Quick answer: An Indian resident can remit up to USD $250,000 per financial year abroad under the RBI's Liberalised Remittance Scheme (LRS) — enough to fund Costa Rica's investor residency in one go. Remittances above ₹10 lakh in a financial year attract Tax Collected at Source (TCS) of up to 20%, which you later adjust against your Indian income tax. The money must move through official banking channels into a Costa Rican bank or escrow account and be registered with Costa Rica's Central Bank to count for residency.
Ask anyone who has bought property abroad from India and they will tell you: finding the house is the easy part. The real project is moving the money correctly. Done right, it is routine paperwork. Done wrong, it can disqualify your residency application or create tax headaches at home. Here is the playbook.
How does the LRS work for a Costa Rica purchase?
The Liberalised Remittance Scheme is the RBI's standing permission for resident individuals to send money abroad — up to $250,000 per person per financial year (April to March) — for permitted purposes, which include acquisition of immovable property overseas. You do not need special RBI approval; you file Form A2 and a purpose declaration with your bank (an "Authorised Dealer"), and the bank handles reporting.
Practical implications for a Costa Rica investor:
- A single remitter covers the $150,000 threshold (and the expected post-July 2026 level of $200,000) within one year's limit.
- Spouses can combine limits — $500,000 per financial year as a couple — useful for premium properties. Both names should then appear appropriately in the purchase structure; discuss this with your Costa Rican attorney because the residency applicant's personal investment must itself meet the threshold.
- The limit resets every April 1, so a larger purchase can also be staged across two financial years if the seller agrees to a split payment schedule.
What is TCS and how do you get it back?
Since October 2023, banks collect Tax Collected at Source on LRS remittances. The threshold was raised to ₹10 lakh per financial year, and for general-purpose remittances — which include overseas property investment — the rate above that threshold is 20%.
On a $150,000 transfer (about ₹1.3 crore), TCS of roughly ₹24–25 lakh will be collected on the amount above ₹10 lakh. Two things matter here. First, TCS is not a tax cost — it is an advance. It appears in your Form 26AS and is adjusted against your income-tax liability for the year; if it exceeds your liability, you claim the difference as a refund in your ITR. Second, it is a real cash-flow item. You need the TCS amount available on top of the purchase funds, and you may wait months for the credit or refund. Build it into your budget from day one.
What does the source-of-funds file look like?
Both your Indian bank (for the outward remittance) and the Costa Rican side (bank, notary, and immigration) will want a clean provenance story for the money. Assemble this once, properly, and every later step gets easier:
- Bank statements showing the funds' accumulation;
- Income-tax returns and Form 16 for salaried income, or business financials for entrepreneurs;
- Sale deeds if the funds come from selling an Indian asset;
- A bank reference letter confirming account standing;
- Your chartered accountant's certificate where the bank requires one (Form 15CA/CB as applicable).
Costa Rican banks apply serious anti-money-laundering scrutiny to inbound six-figure wires. A well-documented file clears in days; an undocumented one can sit frozen for weeks.
Where should the money land in Costa Rica?
Never in the seller's personal account. The standard, safe route is an escrow account held by a licensed Costa Rican escrow company or your attorney's regulated trust account. Funds are released to the seller only when the transfer deed is executed and title is confirmed clean. Escrow also creates exactly the paper trail — SWIFT confirmation, purpose reference, receiving institution — that Costa Rica's Central Bank (BCCR) requires when your attorney registers the investment as foreign direct investment. That BCCR registration is not optional bureaucracy: it is what makes your investment legible to immigration and countable toward the residency threshold.
What sequence should you follow?
- Step 1: Sign the purchase agreement with a closing date that allows 3–4 weeks for money movement.
- Step 2: Compile the source-of-funds file and file Form A2 with your bank.
- Step 3: Wire to escrow; keep every SWIFT confirmation.
- Step 4: Close, record the deed, and have your attorney register the investment with the BCCR.
- Step 5: Claim your TCS credit in your next ITR.
Frequently asked questions
Can I pay for the property in rupees or crypto?
No. Costa Rican closings are in US dollars through banking channels, and any unofficial route (hawala, crypto conversions) both violates FEMA and disqualifies the funds for BCCR registration — which kills the residency file.
Does buying through my Indian company avoid TCS?
Companies route through RBI's Overseas Direct Investment (ODI) framework rather than LRS — a different compliance path with its own filings, covered in our company-buyer guide. It changes the paperwork, not the seriousness of it.
Do I need to report the property in India afterwards?
Yes. Resident Indians must disclose foreign assets in Schedule FA of the income-tax return every year, and rental income from the property is taxable in India. Non-disclosure carries severe penalties under the Black Money Act.
Can NRIs use LRS?
LRS applies to resident Indians. NRIs remit from their NRE/NRO/foreign accounts under different rules — often simpler. Many of our Indian clients are NRIs in the Gulf or US funding the purchase from foreign earnings.
Planning a transfer? Talk to us early — sequencing the remittance around your closing date saves weeks. Contact our team for a consultation.
This article is general information, not legal or tax advice. LRS, TCS and FEMA rules change; confirm current figures with your chartered accountant and Authorised Dealer bank before remitting.