You can send money abroad as a gift to any individual, or as a donation to a registered institution, under the RBI's Liberalised Remittance Scheme (LRS). Gifts and donations have no separate limit: they count towards the $250,000 each resident can send abroad in a financial year. Above ₹10 lakh in the year, your bank collects 20% TCS, which you claim back in your income tax return.
Where most people go wrong is the purpose code:
- Parents mark tuition fees as a gift and pay 20% TCS instead of 2%.
- Families pay hospital invoices as a gift, not realising medical treatment has a lower TCS rate.
- Some route travel bookings or investment transfers under the gift code.
A wrong code costs more in TCS, and since misusing purpose codes is a FEMA issue, it can also draw questions from your bank. Below is when the gift and donation codes apply, and when another code is the right one.
Table of contents
- What is the LRS gift limit?
- What counts as a gift under LRS?
- What counts as a donation under LRS?
- How do gifts and donations differ?
- Which payments can you send as a gift?
- Which payments can you send as a donation?
- How are gifts and donations sent abroad taxed in India?
- How much TCS applies to gifts and donations?
- What documents does your bank need for a gift or donation?
What is the LRS gift limit?
There is no separate gift limit under LRS. Gifts and donations share the $250,000 a financial year that covers all your LRS remittances, across every bank. If you have already sent $50,000 for a child's tuition this year, you can gift up to $200,000 more.
Each family member has their own $250,000 limit, so a couple can each send gifts from their own limit, in their own name, as long as the transfers are genuine gifts.
What counts as a gift under LRS?
When Indians talk about “sending a gift abroad,” they usually mean transferring money to a child, relative, or friend who is living outside India. Under RBI’s Liberalised Remittance Scheme (LRS), this is a permitted transaction and is tracked under the purpose code S1302 (personal gifts and donations).
What qualifies as a gift?
- A gift is a transfer of funds with no expectation of return: you don’t get any asset, service, or repayment back.
- The recipient can be your child studying abroad, your sibling living overseas, or even a friend.
- It can be a one-time lump sum (say, $20,000 for wedding expenses) or smaller transfers spread across the year.
Important:
- Always choose the right purpose code. If you send tuition or medical money as a ‘gift’, banks will apply the gift TCS slab: 0% up to ₹10 lakh, then 20%.
- But under the correct codes, education is much lower (0% with an education loan, or 2% above ₹10 lakh otherwise) and medical is also just 2% above ₹10 lakh.
Using the right category saves you money and avoids compliance issues. Read our full guides on Education and Medical Treatment.
Examples of legal gifting under LRS
- Sending $15,000 to your daughter in the US as a one-off gift towards a car.
- Funding $10,000 for a sibling’s wedding or relocation expenses abroad.
- Gifting $5,000 to a friend who is facing financial hardship overseas.
- Pooling limits as a family: Husband, wife, and child can each gift up to $250,000, together sending $750,000 in a year, as long as the transfers are genuine gifts.
What counts as a donation under LRS?
Apart from personal gifts, RBI also permits residents to send money abroad as donations. These are tracked under the purpose code S1303 (donations to religious and charitable institutions abroad).
What qualifies as a donation?
- The recipient must be an institution, not an individual.
- Eligible donations include contributions to foreign universities, endowment funds, charitable foundations, or religious organizations.
- Banks will apply KYC and AML (Anti-Money Laundering) checks on the receiving institution before approving the transfer.
Examples of legal donations under LRS
- Contributing $10,000 to the Harvard endowment fund.
- Donating $5,000 to the Red Cross abroad.
- Making a one-time contribution to a religious organization or registered foreign charity.
How do gifts and donations differ?
At first glance, gifts and donations under LRS look similar. Both are non-commercial transfers, both are capped at USD 250,000 per individual per financial year, and both attract 20% TCS above ₹10 lakh. But the recipient, documentation, and compliance treatment are very different, and mixing them up is one of the most common mistakes people make.
Here’s a side-by-side comparison:
Aspect | Gift (S1302) | Donation (S1303) |
Recipient | An individual abroad (child, relative, friend) | An institution abroad (university endowment, charity, religious body) |
Purpose | Personal support, weddings, general expenses, lump-sum transfers | Charitable, religious, or philanthropic contributions |
Documentation | Form A2 with S1302 PAN card Simple declaration of relationship | Form A2 with S1303 Details of recipient institution (name, registration, address) Sometimes a receipt or acknowledgement letter |
TCS treatment | 0% up to ₹10 lakh, then 20% | 0% up to ₹10 lakh, then 20% |
Common Misuse | Using gift code for tuition fees or hospital bills (should be Education/Medical) | Using donation code for tuition fees or personal support (should be Education/Gift) |
Which payments can you send as a gift?
