Overseas remittances by Indians under LRS were down 29% in February to $1,964.21 mn: Here’s why
Overseas remittances by Indians under the Liberalised Remittance Scheme (LRS) saw a sharp decline of 29% in February 2025, dropping to $1,964.21 million compared to the same month last year. This significant fall marks one of the steeper contractions in outward remittances in recent times. Here's a closer look at the key reasons behind this trend:
Higher Tax Collected at Source (TCS) Impact
One of the major reasons for the fall in overseas remittances has been the impact of the revised TCS (Tax Collected at Source) rules. Effective October 1, 2023, the TCS rate on foreign remittances above ₹7 lakh was increased from 5% to 20% for purposes other than education and medical expenses. This sharp increase has led many individuals to either postpone their remittances or limit the amount they transfer abroad.
Volatile Global Economic Conditions
Uncertainty in the global economy, particularly concerns over inflation, recession fears in the U.S. and Europe, and ongoing geopolitical tensions, has made Indians more cautious with their international investments, travel, and educational plans. Many are holding back on transferring funds overseas due to exchange rate volatility and economic unpredictability.
Slowdown in Overseas Education and Travel
February is generally a low season for overseas education-related remittances, as most admissions for foreign universities peak in mid- to late-year months. Similarly, international travel remains muted during this period, especially post the holiday season, further reducing the demand for overseas spending.
Currency Fluctuations
The Indian Rupee witnessed bouts of volatility during February, prompting many to delay remittances in the hope of a more favorable exchange rate. This "wait and watch" attitude among remitters contributed to the lower overall remittance figures.
Changing Investment Patterns
With rising interest rates in India offering better returns domestically, some high-net-worth individuals (HNIs) and retail investors are preferring to invest within the country rather than transferring funds abroad. This is a reversal of earlier trends where global diversification was a key strategy.
Looking Ahead Experts suggest that while remittances may recover later in the year — especially during the university admission season and festival-related travel — the new tax structure and ongoing global uncertainties could continue to moderate outward flows under LRS compared to previous years.
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