Rule 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 5 says that every drawal of foreign exchange for transactions included in Schedule III is governed as provided in that Schedule. Paragraph 1 of Schedule III lists nine purposes for which an individual can draw foreign exchange within one limit, and sets four provisos that raise, reduce or shape the limit. This article explains paragraph 1 and paragraph 3, and leaves the persons-other-than-individuals paragraph to the next article. A FEMA advisory review is the quickest way to apply it to your own numbers.
As printed in the Rules, individuals can draw foreign exchange for the nine listed purposes within a limit of USD 2,50,000, and any additional remittance for those purposes needs the prior approval of the Reserve Bank. Four provisos deal with higher amounts demanded by an emigration country, a medical institute or a university, reduction of the limit by amounts remitted under the Liberalised Remittance Scheme, net salary for temporary residents, and persons other than individuals.
The text and its source
The Rules are made by the Central Government under section 5 and sub-section (1) and clause (a) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999. See our articles on section 5 and section 46.
The text used is the one reproduced by the Reserve Bank in Annex 1 of its Master Direction - Other Remittance Facilities, updated as on May 06, 2026. Schedule III is printed there as "Notified by GOI Notification No. G.S.R 426(E) dated May 26, 2015". Later amendments and circulars should be checked on the Reserve Bank and Gazette sites.
Rule 5 in plain words
Rule 5 is headed "Prior approval of Reserve Bank", but its text says something narrower: "Every drawal of foreign exchange for transactions included in Schedule III shall be governed as provided therein." The Rules thus hand the detail to the Schedule. A proviso says that rule 5 does not apply where payment is made out of funds held in the remitter's Resident Foreign Currency (RFC) account. Rule 6(1) similarly exempts drawal from an Exchange Earners' Foreign Currency (EEFC) account, subject to rule 6(2), and rule 7 says rule 5 does not apply to use of an international credit card for expenses while the person is on a visit outside India. For rule 6(2), see the previous article on Schedule II.
Paragraph 1: the nine purposes and the limit
Paragraph 1 says individuals can avail of foreign exchange facility for the following purposes "within the limit of USD 2,50,000 only", and that any additional remittance in excess of the limit for these purposes requires the prior approval of the Reserve Bank of India.
A printing slip to know about. The page prints each purpose on a line of its own without an item number, yet the first proviso refers to "item numbers (iv), (vii) and (viii)". Counted in the order printed, the purposes are as follows. This article counts them that way; check against the Gazette notification before relying on a number.
| Number by count | Purpose as printed |
|---|---|
| (i) | Private visits to any country (except Nepal and Bhutan) |
| (ii) | Gift or donation |
| (iii) | Going abroad for employment |
| (iv) | Emigration |
| (v) | Maintenance of close relatives abroad |
| (vi) | Travel for business, or attending a conference or specialised training, or meeting expenses for medical expenses or check-up abroad, or accompanying as attendant to a patient going abroad for medical treatment or check-up |
| (vii) | Expenses in connection with medical treatment abroad |
| (viii) | Studies abroad |
| (ix) | Any other current account transaction |
The limit is printed as "USD 2,50,000" in the opening of paragraph 1 and as "USD 250,000 (US Dollars Two Hundred and Fifty Thousand Only)" in the second proviso; both mean the same amount in the text.
The four provisos
1. Higher amount demanded by the receiving side. For emigration, medical treatment and studies (counted as (iv), (vii) and (viii)), the individual may avail of exchange for an amount in excess of the limit prescribed under the Liberalised Remittance Scheme "as provided in regulation 4 to FEMA Notification 1/2000-RB, dated the 3rd May, 2000", if it is so required by a country of emigration, a medical institute offering treatment or the university, respectively. The proviso speaks of the Scheme's limit and does not give a number.
2. Reduction by amounts already remitted. If an individual remits any amount under the Scheme in a financial year, the applicable limit for that individual is reduced from USD 250,000 by the amount so remitted. Our article on the Liberalised Remittance Scheme explains the Scheme's side of this.
3. Resident but not permanently resident. A person who is resident but not permanently resident in India, and who is either a citizen of a foreign State other than Pakistan, or a citizen of India on deputation to the office or branch of a foreign company or the subsidiary or joint venture in India of a foreign company, may make remittance up to his net salary, after deduction of taxes, contribution to provident fund and other deductions. The Explanation says that a person resident in India on account of employment or deputation of a specified duration (irrespective of length) or for a specific job or assignment whose duration does not exceed three years is resident but not permanently resident.
4. Persons other than individuals. A person other than an individual may also avail of foreign exchange facility, mutatis mutandis, within the limit prescribed under the Scheme for the purposes in paragraph 1.
Note that the second proviso begins "provided further" and the third and fourth are each "provided also"; the opening proviso refers to "regulation 4 to FEMA Notification 1/2000-RB", the 2000 regulations on permissible capital account transactions, and the Annex does not set out those regulations. See our overview of the classes of capital account transactions.
Paragraph 3: the procedure
Paragraph 3 of Schedule III says the procedure for drawal or remittance under the Schedule "shall be the same as applicable for remitting any amount under the said Liberalised Remittance Scheme". The Rules therefore point to the Scheme for the process. The Master Direction on the Scheme is the place to read what the bank will ask for.
Example
Rohan, a resident individual, is admitted to a university abroad. His fees and living costs would exceed the limit of paragraph 1. The first proviso lets him avail of an amount in excess of the Scheme's limit if the university requires it, which the proviso describes in the words "if it is so required by ... the university". The text does not say what document proves the requirement; that is a matter for the bank's own procedure.
Suppose, in the same year, Rohan has already remitted part of the Scheme amount for a holiday. Under the second proviso the applicable limit for him falls by the amount already remitted under the Scheme.
A second example concerns Ms Clara, a citizen of a foreign State other than Pakistan, working in Gurugram for a stated assignment of two years. She is resident but not permanently resident. Under the third proviso she may remit up to her net salary after taxes, provident fund contribution and other deductions.
Common mistakes
- Reading the heading of rule 5 as a statement that every transaction needs Reserve Bank approval. The text sends you to the Schedule, which allows drawal within the limit.
- Forgetting that the limit is reduced by what was remitted under the Scheme in the same financial year.
- Using the item numbers (iv), (vii) and (viii) without counting the printed purposes in order.
- Treating remittance for "any other current account transaction" as outside the limit. It is the ninth purpose within it.
Need help with a remittance above the limit?
If your remittance goes past the limit, or you are a temporary resident who wants to remit salary, the files that persuade a bank differ case by case. Our FEMA advisory team can read the Schedule against your facts and prepare the application for the Reserve Bank.
Key takeaways
- Rule 5 hands the detail to Schedule III; paragraph 1 sets a limit of USD 2,50,000 for nine purposes.
- Amounts in excess need the prior approval of the Reserve Bank, except as the provisos allow.
- The limit falls by amounts remitted under the Liberalised Remittance Scheme in the financial year.
- Temporary residents of the kind described may remit up to net salary.
- Paragraph 3 says the procedure is the same as under the Scheme.
Read next
- Liberalised Remittance Scheme: Master Direction
- Remittances by companies and firms: Schedule III and rules 6 and 7
- Prohibited current account transactions: rule 3 and Schedule I
- LRS: permitted and prohibited transactions
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.