Liberalised Remittance Scheme in detail

The Liberalised Remittance Scheme is a facility provided by the RBI that allows resident Indians to remit a certain amount of money during a financial year to another country which can be used for investment and expenditure.

Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.

It was introduced by Reserve Bank of India (RBI) vide A.P. (DIR Series) Circular No. 64 in 2004 as liberalization measure to facilitate resident individuals to remit funds outside India.

ELIGIBILITY FOR LRS

The eligibility criteria to apply for this scheme is –

  • The Scheme is available to all resident individuals, including minors.
  • LRS is not available to corporate , partnership firms, HUF, Trusts, etc.

CURRENT LIMITS

Resident individuals are 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.

This can be done in any number of transactions as long as the total amount does not exceed the limit.

However, Remittance of foreign exchange exceeding USD 2,50,000/- requires RBI’s prior approval. However, in certain exceptional transactions, remittance exceeding USD 2,50,000/- may be allowed by the Authorised Dealer (AD) Bank, without seeking prior RBI approval.

RESTRICTIONS UNDER LRS

The Remittance facility under the scheme is not available for the following purposes-

  • Remittance for any prohibited activities such as margin trading, lottery, etc.
  • Remittance for purchase of Foreign Currency Convertible Bonds issued by Indian Companies in the overseas secondary market
  • Remittance for trading in foreign exchange abroad.
  • Remittance 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 the banks
  • A gift from one Indian resident to another Indian resident , in foreign currency to be credited in the account held abroad under LRS.

REQUIREMENTS TO MAKE REMITTANCE UNDER LRS

  • Permanent Account Number (PAN) & KYC is mandatory to make remittance under LRS. 
  • The individual should have maintained an account with the bank through which the remittances will take place for atleast a year.
  • The individual has to furnish Form A2 to AD Bank (if remitter is a minor, Form must be countersigned by  natural guardian).
  • The bank should conduct the necessary due diligence for opening, maintenance and operation of the account.

 

Thus , the Liberalised Remittance Scheme has played an important role in helping Indian Residents to manage their monetary transactions in abroad ,thereby making their lives easier. 

Apart from that, it can also help in diversifying the investment portfolio by investing in securities outside India. 

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