The Liberalized Remittance Scheme (LRS) is part of the Foreign Exchange Management Act (FEMA) 1999, laying down the guidelines for outward remittance from India. Under LRS, all resident individuals, including minors, are allowed to freely remit up to USD250,000 per financial year (April – March).
1. Who is eligible to remit funds outside India under the LRS?
The LRS is for people who are residents of India as defined by the Foreign Exchange Management Act (FEMA). It cannot be used by corporations, partnership firms, Hindu Undivided Family (HUF), trusts, etc.
2. What are the permissible current account transactions under the LRS?
The following are permissible current account transactions under the LRS:
- Private visit (other than Nepal & Bhutan)
- Gift or donation (including rupee gift) to a Non-Resident Indian (NRI) / Person of Indian Origin (PIO), who is a close relative
- Overseas business trip
- Medical treatment abroad
- Pursuing studies outside India
- Going outside India for employment
- Maintenance of close relatives abroad
3. Which capital account transactions are permissible under LRS?
The following are the permissible capital account transactions under LRS:
- Opening a foreign currency account abroad with a bank outside India
- Purchase of foreign property
- Investments in overseas shares, securities, mutual funds, etc
- Setting up wholly owned subsidiaries (WOS) or joint ventures (JV) abroad (subject to stipulated terms and conditions)
- Extending INR (Non-Resident Indian) loans to NRIs who are relatives as defined in the Companies Act
4. What if I need to remit more than USD-250,000?
You can remit more than the USD250,000 limit for emigration, medical treatment and overseas education if it is required by the country of emigration, medical institute offering treatment or the university respectively, but this is subject to certain conditions. In other cases, you will need prior permission from the RBI to remit anything above USD250,000.
5. Can I only send USD?
No, you can make your remittance in any freely convertible foreign currency.
6. Is there any restriction on the total number of remittances I can make in a financial year?
There is no restriction on how often or how many transactions you make in a financial year. However, the total amount of all of your transactions in one financial year should be within the current LRS limit of USD250,000.
7. Can a minor send money under the LRS?
Yes, the LRS is available to all residents of India including minors. However, in this case, the minor’s natural guardian might need to sign Form A2.
8. I’m an Indian passport holder but I’ve been residing in Australia for employment for the last 20 years. Am I eligible for the LRS?
No. As you have left India for employment, FEMA considers you an NRI (or PIO). You cannot use the LRS even though you are an Indian citizen, because you are not a resident of India.
9. Can I consolidate LRS remittances with family members?
Yes, you can consolidate your LRS remittances with family members (including minors) provided each person follows the LRS terms and conditions. However, you can’t group remittances for capital account transactions (such as opening a bank account/investment / purchase of property) with family members who are not co-owners / co-partners of the overseas bank account, investment/property.
10. Do I need to have a PAN card to send money using the LRS?
Yes. You need to provide your Permanent Account Number (PAN) for all transactions under LRS.
11. What is not permitted under the LRS?
You cannot use the LRS to send money:
- for any prohibited activities such as margin trading, lottery, etc.
- to buy Foreign Currency Convertible Bonds issued by Indian Companies in the overseas secondary market
- to trade in foreign exchange abroad
- directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the RBI to the banks.
In addition, there may be times when you cannot use the LRS to make Capital Account remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “Cooperative countries and territories”.
12. If I use the LRS to send money for overseas deposits or investments, do I need to repatriate any accrued interest or dividends back to India?
No, you can retain and/or reinvest the income you earn from portfolio investments made under the LRS. However, if you make a direct investment in overseas equity shares or compulsorily convertible preference shares of a JV or WOS outside India, you need to comply with standard FEMA terms and conditions.
13. Can I remit funds under the LRS if I am a sole proprietor?
Yes, you can. Just remember that in a sole proprietorship business, there is no legal distinction between the individual and the owner. So any LRS transfers you make using your business account will count towards the USD250,000 LRS limit on your personal account, and vice versa.
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Chartered Accountant by profession, CA Sanket Agarwal has an experience of above11 years in Cross Border compliance , Import Export , International Taxation & is a passionate content creator.