How to Send Money Abroad for Education under LRS (2025)

When your child or family member goes abroad to study, one of the first questions is: how do you legally pay for it from India?

The answer lies in the Liberalised Remittance Scheme (LRS), the Reserve Bank of India’s framework that allows resident Indians to remit up to USD 250,000 per financial year for permitted purposes, including education. Whether it’s tuition in the US, living expenses in Europe, or exam fees in Singapore, LRS provides the compliant route to move money abroad.

But education remittances come with their own nuances.

• What counts as an “education expense”?
• Can family members pool their limits?
• What happens if fees exceed USD 250,000?
• How does TCS apply, and what mistakes could push you into a higher tax bracket?

This guide breaks it down step by step.

Table of Contents

• What is LRS
• Education as a Permitted Purpose under LRS
  • What Is Allowed
  • What Is Not Allowed
  • Purpose Codes for Education
  • Nil TCS in the case of Education loan
• Exceeding the USD 250,000 Limit for Education
• Documentation Requirements
• Illegal or Misclassified Expenses
• Credit Card Payments for Education
• TCS on Education
• How to claim back TCS
• FAQs
• Conclusion

What is LRS?

The Liberalised Remittance Scheme (LRS) is the RBI framework that allows resident Indians to legally send money abroad.

• Every individual (including minors) can remit up to USD 250,000 per financial year (April–March) for permitted purposes such as education, medical treatment, travel, or investments.
• All remittances are reported by banks to the RBI and tracked against your PAN.
• If your total outward remittances cross ₹10 lakh in a financial year, certain payments attract Tax Collected at Source (TCS).
• For education specifically, TCS applies at 5% when self-funded and at Nil if the remittance is funded through a specified education loan (as per the April 2025 revision).

Education as a Permitted Purpose under LRS

Overseas education is one of the core categories permitted under the Liberalised Remittance Scheme (LRS). The Reserve Bank of India (RBI) has specifically allowed remittances for tuition fees, living expenses, and related costs, provided they are coded under the correct purpose.

What Is Allowed

• Tuition fees, admission fees, and other charges payable to foreign universities or schools.
• Hostel, housing, and meal charges billed by the institution.
• Living expenses of the student abroad (food, rent, utilities) if backed by the admission letter and fee schedule.
• Books, exam fees, and incidental costs related to the course.
• Travel costs to join the institution (airfare can also be included under education if documented).

What Is Not Allowed

While RBI permits bona fide education expenses, some payments do not qualify:

• Unaccredited universities or diploma mills: Institutions not recognised by local regulators or universities flagged by Indian banks.
• Purely leisure courses: Hobby courses, short workshops, or recreational programs abroad.
• Tourist visa-linked courses: Payments made while on a tourist visa that are not tied to a recognised program.
• Incorrect coding: If funds are sent to the student’s personal account without submitting admission letters and invoices, banks may reclassify the payment as Family Maintenance (S1301) — which attracts 20% TCS instead of the concessional education rate.

Purpose Codes for Education

Key Takeaway: Education is a fully permitted purpose under LRS, but classification matters. Always ensure remittances are coded under S0305 (for full-time overseas study) or S1107 (for distance/online learning) with proper supporting documents. This keeps the transfer compliant and ensures you get the correct TCS treatment.

• For self-funded education, TCS is 5% on amounts above ₹10 lakh.
• For education funded through a specified loan (Section 80E), TCS is Nil as per the April 2025 revision.

Getting the coding right not only reduces tax but also prevents banks from reclassifying your transfer as “Family Maintenance” (which attracts 20% TCS).

Common Questions

Can I use LRS to pay only tuition fees, or also living expenses abroad?
Both are covered. Tuition, housing, meals, and other living costs can be remitted under education (S0305), provided they are backed by admission letters and fee schedules.

Can I use LRS to pay for exam fees, books, or application charges?
Yes. All legitimate education-related expenses are allowed, as long as documents from the institution support them.

