• Not available to corporates, partnership firms, HUF, Trusts, etc.
3. Permissible transactions under LRS:
Sr. No. | Purpose | Nature of Transactions | Conditions/ Points to be kept in mind |
1. | Private Visits - Abroad | Current Account | · Private visits to countries other than to Nepal and
Bhutan. · No Restriction on number of visits during the FY. · All tour related expenses including cost of
transportation outside India and overseas hotel/ lodging expenses shall be included
under the LRS limit. · Tour operator can collect this amount either in
Indian rupees or in foreign currency from the resident traveler. |
2. | Gift | Current Account | Rupee Gift: · RI can make a rupee gift to an NRI/PIO (who is a
relative* of RI) by way of crossed cheque/ electronic transfer. · Gift amount should be credited to NRO a/c · of the recipient and
· Gift amount should be within the LRS limit · It is the responsibility of the Resident donor to
ensure all remittances made during the FY including the gift amount is not
exceeding LRS limit. · Further one may check with the bank for applicability of TCS on above transaction as each bank has it's own set of policies. Foreign currency Gift – Abroad: RI can remit funds up to the LRS limit in one FY as Gift to any person resident outside India by transferring the funds directly to recipient’s overseas bank account Note: RI cannot gift to another RI, in foreign currency for the credit of latter's foreign currency a/c held outside India. In simple terms, RI cannot transfer funds as gift to another resident Indian into his bank account outside India. |
3. | Donation | Current Account | RI can remit funds up to the LRS limit in one FY as donation to an organization outside India |
4. | Going abroad for employment | Current Account | A person going abroad for employment may can draw up to USD 2,50,000/- per FY from any Authorized Dealer in India |
5. | Emigration | Current Account | · RI wanting to emigrate can draw foreign exchange from AD Bank up to the amount
prescribed by the country of emigration or USD 2,50,000/-. · Remittance outside India in excess of above limit
allowed only towards meeting incidental expenses in the country of immigration
and not for earning points or credits to become eligible for immigration by way
of overseas investments in government bonds, land, commercial enterprises etc. |
6. | Maintenance of relatives* abroad | Current Account | A RI can remit up to LRS limit towards maintenance of relatives* |
7. | Business trip | Current Account | · Attending international conference, seminar,
specialized training, apprentice training, etc. are treated as business visits. · No restriction on number of business trips to
foreign countries undertaken during FY · However, if an employee is deputed by an entity and
business trip related expenses of the employee are borne by such entity, such
current account transactions shall be treated outside the purview of LRS limit
and may be permitted without any limit subject to verification of bonafides of
the transaction |
8. | Medical treatment outside India | Current Account | · Remittance up to LRS limit is allowed without any
estimate from doctor/hospital · For amount exceeding LRS limit, AD Bank can allow
remittance based on an estimate from doctor in India or hospital/ doctor abroad,
without RBI approval · A person who has fallen sick after proceeding
abroad may also be released foreign exchange by an AD Bank (without prior RBI approval)
for medical treatment outside India. · In addition to above, USD 2,50,000/- per FY is
allowed to person for accompanying as attendant to a patient going abroad for
medical treatment/ check-up. |
9. | Students pursuing studies outside India | Current Account | · Remittance up to LRS limit is allowed without
insisting on any estimate from a foreign university. · Remittance exceeding USD 2,50,000/ may be allowed
(without prior RBI approval) based on an estimate received from a foreign
university. |
10. | Purchasing objects of art | Current Account | It
is allowed subject to provisions of other applicable laws such as Extant
Foreign Trade Policy of the Government of India. |
11 | Any other current account transaction which are not prohibited | Current Account | Permissible to remit funds under LRS |
12. | Open, maintain and hold foreign currency a/c outside India | Capital Account | ·
Prior approval of
RBI is not required. · This account may
be used for putting through all transactions connected with or arising from
remittances eligible under LRS. |
13. | Acquisition of immovable property abroad | Capital Account | · RI can acquire
immovable property abroad out of remittances sent under LRS · Remittances made
for acquiring property outside India can be consolidated in respect of family
member/relatives. The same is explained with an example below: Eg. A family consist of 4
members- Husband (Mr. A), wife (Mrs. A) and two children named (X) and (Y).
