Encouraged by an improvement in the forex market, the Reserve Bank on Tuesday raised the annual overseas investment ceiling for individuals to $125,000 from $75,000.
"In view of the recent stability in the foreign exchange market, it has been decided to enhance the eligible limit to $125,000 without end-use restrictions except for prohibited foreign exchange transactions such as margin trading, lottery and the like," the Reserve Bank of India said in its Second Bi-Monthly Monetary Policy Statement.
The RBI had in August last year reduced the ceiling from $200,000 to $75,000 per person in a financial year under the Liberalised Remittance Scheme (LRS) in view of the worsening current account deficit and a volatile rupee.
The LRS allows residents to acquire and hold shares, debt instruments or other assets outside India without prior approval of the RBI.
In the monetary policy, the RBI also permitted all residents and non-residents, except citizens of Pakistan and Bangladesh, to carry up to Rs 25,000 in Indian currency notes while leaving the country.
This has been done with a "view to facilitating travel requirements" of non-residents visiting India, the RBI said.
Currently, non-residents visiting India are not allowed to take out any Indian currency while leaving the country.
The current limit for carrying domestic currency notes for Indians travelling overseas is Rs 10,000.
India's current account deficit narrowed to 1.7 per cent of GDP in 2013-14 from a record $ 88.2 billion, or 4.8 per cent of GDP, in 2012-13.
The monetary policy review document said that robust inflows of portfolio investment, supported by foreign direct investment and external commercial borrowings, kept external financing conditions comfortable and helped add to reserves.