What if I transfer money to my child’s personal account instead of directly to the university?
Banks usually allow it if documents clearly show the funds are for education. Without proper proof, they may reclassify it as “Family Maintenance” (S1301), which attracts 20% TCS.

Exceeding the USD 250,000 Limit for Education

The Liberalised Remittance Scheme (LRS) normally allows each resident individual to remit up to USD 250,000 per financial year for permitted purposes, including studies abroad. But higher education often comes with costs that exceed this ceiling, especially when you add tuition, housing, and living expenses.

RBI guidelines provide two clear routes for handling such cases:

Route A: Single Remitter Exceeding USD 250,000

As per RBI: “Authorised Dealer (AD) banks may allow remittances (without seeking prior approval of the Reserve Bank of India) exceeding USD 250,000 based on the estimate received from the institution abroad.”

This means that if one parent’s LRS quota is not enough to cover the entire fee, the bank can still release more funds on the same PAN, provided you submit official university documents.

What banks will ask for:

• Official tuition fee schedule or invoice from the university.
• Admission/offer letter from the institution.
• Standard LRS documents (Form A2, PAN, passport/visa, student ID).

Route B: Pooling Across Family Members

As per RBI: “Remittances under the facility can be consolidated in respect of family members subject to each complying with the terms and conditions of the Scheme.”

This allows parents (or other family members) to combine their individual USD 250,000 limits for the same student’s education. For instance, if the father has already remitted USD 250,000, the mother can send additional funds from her quota, as long as the payment is backed by the university’s documents.

What banks will ask for:

• The same university invoice/fee schedule can be used across family members.
• PAN, passport/visa of each remitter.
• Form A2 and LRS declaration for each family member’s transfer.

Example:
A US university issues an annual invoice of USD 350,000 covering tuition, housing, and meals.

• The father remits USD 250,000 with the official invoice.
• The mother remits the remaining USD 100,000 under her own LRS quota using the same documents.
• Both transfers are coded under S0305 (Education), attracting concessional TCS:
  • 5% above ₹10 lakh if self-funded.
  • Nil TCS if the remittance is funded through a specified education loan (as per April 2025 revision).

Key point: Family pooling ensures students can meet their education costs without interruption, while also taking advantage of the Nil TCS benefit in case of loan-funded remittances.

Common Questions

If my university charges more than USD 250,000 per year, can I still pay it legally from India?
Yes. RBI allows AD banks to approve remittances above USD 250,000 if you provide a bona fide fee estimate or invoice from the university. No separate RBI approval is needed.

Can both parents send money for the same child’s education?
Yes. Each parent has their own USD 250,000 quota under LRS. As long as the remittances are supported by the same university documents, the bank can process them under education (S0305).

What happens if I send money without giving the university’s invoice?
Banks may reclassify the transfer as “Family Maintenance” (S1301), which attracts 20% TCS instead of the concessional 5% for education. Always submit admission letters and fee schedules.

Do I need prior RBI approval if my fees are USD 400,000?
No. Your bank (as an AD Category I entity) has the authority to release amounts above USD 250,000 with proper documentation. RBI approval is not needed.

Documentation Requirements

When remitting funds abroad for education under LRS, banks need to verify that the payment is genuine. While formats may vary slightly across banks, the following are typically required:

Identity & Compliance Documents

• PAN card – mandatory for linking the remittance to your annual LRS quota.
• Passport and visa – of the student traveling abroad.
• Form A2 and LRS declaration – signed form confirming the purpose of remittance.

Education Proof

• Admission letter or enrollment offer from the foreign university.
• Official fee estimate or invoice from the institution.
• Country-specific documents, such as:
  • I-20 form for the United States.
  • CAS (Confirmation of Acceptance for Studies) for the United Kingdom.

Loan Route (if applicable)

• Education loan sanction letter from a specified financial institution (for remittances routed via loans under Section 80E).