Objective (what you are paying for) | Allowed as Gift? | Notes |
Monthly living expenses for your child abroad (rent, groceries) | ❌ | Use Maintenance S1301. A child is a close relative, and regular support for rent and groceries is maintenance, not a gift. A gift (S1302) is a one-off transfer. |
One-time wedding gift to a relative abroad | ✅ | Classic gift. No invoice needed. |
Emergency support to a friend or sibling abroad | ✅ | Permitted as a personal gift. If it is for a specific hospital bill, use Medical S0304 for lower TCS. |
Security deposit or advance rent for student housing | ⚠️ | Many banks accept as gift or Maintenance S1301. If tied to a degree program, route under Education S0305 to keep all student expenses under one code and to benefit from lower TCS. |
General allowance for a student’s off-campus living | ⚠️ | A regular allowance to your own child is maintenance, S1301. If the student is not a close relative, such as a niece or nephew, it goes as a gift under S1302. |
Paying tuition fees to a university | ❌ | Use Education S0305. TCS is 0% up to ₹10L and 2% above, or 0% with an education loan, while gifts are 20% above ₹10L. |
Paying school fees for a minor studying abroad | ❌ | Treat as Education S0305. Same TCS benefits as above. |
Paying hospital or clinic invoices abroad | ❌ | Use Medical S0304. TCS is 0% up to ₹10L and 2% above. Calling it a gift triggers 20% above ₹10L. |
Paying health insurance premium for your child abroad | ⚠️ | Banks differ. Many accept Maintenance S1301 for recurring premiums. If insurance is linked to medical treatment, use Medical S0304. Avoid misusing “gift.” |
Paying airline tickets or tour packages | ❌ | Use the travel code, S0306 for personal travel. Travel you book yourself attracts 20% TCS above ₹10L, the same as a gift, but the correct code avoids questions from your bank. |
Visa application fees for study or travel | ❌ | For students, most banks accept Education S0305 with the admission proof. For general travel, use S0306. |
PR or Immigration fees | ❌ | Do not mark as gift. Emigration has its own purpose code, S1307. |
Car purchase or house down payment for a relative abroad | ✅ | Gift to an individual is permitted within your LRS limit. Expect enhanced due diligence on large values. Never route the seller’s invoice as a “gift.” |
Investment money for a relative to invest as they wish | ⚠️ | A cash gift to an individual is allowed, but if the real intent is to move investment proceeds or fund an overseas entity, this invites scrutiny. Do not disguise ODI or capital account transactions as gifts. |
Sending money to your own foreign account | ❌ | Not a gift. Opening or funding your own foreign account is permitted under LRS with its own code, S0023, not S1302. |
Gifting beyond USD 250,000 in the same financial year | ❌ | LRS limit is hard capped per person. Consider genuine family pooling, each within their own USD 250k limit, and track TCS per PAN. |
Crowdfunding to an individual abroad (non-medical) | ⚠️ | Technically a personal gift to an individual can pass if beneficiary KYC is clear. Banks often refuse due to AML (Anti-Money Laundering) concerns. If it is a hospital fundraiser, better to pay the hospital under Medical S0304. |
Which payments can you send as a donation?
Objective (what you are paying for) | Allowed as Donation? | Notes |
Donation to a foreign university endowment or research fund | ✅ | Classic donation to an institution. Provide institution details. Not tuition. No tax deduction in India. |
Donation to an international charity (for example, Red Cross) | ✅ | Permitted. Banks run KYC and AML (Anti-Money Laundering) checks. Keep the receipt. No deduction in India. |
Donation to a religious organization abroad | ✅ | Permitted under S1303. Some banks ask for additional due diligence. |
Alumni fund contribution to your foreign university | ✅ | Allowed if routed to the university’s charitable or endowment arm. Tuition is not a donation. |
Sponsoring a research chair or scholarship at a foreign institution | ✅ | Permitted when paid to the institution’s charitable arm. Ensure you are not receiving a commercial benefit. |
Paying a student’s tuition but calling it a donation | ❌ | Wrong code. Use Education S0305. Education has lower TCS than donation. |
Funding an individual’s medical expense via “donation” | ⚠️ | Donation must go to an institution, not an individual. If you can pay the hospital directly, use Medical S0304 for lower TCS. |
Donating via crowdfunding platforms abroad | ⚠️ | Often rejected unless the beneficiary is a registered charity and the platform routes to the institution. High AML (Anti-Money Laundering) risk. |
Donation to an unregistered foreign NGO | ❌ | Banks typically block. Fails KYC or regulatory checks. |
Paying membership fees to overseas associations, clubs, or alumni bodies | ❌ | Memberships confer benefits. This is not a donation. Treated as a service or subscription, not S1303. |
Buying event tickets to a charity gala overseas | ❌ | Quid-pro-quo benefit. Not a pure donation. Treated as a service purchase, not S1303. |
Donation in kind (for example, shipping goods) | ❌ | LRS is for remitting foreign exchange. In-kind donations sit outside typical LRS flows and face customs and NGO rules. |
Donation to a diaspora association for community events | ⚠️ | Depends on the association’s status. If it is a registered charity with compliant accounts, banks may allow. Otherwise, expect rejection. |
Donation to a foreign school that is not a charity arm | ❌ | If it is for a student’s benefit, this is education. If it is a general endowment and the entity is a registered charity, it can be S1303. |
How are gifts and donations sent abroad taxed in India?
