Student remittances under India’s Liberalised Remittance Scheme (LRS) fell to their lowest level in five years in FY2025, reflecting a possible slowdown in overseas education demand or a shift in remittance behavior.
According to the latest data from the Reserve Bank of India (RBI), outward remittances for the purpose of “studies abroad” declined sharply compared to the previous fiscal years. This marks the first significant contraction since the pandemic-induced dip in FY2021.
Under the LRS, Indian residents are allowed to remit up to $250,000 per financial year for permitted current or capital account transactions, including funding for education abroad. Over the past decade, education-related remittances had consistently formed a large share of LRS outflows, driven by a surge in Indian students pursuing higher education in countries like the US, Canada, the UK, and Australia.
However, FY2025 witnessed a noticeable drop. Experts attribute this to multiple factors:
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Stringent visa norms and post-study work restrictions in popular destinations.
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Rising tuition fees and cost of living, especially with currency depreciation.
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A resurgence of domestic education opportunities and online international programs.
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Stricter compliance and tax implications on foreign remittances under the LRS.
While travel and investment-related outflows under LRS showed resilience or modest growth, the drop in student remittances stands out and may indicate a realignment in students' preferences or financial planning strategies by Indian households.
Analysts suggest this trend could be temporary, depending on global education policies and economic conditions. However, it also underscores the growing importance of policy and currency stability in shaping educational migration from India.
FAQ
1. What is the Liberalised Remittance Scheme (LRS)?
The LRS is a facility provided by the Reserve Bank of India (RBI) that allows Indian residents to remit up to USD 250,000 per financial year abroad for permitted current or capital account transactions, including education, travel, investment, and medical treatment.
2. How much did student remittances decline in FY2025?
Student remittances under LRS fell to their lowest level in five years in FY2025. The exact amount depends on RBI data, but it reflects a notable year-on-year drop compared to previous fiscals.
3. Why have student remittances declined in FY2025?
Several factors contributed to the decline, including:
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Stricter visa rules and post-study work limitations in destination countries.
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High tuition and living costs abroad.
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Depreciation of the Indian rupee.
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Growing availability of quality domestic and hybrid (online) education.
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Increased tax scrutiny and compliance requirements on foreign remittances.
4. Which countries are most affected by the drop in Indian student remittances?
Countries such as the United States, Canada, the UK, and Australia, which are major destinations for Indian students, may see an impact due to reduced financial inflows from India.
5. Are other LRS categories also affected?
While student remittances have declined, other categories such as travel and overseas investments have shown resilience or modest growth, as per preliminary trends.
6. Do students still use LRS to fund education abroad?
Yes, LRS remains the primary legal channel for Indian families to fund overseas education. However, the volume has declined in FY2025 compared to previous years.
7. What are the tax implications for remittances under LRS?
From FY2023 onwards, a Tax Collected at Source (TCS) is applicable on LRS remittances. For education-related remittances funded by loans, TCS is 0.5%; otherwise, it’s 5% on amounts exceeding ₹7 lakh.
8. Will this trend continue in FY2026?
It’s uncertain. Future trends will depend on factors like global education policies, foreign exchange rates, visa regulations, and domestic education alternatives.
Publish on may 24,2025 by :selvi