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Overseas Remittances by Indians Under LRS Fall 29% in February 2025: Key Factors Behind the Decline

Written by: Team Angel OneUpdated on: Apr 29, 2025, 3:39 PM IST
Overseas remittances under LRS fell 29% in February 2025. Travel, education declines, global volatility, and TCS rule changes contributed to the drop.
Overseas Remittances by Indians Under LRS Fall 29% in February 2025: Key Factors Behind the Decline
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Overseas remittances by Indian residents under the Liberalised Remittance Scheme (LRS) witnessed a significant decline in February 2025. According to data released by the Reserve Bank of India (RBI), outward remittances dropped by 29% to $1,964.21 million compared to $2,768.89 million recorded in January. A closer examination reveals multiple factors contributing to this sharp fall, including subdued travel demand, reduced student migration, and broader economic volatility.

Sharp Decline in Travel and Education Remittances

A major contributor to the overall fall in remittances was the decline in funds sent abroad for travel and education. RBI data indicates that remittances for travel purposes plummeted by 33.77%, from $1,646.74 million in January to $1,090.61 million in February. Similarly, remittances for studies abroad halved, registering a 50.52% drop to $182.17 million.

This trend coincides with a significant drop in the number of Indian students travelling to foreign universities. For the first time in 4 years, study permits issued to Indian students in Canada, the United States, and the United Kingdom declined by at least 25% in 2024. The combination of reduced educational migration and hesitant travel due to global uncertainties sharply impacted remittance volumes.

Global Volatility and Postponed Travel Plans

Travel industry sources have highlighted that a notable segment of Indian travellers either postponed or cancelled their trips during this period. The global economy faced volatile movements, influencing consumer sentiment and prompting individuals to delay discretionary spending on international travel. This cautious approach was visible in the February remittance figures.

Investment Remittances Witness a Surge

Interestingly, even as travel and education-related remittances declined, investments in foreign equity and debt saw a marked increase. RBI data shows that remittances for investment purposes surged to $173.84 million in February, up from $104.98 million in January. This suggests that some Indian residents shifted their focus towards overseas investment opportunities amidst global market corrections.

Impact of TCS Changes Announced in Union Budget 2025

Another development during the period was the Union Budget announcement in February 2025, which revised the threshold for collecting Tax Collected at Source (TCS) on LRS transactions from ₹7 lakh to ₹10 lakh. This move was aimed at providing relief to outbound tourism, education, and the foreign exchange sectors. While the new threshold was expected to encourage higher remittance activity in the coming months, the immediate effect on February’s figures appears muted.

It is important to note that TCS is not an additional tax burden. Taxpayers can claim a refund or adjust it against their tax liability while filing income tax returns.

Read More: TCS on Foreign Remittances: What Changes from April 1 for Education and Travel

Under the Liberalised Remittance Scheme, resident individuals, including minors, can freely remit up to $2,50,000 per financial year for permissible current or capital account transactions. These include purposes such as education, medical treatment abroad, purchase of immovable property, and investments in foreign securities.

For the year ended March 2024, outward remittances under LRS amounted to $31.735 billion. Travel emerged as the largest contributor, accounting for over 50% of total outward remittances at $17 billion. In contrast, student-related remittances stood at $3.47 billion during the same period. This marks a significant transformation when compared to FY14, when travel constituted just 1.5% of outward flows.

Conclusion

The 29% decline in overseas remittances under LRS in February 2025 reflects a confluence of factors — a decrease in international student migration, postponed travel plans amidst global uncertainty, and policy changes related to taxation. While investment-related remittances have grown, the broader picture highlights evolving patterns in how Indian residents engage with the global economy.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Apr 29, 2025, 3:39 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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