Understanding the Liberalised Remittance Scheme (LRS) for Indian Residents

The Liberalised Remittance Scheme (LRS) introduced by the Reserve Bank of India (RBI) has made it easier for Indian residents to remit funds abroad for various purposes. This scheme allows individuals to send up to USD250,000 per financial year outside of India for permissible current and capital account transactions.

In this blog post, we will have an understanding of the LRS, including its eligibility criteria, permissible transactions, and important considerations.

 

Eligibility for the LRS

The LRS is available to Indian residents as defined by the Foreign Exchange Management Act (FEMA).

However, it is important to note that corporations, partnership firms, Hindu Undivided Family (HUF), trusts, and NRIs are not eligible to utilize the LRS.

 

Permissible Current Account Transactions

The LRS allows Indian residents to undertake various current account transactions, including:

1. Private visits (excluding Nepal & Bhutan): Remitting funds for personal travel abroad.

2. Gift or donation to NRIs: Sending gifts or donations, including rupee gifts, to close relatives who are NRIs.

3. Emigration: Remitting funds for the purpose of emigrating to another country.

4. Overseas business trips: Sending funds for business-related travel abroad.

5. Medical treatment abroad: Remittances for medical treatment and related expenses outside India.

6. Pursuing studies abroad: Sending funds for educational expenses incurred by individuals studying overseas.

7. Going outside India for employment: Remittances for individuals moving abroad for employment purposes.

8. Maintenance of close relatives abroad: Sending funds for the support and maintenance of close relatives residing outside India.

 

Permissible Capital Account Transactions

Under the LRS, Indian residents can engage in certain capital account transactions, which include:

 

1. Opening a foreign currency account abroad: Individuals can open and maintain foreign currency accounts with banks located outside India.

2. Purchase of foreign property: Remittances for acquiring properties located outside India.

3. Investments in overseas shares, securities, mutual funds, etc.: Investing in foreign stocks, securities, mutual funds, and similar financial instruments.

4. Extending INR loans to NRIs who are relatives: Providing loans in Indian Rupees (INR) to NRIs who are considered relatives.

Limits and Permissions

 

The LRS has a limit of USD250,000 per financial year for remittances. However, higher amounts may be remitted for emigration, medical treatment, and overseas education if required, subject to certain conditions. Any remittances exceeding the USD250,000 limit for other purposes require prior permission from the RBI.

 

Key Considerations

1. Currency Choice: Remittances under the LRS can be made in any freely convertible foreign currency.

2. Remittance Frequency: There is no restriction on the number or frequency of transactions in a financial year. However, the cumulative amount of all transactions should not exceed the current LRS limit.

3. Minors and LRS: Minors are eligible to utilize the LRS, but their natural guardian may need to sign Form A2.

4. PAN Card Requirement: Providing your Permanent Account Number (PAN) is mandatory for all LRS transactions.

 

The Liberalised Remittance Scheme (LRS) is a beneficial scheme for Indian residents to remit funds abroad for various purposes. By understanding the eligibility criteria, permissible transactions, limits, and key considerations associated with the LRS, individuals can make informed decisions and effectively utilize this scheme.

Stay updated with the latest regulations and guidelines issued by the RBI regarding the LRS to ensure compliance and smooth remittances. Consider consulting your professional to make an informed decision.