Payments
What is Liberalized Remittance Scheme (LRS)
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Feb 24, 2021
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Liberalized Remittance Scheme (LRS) is a scheme introduced by the Reserve Bank of India (RBI). Under the scheme, all Resident Individuals (RI) can freely remit (invest) funds up to USD 2,50,000/- overseas every financial year (April to March). It can be for a permissible set of current or capital account transactions.
Permissible Current Account Transactions Under LRS
Below are permissible current account transactions under LRS:
- Overseas business trip
- Paying for overseas education
- Immigration
- Medical treatment abroad
- Maintenance of close relatives abroad
- Gift to any person residing outside India or donations to any organization outside India
- Private/ Personal visit to any country
- Going abroad for employment
Permissible Capital Account Transactions Under LRS:
Below are permissible capital account transactions under LRS:
- Investments in shares, securities, mutual funds, etc. abroad
- Opening foreign currency account abroad with a bank outside India
- Buy immovable properties in the overseas market.
- Setting up wholly owned subsidiaries (WOS) and Joint Venture (JV) abroad for Bonafede business operations
- Providing loans in Indian National Rupees (INR) to NRIs who are relatives as defined in Companies Act, 2013
So, if you are considering any of the above – the RBI’s Liberalized Remittance Scheme (LRS) would be the single stop for all your concerns related to foreign exchange. There is no restriction on frequency or on the number of transactions during a financial year. However, the total amount of foreign exchange remitted through all sources in India under LRS during the current FY should be within the LRS limit (currently at USD 250,000).
Activities/ Transactions Not Permitted Under LRS
- Any prohibited activities such as margin trading, lottery, etc.
- Trading in foreign exchange abroad
- This facility cannot be used to purchase Foreign Currency Convertible Bonds (FCCBs) issued by Indian Companies in the overseas secondary market
- Remittance not available for countries identified as “Non-co-operative countries and territories” – as per the Financial Action Task Force (FATF)
- Cannot remit if you are dealing directly or indirectly with individuals and entities that are identified as a significant risk of committing acts of terrorism – as advised by RBI to banks
Eligibility Criteria to Remit Funds Outside India Under LRS
The person must be a resident of India as per Foreign Exchange Management Act (FEMA). Once an individual is a resident under FEMA, he/she is eligible to avail the benefits of LRS, whether or not he is an Indian citizen. One has to also comply with the ‘Know Your Customer’ guidelines and the Anti-Money Laundering Rules while making any of the
current account transactions.
LRS facility is available to all Resident Individuals (RIs) including minors. In case of the remitter being a minor, Form A2 needs to be countersigned by the minor’s natural guardian. However, LRS is not available to corporates, partnership firms, HUF, Trusts, etc.
Loan Under LRS
Resident Individuals (RI) can give loans to relatives (as defined under the Companies Act) abroad under LRS – since extension of loans is a permissible capital account transaction. The loan is free of interest and the minimum maturity of the loan is one year.
How to Apply?
1. You can walk into your nearest bank branch and submit a request for remittances under LRS
2. You can also reach out to your bank’s relationship manager, to know more about this scheme.
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