Special Case: Living Expenses

• If funds are being sent directly to the student’s overseas account for living costs (rent, food, transport), banks will ask for:
  • Proof of admission.
  • Estimate of annual living expenses (often issued by the university along with tuition details).

Illegal or Misclassified Expenses

Not every payment abroad can be classified as “education” under LRS. Misuse of purpose codes can lead to higher TCS, rejection by your bank, or even FEMA scrutiny.

What Is Not Allowed Under “Education”

• Funding non-students abroad: You cannot remit funds to a relative overseas and call it “education” unless the recipient is the enrolled student with proper admission documents.
• Leisure or travel disguised as education: Paying for short hobby courses, workshops, or vacations abroad cannot be coded under education.
• Personal transfers without documents: Sending money to a student’s personal account without attaching admission letters or fee invoices may cause the bank to classify it as Family Maintenance (S1301) — which attracts 20% TCS instead of the concessional education rate.

General Prohibited Uses Under LRS
The following are strictly barred, regardless of the purpose code:

• Remittances for cryptocurrency or virtual digital assets.
• Speculative forex trading, margin trading, or derivatives bets.
• Lottery, betting, or gambling of any form.
• Transfers to FATF blacklisted or non-cooperative countries.

Credit Card Payments for Education

From FY 2025–26, the rules for overseas credit, debit, and forex card payments have changed. All such transactions are now counted under the Liberalised Remittance Scheme (LRS). This means that whether you pay university fees directly with your Indian credit card, load a forex card for your child, or remit via bank transfer — everything falls under your USD 250,000 annual LRS limit.

How It Works

• Up to ₹10 lakh per PAN per year: No TCS applies.
• Above ₹10 lakh: TCS applies at concessional education rates:
  • 5% if the remittance is self-funded.
  • Nil TCS if the remittance is funded through an education loan (as per April 2025 revision).

Why Documentation Still Matters

Even when paying with a card, banks may request proof that the spend is for education. This helps ensure the payment is coded under S0305 (Education) and not misclassified as “Family Maintenance” or “Personal Travel,” which attract a higher 20% TCS.

Example:

• A parent pays ₹12 lakh in tuition fees directly at a UK university using their Indian credit card.
• The first ₹10 lakh attracts no TCS.
• The remaining ₹2 lakh is charged at 5% TCS = ₹10,000 (if self-funded).
• If the same payment was funded through an education loan, Nil TCS would apply.

Note: In practice, many families prefer to remit funds directly to a university or to a student’s overseas account. Platforms like Paasa are primarily designed as investment platforms, giving Indian investors access to global markets. But since every client has a global brokerage account, it adds an extra layer of flexibility — if the client also holds an overseas bank account, funds already lying in the brokerage account can be legally transferred there and then used for tuition or living costs.

Common Questions

If I pay my child’s tuition abroad using my Indian credit card, does it count under LRS?
Yes. From FY 2025–26, all international credit, debit, and forex card spends are counted under LRS and add up toward your USD 250,000 annual quota.

Do I have to pay TCS if I use a credit card for university fees?
Yes, but only if your total education spends exceed ₹10 lakh in a financial year. The concessional rate applies — 5% if self-funded, Nil if funded through a specified education loan.

If I visit my child abroad and pay their tuition fee with my credit card, will it count as education?
Yes. Payments made directly to the university or for hostel fees are considered education expenses (S0305), provided you keep the fee invoice and admission letter as proof.

What if I use my credit card for my own hotel stay or sightseeing during the visit?
That will not count as education. Such spends are treated as personal travel (S0301) and attract 20% TCS once you cross the threshold. Only the student’s bona fide education costs qualify under the concessional education rate.