They want to purchase an immovable property outside India for USD 10,00,000/-
in the name of wife Mrs. A. Each family member can remit funds upto USD
2,50,000/- under LRS and same can be consolidated to acquire property in name
of wife, Mrs. A. |
.14 | Overseas Direct Investment/ Overseas Portfolio Investment | Capital Account | Permissible in accordance with provisions of- a) Foreign Exchange Management (Overseas Investment) Rules, 2022, b) Foreign Exchange Management (Overseas Investment) Regulations, 2022 and c) Foreign Exchange Management (Overseas Investment) Directions, 2022. |
15. | Extending Loans | Capital Account | Lending loan in India- Rupee Loan: · Loan can be given to NRI/ PIO relative*. · Mode of transfer should be crossed cheque/
electronic transfer and credited to NRO a/c of NRI/ PIO. · Loan amount shall not be remitted outside India. · Repayment of loan should be made by way of inward
remittances through normal banking channels or debit to NRO/NRE/FCNR a/c of the
borrower out of sale proceeds of shares/ securities/ immovable property against
which loan was granted. · Loan should be free of interest and minimum
maturity of the loan is one year. · Purpose of loan should be meeting borrower’s
personal requirements or business purposes in India. It should not be utilized
for activities in which investments by persons resident outside India is
prohibited namely: i.
Business of chit
fund, or
ii.
Nidhi Company, or
iii.
Agricultural or
plantation activities or in real estate business, or construction of farm
houses, or
iv.
Trading in
Transferable Development Rights (TDRs) Extending loan outside India: It is suggested to approach Bank before undertaking remittance for loan transaction outside India. Practically, in our experience remittance of funds under LRS to extend loan outside India is not permitted. |
16 | IFSC | Capital Account | Permissible subject to fulfillment of specified conditions |
* Definition of ‘relative’ covers below:
(i) Husband; or
(ii) Wife; or
(iii) One person is related to the other in any of the below manner:
·
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)
4. Prohibited Transactions:
i. Remittances for any prohibited activities such as margin trading, lottery, etc.;
ii. Remittance for purchase of FCCBs issued by Indian Companies in the overseas secondary market
iii. Remittance for trading in foreign exchange abroad
iv. Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non-co-operative countries and territories” (as available from FATF website www.fatf-gafi.org. or as notified by RBI.)
v. Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the RBI to AD Bank.
5. Procedure to remit funds under LRS:
i. RI will have to designate an AD Bank branch through which all remittances under LRS for that FY will be made
ii. The RI should maintain a bank account with the AD bank for a minimum period of one year prior to the remittance for capital account transaction.
iii. RI has to furnish Form A2 regarding purpose of remittance and declare that funds will not be used for prohibited purpose. In case remitter is a minor, Form A2 must be countersigned by minor’s natural guardian.
iv. PAN is mandatory to make remittance under LRS for all transactions
v. I is required to submit other supporting documents as required by AD Bank
6. Other Important Points:
· There is no restriction on number of remittances made under the Scheme during a particular FY
· The payment for capital account transaction should be made out of the funds belonging to the remitter and practically, borrowed funds is not allowed to be remitted under LRS. However, AD Bank can grant credit facilities to facilitate current account remittance under the Scheme.
· Remittances under LRS can be consolidated in respect of family members. However, clubbing for capital account transaction such as opening of banking accounts or investments like, shares/securities is allowed only when each of the remitter is co-owner/joint-owner of bank account or investment.
· Earlier, an investor who had remitted funds under the LRS could retain, re-invest the income earned on the investments and was not required to repatriate the funds or income generated out of investments made under the Scheme. However, as per the amendment in Master Direction on Liberalised Remittance Scheme in August, 2022, RI is now required to repatriate and surrendered any received/realized/unspent/unused foreign exchange, unless reinvested, 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.
On plain reading, one may understand the key changes under LRS as under
- The amount remitted has to be utilized within 180 days or funds have to be repatriated back to India
- Income also has to be bought back unless re-invested within 180 days
- Accumulated funds for planned investment/expense (eg. Remittance of USD 2,50,000/- made in initial 3-4 FYs to purchase immovable property equivalent to USD 7,50,000/- in the 4th year) may lose benefit
- Balances held in bank account abroad or as Fixed Deposits may not amount to investment and may be required to be repatriated back to India
- RI may now be required to maintain records of assets/investments held abroad and details of re-investment along with timeline of re-investment etc.
Considering the complexity involved and to understand the extent to which the above provisions shall apply, it is suggested to approach Bank and seek professional advice before making any remittance under LRS
· Tax is Collected at Source (TCS) on remittances made under LRS Scheme. Refer FAQ No. 3 under TCS on LRS and purchase of Overseas Tour Program Package.
- Updated 03/2024