There are two separate questions: whether anyone owes income tax on the gift, and the TCS your bank collects when you remit (covered in the next section).
1. Tax for you, the sender
India has no gift tax for the person giving, so you pay no tax on the money you gift. Donations to foreign charities do not qualify for a deduction in India.
2. Tax for the person receiving it
- Relatives: gifts from a relative, such as a spouse, parent, child, sibling or other lineal ascendant or descendant, are exempt in the recipient's hands, whatever the amount.
- Non-relatives: if the gifts a person receives from non-relatives in a year total more than ₹50,000, the whole amount is taxable as their income, not just the excess. This applies even when the recipient lives abroad, because money a resident gifts to a non-resident is treated as income arising in India under section 9(8) of the Income-tax Act 2025 (section 9(1)(viii) of the 1961 Act).
- Marriage: gifts received on the recipient's own marriage are exempt, even from non-relatives.
The recipient's country may have its own rules. In the US, for example, a person who receives more than $100,000 in gifts in a year from a foreign person, such as a parent in India, must report it to the IRS on Form 3520, though no tax is due on it.
How much TCS applies to gifts and donations?
There is no TCS on the first ₹10 lakh you send abroad under LRS in a financial year, across all purposes and banks.
Above that, banks collect 20% TCS on gifts and donations, under section 394 of the Income-tax Act 2025. TCS is not a final cost: it is credited to your PAN and set off against your income tax when you file your return, and you can also adjust it against advance tax during the year.
Example. Suppose you send ₹15 lakh to your child's university abroad for fees this year, and it is your only LRS remittance.
| Item | Coded as education (S0305) | Coded as a gift (S1302) |
|---|---|---|
| Amount remitted | ₹15,00,000 | ₹15,00,000 |
| Threshold with no TCS | ₹10,00,000 | ₹10,00,000 |
| Amount above the threshold | ₹5,00,000 | ₹5,00,000 |
| TCS rate | 2% | 20% |
| TCS collected | ₹10,000 | ₹1,00,000 |
The result: coding tuition as a gift ties up ₹1 lakh in TCS instead of ₹10,000
If you are covering a family member's regular living costs rather than making a one-off gift, read LRS for family maintenance.
What documents does your bank need for a gift or donation?
When remitting money abroad under LRS for gifts or donations, banks act as Authorised Dealers (ADs) and are responsible for compliance. This means they will always ask for a minimum set of documents before processing your transfer.
Common documents (for all LRS remittances)
- Form A2: The RBI-mandated form that records the purpose code (e.g., S1302 for gifts, S1303 for donations).
- PAN card: Required for all remittances to link transactions to your annual LRS limit of USD 250,000.
- Bank’s KYC compliance: Updated address, ID proofs, and in some cases a declaration that the funds are from your own account.
Gifts (S1302)
- Declaration of relationship: Most banks will ask for a simple self-declaration that the transfer is a personal gift, often stating your relationship with the recipient.
- No invoice needed: Unlike education or medical remittances, you are not required to submit bills, invoices, or proof of expenses.
- Form 15CA/15CB: Not needed for gifts under LRS. The income-tax rules exempt remittances by individuals that do not need the RBI's approval, and gifts within the LRS limit do not.
Donations (S1303)
- Institution details: Banks will ask for the beneficiary institution’s name, address, and registration details.
- Donation acknowledgement/receipt: Some banks request a copy of the institution’s receipt or letter confirming the donation, especially for larger values.
- AML/KYC checks: Banks may run additional due diligence on foreign charities, especially lesser-known ones, to ensure the institution is genuine and compliant with Anti-Money Laundering (AML) rules.
Gifts require minimum paperwork (Form A2, PAN, and a declaration). Donations require more scrutiny (Form A2 plus recipient institution details and sometimes receipts).
Always be prepared for banks to ask extra questions if the recipient is not a well-known institution or if the transfer amount is unusually large.
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