Liberalized Remittance Scheme

1. What is Liberalized Remittance Scheme (LRS)?

Ans.

LRS is a scheme introduced as liberalization measure to facilitate Resident Individuals (RI) to remit funds outside India without any RBI permission.


Under this Scheme, RI is allowed to freely remit upto USD 2,50,000/- per Financial Year (FY) (April – March) for any permissible current or capital account transaction or a combination of both.

2. Who is eligible to remit funds outside India under LRS?

Ans.

The Scheme is available to all RIs including minors. The person must be a person resident in India as per FEMA.


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

3. What are the permissible Current account transactions under LRS?

Ans.

The following are permissible current account transactions under LRS:


·         Private visits to any country (except Nepal and Bhutan)

·         Gift or donation including rupee gift to Non-Resident Indian (NRI)/ Person of Indian Origin (PIO), who is a close relative (subject to certain conditions).

·         Going abroad for employment

·         Emigration

·         Maintenance of close relatives abroad

·         Travel for business, or attending a conference or specialised training 

·         Expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up

·         Expenses in connection with medical treatment abroad

·         Studies abroad

·         Any other current account transaction which are not prohibited

4. Which Capital account transactions are permissible under LRS?

Ans.

The following are the permissible Capital account transactions under LRS:

 

·         Opening of foreign currency account abroad with a bank

·         Acquisition of immovable property outside India as per Overseas Investment, 2022

·         Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI), in accordance with applicable FEMA Regulations and Rules

·         Extending loans including loans in Indian Rupees to NRIs/PIOs who are close relatives (subject to stipulated terms and conditions)

5. Can bankers open foreign currency accounts in India for residents under LRS?

Ans.

No.

6. Can bankers open foreign currency accounts outside India for residents under LRS?

Ans.

Yes, RIs can open foreign currency accounts outside India for making remittance under LRS without prior approval of RBI.

7. Can exchange facility be availed more than USD 2,50,000/-?

Ans.

RI may avail exchange facility more than the limit of USD 2,50,000/- for purpose of emigration, medical treatment and studies outside, if it is so required by the country of emigration, medical institute offering treatment or the university respectively but subject to certain conditions.

 

For other permissible capital and current account transaction, prior RBI permission is required to remit funds exceeding USD 2,50,000/-

 

8. Can remittances be made only in US Dollars?

Ans.

The remittances can be made in any freely convertible foreign currency

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

Ans.

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

10. Is LRS in addition to use of International Debit Card by a resident?

Ans.

No. Limit of LRS shall apply to International Debit Card. Further, use of International Debit Card for payment in foreign exchange in Nepal and Bhutan is not permitted

 

11. Is there any restriction on the number of remittances during a FY?

Ans.

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

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

Ans.

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

13. 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?

Ans.

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

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

Ans.

Since he has left India for employment purpose, 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.

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

Ans.

Remittances under LRS can be consolidated in respect of family members subject to individual family members complying with LRS terms and conditions. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank account and investment, if they are not the co-owners/co-partners of the investment/ overseas bank account. Remittances for acquiring immovable property outside India from a person resident outside India, may be consolidated in respect of relatives if such relatives, being persons resident in India, comply with the terms and conditions of the Scheme.

16. Is the AD required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

Ans.

AD will be guided by the nature of transaction as declared by the remitter in Form A2 and will thereafter certify that the remittance is in conformity with the instructions issued by the RBI in this regard from time to time. However, the ultimate responsibility is of the remitter to ensure compliance to the extant FEMA rules/regulations.

17. Is it mandatory for RI to have PAN for outward remittance under LRS?

Ans.

Yes, it is mandatory for the RI to provide his/her PAN for all transactions under LRS made through AD Bank. 

18. What is not permitted under LRS?

Ans.

The remittance facility under the Scheme is not available for the following:


·         Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

·         Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.

·         Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.

·         Remittance for trading in foreign exchange abroad.

·         Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.

·         Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

·         A RI cannot gift to another RI, in foreign exchange, for the credit of latter's foreign currency account held outside India.

