Liberalized Remittance Scheme

LRS is a scheme introduced by the RBI as a step towards further simplification and liberalization of foreign exchange facilities available to RI and also for other persons resident in India (for certain transactions) subject to limits and conditions as specified in FEMA. Currently the bank allows remittance of all permissible Current/ Capital account transactions upto USD 2,50,000/- per FY (April- March) per RI without RBI permission.

Exceptions for certain individuals

*A person who is a resident but not permanently resident in India and

  • Is a citizen of foreign state other than Pakistan; or
  • Is a citizen of India, who is on deputation to the office or branch of a foreign company or subsidiary or joint venture in India of such foreign company, may make remittance upto his net salary (after deduction of taxes, contribution to provident fund and other deductions).

*A person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which does not exceed three years, is a resident but not permanently resident.

Points to Remember:

  • LRS is not available to corporates, partnership firms, HUF, Trusts, etc.

  • The RI will have to designate a branch of an AD Bank through which all the remittances under LRS will be made.

  • A RI cannot gift to another RI in foreign currency, for the credit of latter’s foreign currency a/c held abroad under LRS.

  • RIs can also open, maintain and hold foreign currency a/c’s with a bank outside India for making remittances under LRS without prior RBI approval. The foreign currency a/c may be used for putting through all transactions connected with or arising from remittances under LRS.

Frequently asked questions

Which current account transactions are the exceptions for which amount in excess of USD 2,50,000/- can be availed?


Individual may avail of exchange facility in excess of USD 250,000/- as prescribed under LRS in connection with Emigration, medical treatment abroad and studies abroad, subject to other prescribed conditions/ restrictions.




What remittances are permissible under LRS for persons other than RI?


Persons other than RI can make remittances for:

  • Donations for educational institutions;
  • Commissions to agents abroad for sale of residential flats/commercial plots in India;
  • Remittances for consultancy services and
  • Remittances for reimbursement of pre-incorporation expenses within the limit and conditions laid down therein.
Such persons shall submit to the AD Bank a declaration to the effect that the limits and conditions relating to the remittances have been complied with.




Is the LRS in addition to the use of International Credit Card by a resident?


Yes, LRS is in addition to the use of International Credit Card. There is no monetary ceiling fixed by RBI for remittances by use of International Credit Card towards meeting expenses while such person is on a visit outside India. Use of International Credit Card for payment in foreign exchange in Nepal and Bhutan is not permitted.




Is there any frequency for the remittance?


There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India under the LRS scheme during the current FY should be within the LRS limit currently at USD 250,000/-.




Who is eligible to remit funds outside India under LRS?


RIs are eligible to avail benefit of LRS. The person must be a person resident in India as per FEMA. Once an individual is a resident under FEMA, he is eligible to avail benefits of LRS, whether or not he is an Indian citizen. Persons other than RIs are eligible to avail benefits of LRS but only for few transactions subject to limits and conditions as specified in FEMA.




Can a remittance under the LRS be made by a minor?


Yes, LRS facility is available to all RIs including minors. In case of remitter being a minor, the Form A2 must be countersigned by the minor’s natural guardian.




A UK passport holder and British Citizen (not of Indian origin), is permanently residing in India for carrying on business. Will he be eligible for availing the LRS even though he is not an Indian citizen?


Since he is carrying on business in India, he shall be treated as a person resident in India under FEMA. Hence, he would be eligible for availing the LRS even though he is not an Indian citizen.




An Indian passport holder is residing in Singapore for his employment since the last 20 years. Will he be eligible for availing LRS even though he is an Indian citizen?


Since he has left India for employment purpose, hence he shall be treated as a person resident outside India under FEMA. He would not be eligible for availing LRS even though he is an Indian citizen.




Can remittances under LRS be consolidated in respect of family members?


Remittances under LRS can be consolidated in respect of family members (including minors) subject to the individual family members complying with the terms and conditions of the Scheme. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank a/c/ investment/ purchase of property, if they are not the co-owners/ co-partners of the overseas bank a/c, investment/ property.




Is it mandatory for RI to have PAN for sending outward remittance under the scheme?


It is mandatory to have PAN card to make remittances under LRS for capital account transactions. However, PAN card need not be required for remittances made towards permissible current account transactions up to USD 25,000/-.




What is not permitted under the LRS?


All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges / overseas counterparty are not allowed under the Scheme.




Are RI under LRS required to repatriate back to India the accrued interest/ dividend on deposits/ investments abroad, over and above the principal amount?


The RI investors can retain and re-invest the income earned on investments made under LRS. At present the RIs are not required to repatriate the funds or income generated out of the investments made abroad under LRS.




A RI, intends to give loan abroad by using LRS? Can he do so?


Yes, a RI can give loan abroad by using LRS as giving of loans is a permissible capital account transaction.




Can an individual, who has availed of a loan abroad while a non-resident Indian can repay the same on return to India, under LRS as resident?


Yes.




A RI has gifted an amount of USD 1,50,000/- to his daughter in USA in October 2016. He intends to gift another amount of USD1,00,000/- to his son in UK before March 2017. Can he do so?


Yes, since the RI has partly utilized the limit of USD 250,000/-, he can gift an additional amount of up to USD 1,00,000/- before 31st March 2017. No further remittances shall be permitted in FY 2016-17 since the LRS limit has been utilised.




A RI has gifted an amount of USD 250,000 to her daughter in USA in December 2016. She intends to remit additional amount of USD 50,000/- to her daughter for her maintenance before March 2017. Can she do so?


No. she cannot remit additional amount of USD 50,000/- to his daughter (a close relative) in accordance with the regulations governing current account transactions. Remittance for maintenance of close relative abroad has also been subsumed under the LRS limit. Hence, the limit of USD 250,000/- shall be applicable in case of gift to close relatives too.




What is the procedure to remit funds under the LRS?


  • Approach the Bank and notify them that you would like to engage in an outward remittance via demand draft, under LRS.
  • Application cum declaration for purchase of foreign exchange under LRS of USD 250,000.
  • Form A2 will be presented to you in addition to the demand draft documentation. Form A2 is a declaration form. Under the form, you are required to attest that you have not breached the limit of USD 250,000 per FY and state the purpose of the remittance. Form 15CA/CB is not mandatory under LRS transactions.
  • Apart from above, request for release of foreign exchange is to be given to AD Bank in case of transfer of funds overseas. (Application to Release forex)
  • Other AD Bank specific requirements.




To whom can a RI remit for the purpose of "maintenance of close relatives"?


Funds can be remitted to below mentioned relatives as defined in the Companies Act,:

  • Members of your Hindu undivided family; or
  • Resident individual’s spouse
  • Resident is related to the beneficiary in any of the manners indicated below:
    • Father (including step-father)
    • Mother (including step-mother)
    • Son (including step-son)
    • Son's wife
    • Daughter
    • Daughter's husband
    • Brother (including step-brother)
    • Sister (including step-sister)





 

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