TCS on Education (2025 Update)

From 1 April 2025, Tax Collected at Source (TCS) on overseas education remittances works as follows:

• Threshold: ₹10 lakh per PAN per financial year (raised from ₹7 lakh earlier).
• Self-funded education: 5% TCS on the amount above ₹10 lakh.
• Education funded via specified loan (Section 80E): Nil TCS, even if the remittance exceeds ₹10 lakh.
• Aggregation rule: The threshold applies across all modes — bank wire, debit/credit cards, or forex card loads. Everything adds up under the same ₹10 lakh limit.

Examples:

• Parent remits ₹9 lakh to a UK university → No TCS.
• Parent remits ₹15 lakh directly → 5% on excess ₹5 lakh = ₹25,000 TCS.
• Parent pays ₹20 lakh via an education loan sanctioned by a bank under Section 80E → Nil TCS.

How to Claim Back TCS

TCS is not an extra cost — it is an advance tax that you can adjust while filing your Income Tax Return (ITR).

• Where it appears: All TCS collected by banks or card issuers gets deposited against your PAN and shows up in Form 26AS and the Annual Information Statement (AIS) on the Income Tax portal.
• How to claim:
  • While filing your ITR, go to the “Taxes Paid” section.
  • Enter the TCS amounts reflected in your 26AS/AIS.
  • The system automatically adjusts this against your total tax liability.
• Refunds: If your tax liability is lower than the TCS already collected, the excess is refunded to your bank account.

Note: The credit for TCS is always given in the name of the remitter (parent/guardian) whose PAN was used for the transfer, not in the student’s name.

FAQs

Can I use my LRS quota to pay for exam fees like GMAT, GRE, or IELTS?
Yes, standardized test fees and application charges are permitted under education remittances, provided invoices or receipts are available.

Does hostel rent or off-campus accommodation qualify under LRS for education?
Yes, rent and living expenses abroad are permitted, but banks usually require proof of admission and estimated cost of living from the university.

If I take an education loan, do I still need to use my personal LRS quota?
No, if the loan is sanctioned under Section 80E, remittances directly funded through the loan are exempt from your personal USD 250,000 LRS limit.

Can I use LRS to pay for short-term online or distance learning courses abroad?
Yes, but only if the institution is recognized and falls under permitted purpose code S1107. Purely informal or recreational online courses are not covered.

What happens if I misclassify education remittance under personal travel?
The bank may still process it but TCS will be charged at 20% instead of the concessional 5%, and compliance issues could arise later during audits.

Conclusion

Studying abroad comes with big financial commitments, and the LRS framework ensures there is a clear, compliant way to fund them. By using the right purpose code, keeping university documents ready, and understanding how TCS applies, families can avoid unnecessary hurdles. With these steps in place, paying for overseas education becomes straightforward and stress-free.

About Paasa

Paasa is an Indian investor’s gateway to global markets, trusted by HNIs, family offices, and institutions to diversify across the US, Europe, China, Japan, and beyond.

What sets Paasa apart is the India-facing layer:

• FEMA and LRS compliance embedded into every transaction.
• Tax reporting and analytics tailored for Indian investors (LTCG, STCG, dividend tax, TCS tracking).
• End-to-end support for remittance, reconciliation, and compliance queries.

While Paasa is primarily designed as an investment platform, our team regularly guides clients through complex remittance questions around healthcare, education, and global allocations. If you need clarity on how LRS applies to your situation, our experts are here to help you navigate it with confidence.

Disclaimer

This blog is for informational purposes only and should not be treated as investment, tax, or legal advice. The information presented reflects publicly available regulations and our understanding of the Liberalised Remittance Scheme (LRS) as of the date of publication. Rules, tax laws, and RBI guidelines are subject to change, and their interpretation may vary depending on individual circumstances.

Overseas education payments, remittances, and related financial transactions involve risks, including foreign exchange fluctuations, regulatory updates, and policy changes. Readers are strongly advised to consult their financial, tax, and legal advisors before making any remittance or investment decisions.

Paasa disclaims any liability for actions taken solely on the basis of this content.