19. Under LRS, is RI required to repatriate back to India the accrued interest/ dividend on deposits/ investments abroad, over and above the principal amount?

Ans.

An investor who has remitted funds under LRS can retain and reinvest the income earned on investments. The received/realized/unspent/unused foreign exchange, unless reinvested, shall be repatriated and surrendered to an authorized person within a period of 180 days from the date of such receipt/ realization/ purchase/ acquisition or date of return to India, as the case may be.


Further, a resident individual who has made Overseas Direct Investment (ODI) shall have to comply with applicable rules and regulations specified under FEMA.

20. A RI has gifted an amount of USD 1,50,000 to his daughter in USA in June 2023. He intends to gift another amount of USD 1,00,000/- to his son in UK before March 2024. Can he do so?

Ans.

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 2024. No further remittances shall be permitted in FY 2023-24 since the LRS limit has been utilized.

21. A RI has gifted an amount of USD 250,000 to her daughter in USA in June 2023. She intends to remit additional amount of USD 50,000/- to her daughter for her maintenance before March 2024. Can she do so?

Ans.

No. In accordance with regulations governing current account transactions remittance for maintenance of close relative abroad has also been subsumed under the LRS limit. She cannot remit an additional amount of USD 50,000/- to her daughter (a close relative) since the LRS limit has been utilized.

22. A RI intends to gift another RI in foreign currency by credit to latter’s foreign currency a/c held abroad, under LRS. Can he do so?

Ans.

No. A RI cannot gift to another RI in foreign currency, for the credit of latter’s foreign currency a/c held abroad under LRS

23. What is the procedure to remit funds under LRS?

Ans.

·       RI has to approach AD Bank and notify them that he/she would like to engage in an outward remittance under LRS. (The applicant should maintain a bank account with the AD bank for a minimum period of one year prior to the remittance for capital account transaction). If RI seeking to make remittance towards permissible capital account transaction and he is a new customer of the bank, it is AD Bank’s responsibility to carry out due diligence on the opening, operation and maintenance of the account.

·       RI has to furnish Form A2 regarding the purpose of the remittance and declare that the funds belong to him and will not be used for prohibited purpose. In case remitter is a minor, the Form A2 must be countersigned by the minor’s natural guardian.

·        PAN is mandatory to make remittance under LRS for all transactions

·        RI is required to submit other supporting documents as required by the AD Bank

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

Ans.

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


·         Members of Hindu undivided family; or

·         RI’s spouse

·         RI is related to the beneficiary in any of the manners indicated below:


1.Father (including step-father)

2.Mother (including step-mother)

3.Son (including step-son)

4.Son's wife

5.Daughter

6.Daughter's husband

7.Brother (including step-brother)

8.Sister (including step-sister)

25. RI (but not permanently resident in India) can remit up to net salary after deduction of taxes. However, if he has exhausted the limit of USD 2,50,000/- as net salary remittance and desires to remit any other income under LRS is it permissible as the limit will be over and above USD 2,50,000?

Ans.

RI (but not permanently resident in India) who have remitted their entire earnings and salary and wish to further remit ‘other income’ may approach RBI with documents through their AD bank for consideration. 

26. Whether credit facilities (fund or non-fund based) in Indian Rupees or foreign currency can be extended by AD banks to RI?

Ans.

LRS does not envisage extension of fund and non-fund based facilities by the AD banks to their RI customers to facilitate remittances for capital account transactions under LRS.

However, AD banks may extend fund and non-fund based facilities to RIs to facilitate current account remittances under LRS.

27. Can a sole proprietor remit funds under LRS?

Ans.

In a sole proprietorship business, there is no legal distinction between the individual / owner and as such the owner of the business can remit USD up to the permissible limit under LRS. If a sole proprietorship firm intends to remit the money under LRS by debiting its current account then the eligibility of the proprietor in his individual capacity has to be reckoned.  Hence, if an individual in his own capacity remits USD 250,000 in a financial year under LRS, he cannot remit another USD 250,000 in the capacity of owner of the sole proprietorship business as there is no legal distinction.

