taken from the hospital where the operation will be carried out
Educational remittances – A rough estimate of the total amount can be taken by the university for the tuition fee and other expenses while studying there.
According to a new rule introduced in October 2024, a 5% TCS (Tax collected at source) will be levied on all outward remittances crossing INR 7 lakh under the Reserve Bank of India’s LRS. TCS will be put at a rate of 0.5 percent to remittances for the intent of overseas education, just in the event that the amount transferred originates from a loan taken from an authorized financial organization.
This can obviously be claimed just like TDS while filing income tax at the end of the year.
Special limit for living expenditures while studying abroad
Under LRS, the living expenses of students studying abroad are also protected because it is an important part of studying abroad. Typically, it is the case that the student is supposed to live in a hostel or leased housing for the minimum till the first year, while the graduation is in development. For each academic cycle, the maximum $250,000 limit is the same. There are no special limits given as such by the RBI.
Students moving out of India to do their grad/post-grad have been granted special privilege by the Indian government. From the moment they leave the country, these students are categorized as NRIs and would not have to stay to finish the 182 days overseas to be considered as NRI. This revised regulation has allowed students to open a bank account in a foreign nation that their families could use to transfer them money.
The NRE / NRO accounts can also be opened by the students abroad in case they wish to send money back to India.
Carrying cash on foreign trips as an Indian student
A resident Indian can carry up to a maximum of USD 3,000 or equivalent in the form of currency notes while going on a foreign trip. The amount that’s left now can be taken up in a forex card/demand draft as well. You have another option in the form of a traveller’s cheque to carry money abroad.
Documents required for sending tuition fee abroad
A compulsory document for an individual to make outward remittance from India has indeed been made for the PAN Card. The step was taken due to the fact that some individuals would approach different banks earlier to render remittances overseas. It was not mandatory to provide a PAN card if the remittance was up to 25,000 US Dollars.
Individuals were able to transfer money abroad more than just the LRS cap in this manner. Nevertheless, this misuse of the LRS system has now been prevented by making the PAN Card a compulsory document. Now it is possible to monitor all the money transfers abroad of a resident person using their PAN Card.
So, it’s now mandatory to provide the PAN Card if you plan on sending money overseas.
Implications of Liberalized Remittance Scheme (LRS) on International Credit Cards
International Credit Cards (ICCs) offered by overseas banks and other reputable entities are available to resident individuals who hold a foreign currency account with a bank in India or a bank overseas. Fees incurred on a card either in India or abroad can be reimbursed from funds deposited in the account holder’s foreign currency account in India or via money transfers from India via a bank in which the cardholder has a current or savings account. For this reason, remittances must also be addressed immediately to the agency that issues the card overseas.
For money transfers, if there are any, under such a facility, there really is no monetary limit set by the Reserve Bank of India. The LRS cap does not extend to the usage of the international credit card to make an individual pay for costs incurred when that person is on a visit other than India.
Importance of the Currency Declaration form while coming back to India
If an individual is coming back to India, he/she can carry as much forex as they want without any barriers. Forex can be carried in multiple forms: Bank notes/Forex card/Traveller’s cheques. If the amount exceeds 10,000 US Dollars, it is mandatory for you to declare that to the Customs Regulatory Authorities at the airport itself in the form.
People who have returned are supposed to give back the foreign currency to the authorized vendors and get the currency exchange done. This should be carried out within 180 days of return when returning from a trip overseas. The person can keep up to 2000 US dollars in the form of overseas currency notes in case they require it in the future.
How to transfer money abroad for paying up tuition fee?
You can pay up tuition fee using the services of an online forex & remittance platform. There are a number of reasons why you should prefer an online foreign exchange market places over doing it directly via banks.
You get the best exchange rates as well as you are able to send money abroad from the comfort of your home. Rather than personally visiting the banks, an online forex marketplace allows you to upload all the documents online on their portal.
Step 1: So, first, you will need to check whether you would be qualified to do an outward remittance or not. You can now list the sender’s data along with the recipient’s information after seeing that. The intent of your transfer of funds to an overseas country will also be needed for you to report.
Step 2: Once you have the details mentioned, you will be asked to submit a few other documents. Paperwork will be necessary, such as a PAN card, passport, sender’s photo cum address proof, and several other documents.
Step 3: You can now easily move funds to one of the tie-up banks of the online forex marketplace afterward.
Step 4: This forex rate which is presented to you during the process will be reserved for you. A digital A2 form will eventually be sent to you. You may sign it on the platform. The transfer process will start with the coordinating bank of the company and you’ll be given a SWIFT acknowledgment. It’s that easy actually.
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