Everything you need to know about foreign remittance limits for Indian businesses

Sending money out of India involves more than a bank transfer. Different currencies, RBI rules, and exchange rate swings mean the transaction is stringently regulated, and one rule every business and individual must understand is the foreign remittance limit.

These limits affect the country’s forex reserves and exchange rate stability, so getting them right matters. This guide breaks down the outward remittance limits, documentation, and tax rules that apply to Indian businesses and individuals in 2026.

• Indian businesses have no fixed cap on outward remittances, but every transfer must route through an RBI-authorised dealer bank.
• Individuals can remit up to USD 2,50,000 a year under the Liberalised Remittance Scheme (LRS); the scheme does not apply to companies, partnerships, or HUFs.
• TCS now applies at 2% (down from 5%) on self-funded education and medical remittances above ₹10,00,000, effective April 2026. Investments and gifts stay at 20%.
• Businesses deduct TDS on taxable foreign payments and pay GST under reverse charge on imported services; individuals pay TCS instead.
• Current account transactions (vendor payments, consultancy fees) move on the automatic route; capital account transactions (foreign investments) may need RBI approval.

Before we get into the nitty-gritty of foreign outward remittance limits, it is essential to understand what foreign remittances are and why they happen.

Foreign remittances refer to fund transfers between individuals or businesses across different countries, for both personal and business reasons.

Personal remittances cover things like gifting, medical treatment, or education costs sent between family and friends abroad. Business remittances cover foreign investments, payments to overseas vendors, and similar transactions.

If you are new to how these transfers work end to end, our remittance payments 101 guide walks through the basics before you get into limits and paperwork.

Types of foreign remittances

Remittances fall into two categories, covered in full in our inward remittance vs outward remittance guide:

• Inward remittances: funds entering India from abroad.
• Outward remittances: funds leaving India for other countries.

This guide focuses on outward remittances, where Indian resident individuals or businesses send money to entities in other countries.

Foreign outward remittances simply mean sending money from India to someone in another country. This could be for things like paying for studies, travel, buying something, or sending money to family.

While transactions for both personal and business purposes come under foreign outward remittances, the limit, tax implications, and other regulations differ, which we will learn about in the coming sections.

The Indian government enacted the Foreign Exchange Management Act (FEMA) in 1999 to regulate foreign exchange transactions, promote foreign trade, and foster the forex market.

The Reserve Bank of India administers FEMA and issues the guidelines on remittance limits and compliance that flow from it.

The RBI sets a foreign remittance limit for individuals under the LRS liberalized remittance scheme, but this scheme does not apply to businesses. The RBI’s own FAQ confirms LRS “is not available to corporates, partnership firms, HUF, Trusts etc.”

That does not mean anything goes. Every outward transfer must route through an RBI-designated authorised dealer bank, which checks documentation and confirms compliance before releasing funds.

Before a bank clears a transfer, it classifies it as one of two transaction types:

Current account transactions

Business-as-usual transactions that do not affect assets or liabilities held abroad. These carry fewer regulations, move through the automatic route, and do not need the RBI’s prior approval, for example vendor payments and consultant fees.

Capital account transactions

Transactions that create long-term foreign assets or liabilities, such as foreign investments and asset transfers. These involve extensive documentation and may need the RBI’s prior approval before funds move. See our capital account vs current account comparison for a fuller breakdown.

Documentation is a crucial part of foreign outward remittance for businesses. Submitting it to the authorised dealer confirms the transfer’s legitimate purpose, its alignment with capital or current account rules, and a clean, trackable transaction. Our detailed breakdown of capital and current account transactions under fema explains which category your remittance falls into.

Documents required for every transaction

• Form A2: the RBI’s mandatory application and declaration for the remittance, with full transaction details.
• Request letter: a formal letter authorising the bank to process the remittance.
• Transaction proof: an invoice for imports, an agreement for investments, or other valid proof of the transaction.
• KYC documents: PAN card, company registration certificate, and other relevant documents.

Form A2 also asks for a purpose code, the RBI’s classification for why the money is leaving India, and getting this field right is worth understanding on its own; our guide on purpose code for outward remmitance covers how to pick the correct one.

Additional documents by transaction type

• Current account transactions: import bills, proof of business relationship, purchase agreement.
• Capital account transactions: Form ODI (Overseas Direct Investment), auditor’s certificate, net-worth certificate, board resolution.

Foreign outward remittances are also subject to regulations under the Income Tax Act of 1961. Businesses need to comply with these tax regulations to avoid fines and penalties.

Withholding Tax (TDS)

Also called TDS on foreign payments, businesses must deduct tax at source on foreign payments if that income is taxable under the Income Tax Act.

For example, a payment to an overseas consultant attracts TDS because that income is taxable in India. A payment for imported goods does not, since it falls outside the Income Tax Act’s scope.

The TDS rate depends on factors like the receiver’s country and the transaction type. After deducting TDS, businesses must file Form 15CA and 15CB to track the payment and confirm tax compliance.

Goods and Services Tax (GST)

GST on outward remittances works on the reverse charge mechanism, where the recipient of goods or services, not the payer, is chargeable. GST applies to the imported goods or services, not the remittance itself.

For example, a business importing software services pays the foreign vendor in full, then separately pays 18% GST in India under reverse charge, which it can typically reclaim later as Input Tax Credit.

The Liberalised Remittance Scheme was introduced by FEMA in 2004, allowing Indian resident individuals to transact up to USD 2,50,000 per year towards foreign outward remittance. This limit applies only to individuals, not businesses.

The Foreign Exchange Management Act, however, prohibits the following remittances under the Liberalised Remittance Scheme:

• Payments towards lottery tickets and other restricted items under Schedules 1 and 2 of the Act
• Payments towards margin calls in foreign exchanges
• Payment towards Indian FCCBs (Foreign Currency Convertible Bonds) in the overseas market
• Payment towards trading in foreign exchanges abroad
• Capital account payment to countries identified by the Financial Action Task Force (FATF)
• Payments to individuals posing a risk of committing acts of terrorism

Tax Collected at Source, or TCS on foreign remittance, applies only to outward remittances made by individuals. Under Section 206C(1G) of the Income Tax Act, remittances by businesses fall outside its scope.

Remittances up to ₹10,00,000 in a financial year are exempt from TCS. The Union Budget 2025 raised this threshold from ₹7,00,000.

The Union Budget 2026 went further, cutting the TCS rate on education and medical remittances from 5% to 2%, effective 1 April 2026.

The current rates, as of FY 2026-27, are:

Getting these classifications right matters. A remittance wrongly filed under the wrong purpose code can mean an unnecessary 20% TCS deduction instead of 2%, tying up cash until the next tax return.

On the receiving side, correctly reporting the receipt of foreign remittance in the itr follows its own disclosure rules worth understanding.

Xflow does not process outward remittances. Its focus is the other side of the flow: helping Indian exporters receive international payments compliantly.

For an IT-enabled services exporter juggling incoming client payments alongside outgoing vendor or consultant payments, that still matters.

Xflow’s receiving accounts settle export earnings at the live mid-market rate by the next business day, with eFIRA issued automatically so the downstream FIRC and EDPMS paperwork stays unchanged.

Since KYC checks apply on both ends of a cross-border transaction, our guide on mastering kyc to manage international payments without risks covers what businesses need in place before funds move either way.