28. Can a RI make a rupee loan to a NRI/PIO who is a close relative of RI, by of crossed cheque/ electronic transfer?

Ans.

A RI is permitted to make a rupee loan to an NRI/PIO who is a close relative of the RI (as per the Companies Act, 2013) by way of crossed cheque/ electronic transfer  subject to stipulated conditions.

29. Can a RI make a rupee gift to a NRI/PIO who is a close relative of RI, by of crossed cheque / electronic transfer?

Ans.

A RI can make a rupee gift to a NRI/PIO who is a close relative of the RI [relative’ as defined in Section 2(77) of the Companies Act, 2013] by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 250,000 per FY as permitted under the LRS for a RI. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances made by the donor during the financial year including the gift amount have not exceeded the limit prescribed under LRS.

30. Can bank permit RI to borrow funds in India and remit outside India under LRS?

Ans.

No. remittance under LRS cannot be out of borrowed funds. The banks should ensure that the payment is received out of the funds belonging to the RI.

31. Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in?

Ans.

No ratings or guidelines have been prescribed under LRS of USD 2,50,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.

32. Mr. A and Mrs. A (both RI) remit funds under LRS amounting USD 2.5 Lakhs each to their respective bank a/c outside India. Upon such remittance, Mrs. A transfer such funds from her overseas bank account to Mr. A’s overseas bank account by way of gift and thereafter Mr. A purchases immovable property of USD 5 lakhs abroad. Is this transaction permissible under FEMA?

Ans.

RI cannot gift to another RI, in foreign currency, for the credit of latter’s foreign currency account held abroad under LRS. However, remittances by Mr. A and Mrs. A to their respective foreign bank accounts under LRS is permissible. Further, once the funds are transferred to their respective foreign bank accounts, if Mrs. A thereafter funds by way of gift from her overseas bank to Mr. A’s overseas bank, Mr. A may be required to repatriate those funds back to India and such gifted funds cannot be utilized by Mr. A for acquisition of immovable property abroad.

33. Whether LRS can be used for making application under EB5 Visa applications for US residency and citizenship?

Ans.

A person wanting to emigrate can draw foreign exchange up to LRS limit. Remittance of any forex exceeding this limit may be allowed towards meeting incidental expenses in the country of emigration and not for earning points or credits to become eligible for immigration by way of overseas investments in government bonds; land; commercial enterprise; etc.

34. Are there any restrictions towards remittances to Mauritius and Pakistan for permissible current account transactions?

Ans.

No, there are no restrictions towards remittances for current account transactions to Mauritius and Pakistan.


Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time; and remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks are not permissible.

35. Is TCS applicable on remittances made under the LRS Scheme?

Ans.

Yes, TCS on remittances made under the LRS Scheme is applicable as under:

 

Sr. No.

Purpose of Remittance

Original TCS Rate

Revised TCS Rate

(With effect from 1st October,2023)

1

For education

 

(Source - loan from prescribed financial institution)

0.5% of the amount in excess of Rs. 7 lakhs

Same

2

For education, other than (1) or

For medical treatment

5% of the amount in excess of Rs. 7 lakhs

Same

3

Overseas tour package

5% of the amount (Without threshold)

-5% of amount upto Rs 7 lakh

 

-20% of the amount in excess of Rs. 7 lakhs

4

Any other purpose

5% of the amount in excess of Rs. 7 lakhs

-Nil upto Rs 7 lakh

 

-20% of the amount in excess of Rs. 7 lakhs

5

Resident individual falling under “Specified Person” category/inoperative PAN

Double the normal rate of TCS or 5%, whichever is higher. However, TCS shall exceed 20%

Same

    

     “Specified Person” means a person who satisfies both conditions below:

·         He/she has not furnished Tax Return for assessment year relevant to previous year immediately preceding financial year in which tax is required to be collected, for which time limit for furnishing Tax Return under sub-section (1) of section 139 of Income-tax Act, 1961 (“the Act”) is expired, and

·         Aggregate tax deducted at source and collected at source is Rs. 50,000 or more in that previous year

Updated 12/2023