FEMA — Foreign Exchange Rules for Indians
Complete guide to FEMA regulations — LRS limits, forex rules for NRIs, overseas investments, foreign remittances, TCS on forex, NRE/NRO accounts, and property purchase rules for NRIs.
🏛️ Background
The Foreign Exchange Management Act, 1999 (FEMA) replaced FERA (1973) and came into effect on 1 June 2000. Unlike the draconian FERA, FEMA is a civil law (violations are civil offences, not criminal). It regulates all foreign exchange transactions in India, administered by RBI with enforcement by the Enforcement Directorate (ED). FEMA enables current account transactions (generally permitted) while restricting capital account transactions (require RBI approval).
💸 Liberalized Remittance Scheme (LRS)
Annual Limit: USD $2,50,000 per person per financial year
Permitted Uses:
- ✅ Overseas education (tuition, living expenses, books)
- ✅ Medical treatment abroad
- ✅ Overseas investments (shares, property, mutual funds, bonds)
- ✅ Maintenance of relatives abroad
- ✅ Gift / donation to non-residents
- ✅ Opening foreign currency accounts abroad
- ❌ NOT allowed: Lottery, banned magazines, margin trading, forex trading (speculative), real estate trading (countries in FATF blacklist)
💳 TCS on Foreign Remittance
| Purpose | Threshold | TCS Rate |
|---|---|---|
| Education (financed by loan) | Above ₹7 lakh | 0.5% |
| Education (self-financed) | Above ₹7 lakh | 5% |
| Medical treatment | Above ₹7 lakh | 5% |
| Overseas tour package | Above ₹7 lakh | 5% |
| All other remittances (investments etc.) | Above ₹7 lakh | 20% |
TCS is adjustable against income tax liability. First ₹7 lakh in any FY — no TCS regardless of purpose (from Oct 2023).
🏠 NRI Accounts & Property Rules
| Feature | NRE Account | NRO Account | FCNR Account |
|---|---|---|---|
| Currency | INR | INR | Foreign Currency |
| Source | Foreign earnings | Indian income | Foreign earnings |
| Repatriation | Fully repatriable | Up to USD $1M/FY | Fully repatriable |
| Tax on Interest | Tax-free in India | Taxable (30% TDS) | Tax-free in India |
| Joint Holding | NRI/PIO only | Resident Indian OK | NRI/PIO only |
⚠️ Disclaimer
This page is for educational and informational purposes only and does not constitute legal, tax, or financial advice. While we strive for 100% accuracy, laws and regulations change frequently. Always refer to the official gazette notifications, consult a qualified Chartered Accountant (CA), Company Secretary (CS), or legal professional before making any financial or legal decisions. Tenhash is not responsible for any actions taken based on this information. Last reviewed: March 2026.