The Liberalized Remittance Scheme (LRS) permits all resident Indians, including minors, to make remittance for an amount not exceeding USD 200,000 per financial year for any Current or Capital Account transaction or a combination of both. Remittance under this scheme is on a gross basis.
The Foreign Exchange Management Act (FEMA), 1999 specifies that a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
Further, in order to liberalize the foreign exchange facilities available to resident individuals, RBI has started a Liberalized Remittance Scheme that allows a resident Indian to remit up to US$ 200,000 in one financial year for any permitted capital and current account transactions, including acquisition of immovable property, shares, debt instruments or any other assets outside India as permitted under the scheme.
Liberalized Remittance Scheme (LRS)
The Liberalized Remittance Scheme (LRS) permits all resident Indians, including minors, to make remittance for an amount not exceeding USD 200,000 per financial year for any Current or Capital Account transaction or a combination of both. Remittance under this scheme is on a gross basis.
LRS Guidelines
Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank of India. Individuals can also open, maintain and hold foreign currency accounts with Banks outside India.
The investor can retain and reinvest the income earned on investments made under the Scheme. Currently, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.
Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.
The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can be also be used for these purposes.
Gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 100,000 per financial year under the Scheme. Any money transferred to another country is taxable except money transferred as gift on the occasion of marriage of an individual, irrespective of any limit (but within reasonable amounts) as specified by the taxation laws.
Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.
A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc under this Scheme. Further, the resident can invest in such securities out of the Bank account opened abroad under the Scheme.
