What is Liberalized Remittance Scheme (LRS):
- Resident Individuals (RIs) are permitted to remit a sum not exceeding USD 250,000/- per Financial Year (April – March), outside India from RI’s own funds (and not borrowed funds).
- Limit of USD 2,50,000/- is per person per financial year. The facility is available to each family member (including minor) and thus a family of four members can remit up to USD 10,00,000/- every financial year.
- Opening of foreign currency bank account outside India;
- Purchase of property outside India;
- Investments in shares, securities and mutual funds outside India;
- Setting up Wholly Owned Subsidiaries (WOS) and Joint Ventures (JV) outside India for bonafide business (subject to stipulated terms and conditions);
- Extending loans in Indian bank account of Non-Resident Indian (NRI) relatives (as defined) subject to certain conditions;
- Private Visits (other than Nepal and Bhutan) / Business Trips;
- Gifts/ Donations;
- Going outside India for employment;
- Maintenance of close relatives outside India;
- Medical treatment outside India;
- Studying outside India.
- Does not permit remittances for any prohibited activities such as margin trading, lottery, etc.;
- Under the Scheme, RI cannot gift to another RI, outside India;
- Remittances by family members can be invested jointly in banking accounts, shares and securities and property outside India only when each of the remitter is jointly holding such asset.
Exceptions to USD 2,50,000 limit:
RIs may avail facility in excess of the limit prescribed for purpose of emigration, medical treatment and studies outside (subject to certain conditions).
Gift under LRS:
Gift by RIs to NRO Account of NRI relatives is considered as remittance under the Scheme and thus should not exceed USD 2,50,000/- per financial year.
Procedure for remittance:
- Application to the bank in Form A2.
- PAN is mandatory for certain specified transactions.
RI who has remitted funds under the Scheme can retain outside India the principal and income earned on the investments. However, RI who has made overseas direct investment in equity shares, compulsorily convertible preference shares of a JV/WOS outside India or ESOPs, shall have to comply with terms and conditions prescribed under FEMA. Income earned outside India is required to be disclosed and reported by RI in the Return of Income filed every year.