Liberalized Remittance Scheme

• What is Liberalised Remittance Scheme (LRS)?

LRS is a scheme introduced under FEMA by RBI for Resident Individuals 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 a/c transactions up to USD 250,000/- per Financial Year (FY) (Apr-Mar) per resident individual(including minor individuals) without RBI permission.

• What are the permissible current account transactions under LRS for individuals?

Individual can avail of foreign exchange facility for the following purposes within the limit of USD 250,000 only. Any additional remittance in excess of the said limit for the following purposes shall require prior approval of RBI:

• Private visits to any country (except Nepal and Bhutan)
• Gift or donation
• Going abroad for employment
• Emigration
• Maintenance of close relatives abroad
• Travel for business, or attending a conference or specialised training or for meeting 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 current account transactions are the exceptions as specified in the above Question?

Expenses in connection with the Emigration, medical treatment abroad and studies abroad (as mentioned below in point (iv), (vii) and (viii)) are the exceptions as mentioned in the above Q.124. Individual may avail of exchange facility under LRS for an amount in excess of USD 250,000 as prescribed under LRS, if it is so required by a country of emigration, medical institute or the university respectively.

• Which capital account transactions are permitted for resident individuals under LRS?

The permissible capital account transactions by an individual under LRS are:

1. Opening of foreign currency account abroad with a bank;
2. Purchase of property abroad;

• Making investments abroad;

1. Setting up Wholly owned subsidiaries and Joint Ventures abroad;
2. Extending loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013.

• What remittances are permissible under LRS for persons other than individuals?

Persons other than individuals can make remittances for:

1. Donations for educational institutions;
2. Commissions to agents abroad for sale of residential flats/commercial plots in India;

• Remittances for consultancy services and

1. Remittances for reimbursement of pre-incorporation expenses

within the limit and conditions laid down therein.

Persons other than individuals (such as corporates, trusts; etc.) can remit upto USD 2.50,000 under LRS Facility for any current account transaction as mentioned above

• Is the LRS in addition to the use of international credit cards by a resident?

There is no monetary ceiling fixed by the Reserve Bank for remittances by use of international credit cards towards meeting expenses while such person is on a visit outside India.

• 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 limit of USD 250,000/-.

• Who is eligible to remit funds outside India under LRS?

Resident individuals are eligible to avail benefit of LRS. Also, persons other than individuals are eligible to avail benefits of LRS but only for few transactions subject to limits and conditions as specified in FEMA. 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.

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

Yes, the LRS facility is available to all individuals including minors. Therefore, remittance under the LRS can be made by a minor.

• Mr. Naor, 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 Mr. Naor 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.

• Nath, is an Indian passport holder residing in Singapore for her employment since the last 20 years. Will she be eligible for availing LRS even though she is an Indian citizen?

Mrs. Nath has left India for employment purpose and hence she shall be treated as a person resident outside India under FEMA. She would not be eligible for availing LRS even though she is an Indian citizen.

• Can remittances under the facility 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.

• Is it mandatory for resident individual to have PAN for sending outward remittance under the scheme?

Yes, it is mandatory to provide valid PAN to the Bank.

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

The resident individual investors can retain and re-invest the income earned on investments made under the Scheme. The residents are not required to repatriate the funds or income generated out of the investments made abroad under the Scheme.

 Mr. Vivek Jain, Indian resident, intends to give a loan abroad by using LRS? Can he do so?

Yes, a resident can give a 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 this scheme as resident?

Yes.

 Mr. Shah, Resident, has gifted an amount of USD 1,50,000/- to his daughter in USA in October 2015. He intends to gift another amount of USD1,00,000/- to his son in UK before March 2016.  Can he do so?

Mr. Shah has partly utilized the limit of USD 250,000, he can gift an additional amount of up to USD 1,00,000 before 31^st March 2016. Hence, he is permissible to gift another amount of USD 1,00,000 to his son in UK before 31^st March, 2016. Once a remittance is made for an amount of USD 250,000 during the FY, he would not be eligible to make any further remittances under this scheme.

 Mrs. Shah has gifted an amount of USD 250,000 to her daughter in USA in December 2015. She intends to remit additional amount of USD 50,000/- to her daughter for her maintenance before March 2016.  Can she do so?

No. Mrs. Shah cannot remit additional amount of USD 50,000/- to her daughter (a close relative) in accordance with the regulations governing current a/c 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.

1. Application cum declaration for purchase of foreign exchange under LRS of USD 250,000.
2. 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.
3. 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)

 To whom can a Resident remit for the purpose of “maintenance of close relatives”?
Funds can be remitted to the below mentioned persons:

1. Members of your Hindu undivided family; or
2. Resident individual’s spouse
3. Resident is related to the beneficiary in any of the manners indicated below: