Summary: The Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme to facilitate outward remittances from India for various purposes. Continue reading to learn more about how this scheme provides a more convenient framework for remitting funds overseas.
The world is becoming increasingly interconnected, and the need to send money abroad for various purposes is more prevalent than ever. Whether it’s funding your child’s education overseas, managing medical bills for a loved one abroad, or making a dream investment, understanding the process of foreign remittances can seem daunting. This is where the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) comes in, offering a simplified and regulated way for Indian residents to transfer funds overseas.
Understanding the Liberalised Remittance Scheme (LRS)
Under the Liberalised Remittance Scheme, all resident individuals, including minors, can remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. Introduced on February 4, 2004, with an initial limit of USD 25,000, the LRS aimed to ease the process and foster economic growth through increased cross-border transactions. Before this, regulations were stricter, and individuals faced limitations on sending money abroad.
Over the years, the LRS limit has been revised gradually, reflecting the evolving economic landscape. Today, LRS allows you, as a resident individual, to freely send funds up to USD 250,000 per financial year (April-March) for various permissible reasons. Note that in the case of a minor remitter, the LRS declaration form must be authorized by the minor’s natural guardian. It’s important to note that the Scheme is not accessible to entities such as corporates, partnership firms, HUF, Trusts, etc.
Purposes for Availing Foreign Exchange under LRS
The RBI’s Liberalised Remittance Scheme (LRS) allows resident individuals in India to send money abroad for various permissible purposes. Here’s a breakdown of the categories under which you can utilize the LRS scheme:
1. Personal visits to any country (excluding Nepal and Bhutan)
2. Gifting or donating money
3. Traveling abroad for employment or emigration
4. Supporting close relatives living abroad
5. Business travel, attending conferences or training, covering medical expenses or check-ups abroad, or accompanying a patient for medical treatment
6. Expenses related to medical treatment overseas
7. Pursuing studies abroad
8. Any other current account transaction not covered under the definition of current account in FEMA 1999.
Prohibited Purposes Under the LRS Scheme
The RBI’s Liberalised Remittance Scheme (LRS) offers a convenient way for Indian residents to send money abroad for various purposes. However, it’s important to be aware of what types of transactions are strictly prohibited under the scheme.
Here’s a breakdown of some of the most common categories of prohibited transactions under the LRS:
1. Remittances for purchasing lottery tickets or sweepstakes, banned magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
2. Remittances from India for margins or margin calls to overseas exchanges/overseas counterparties.
3. Remittances for purchasing FCCBs issued by Indian companies in the overseas secondary market.
4. Remittances for trading in foreign exchange abroad.
5. Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non-cooperative countries and territories”, as updated from time to time.
6. Remittances directly or indirectly to individuals and entities identified as posing a significant risk of committing acts of terrorism, as separately advised by the Reserve Bank to banks.
7. Gifting by a resident to another resident, in foreign currency, for crediting the latter’s foreign currency account held abroad under LRS.
Frequency of Remittances under Liberalised Remittance Scheme (LRS)
There are no limitations on how often remittances can be made under LRS. However, the total foreign exchange acquired from or sent through all channels in India during a financial year must not exceed the cumulative limit of USD 2,50,000.
Once a resident individual has remitted up to USD 2,50,000 during the financial year, they cannot make any additional remittances under this scheme, even if the profits of the investments have been brought back into the country.
Understanding the Requirements to Be Complied with by the Remitter
The Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) streamlines sending money abroad for Indian residents. However, the responsibility doesn’t solely lie with the banks processing the transactions. As the remitter (the person sending the money), you also have certain requirements to fulfill to ensure a smooth and compliant experience.
1. The individual must select a branch of an Authorized Dealer (AD) through which all capital account remittances under the Scheme will be processed.
2. Moreover, applicants may have to maintain a bank account with the bank for at least one year before the remittance.
3. For remittances related to permissible capital account transactions, if the applicant seeking to make the remittance is a new customer of the bank, Authorized Dealers might conduct due diligence on the account’s opening, operation, and maintenance.
4. Additionally, the remitter may have to submit a bank statement from the previous year to verify the source of funds. If such a bank statement is unavailable, copies of the latest Income Tax Assessment Order or filed Return may be requested.
5. The applicant is required to submit Form A-2 detailing the purpose of the remittance and declaring ownership of the funds, ensuring they will not be used for purposes prohibited or regulated under the Scheme.
Documents Required for Remittance of Foreign Exchange under LRS
The documents required for remittance of foreign exchange under LRS can vary depending on the purpose and amount of your transaction. However, here are a few general documents which are required for LRS transactions:
1. A2 cum LRS declaration form – Retail outward remittance application
2. A photocopy of your PAN card
3. Photo cum address proof of the remitter (Adhaar/Passport/voter card etc)
4. Other KYC documents if requested by the service provider
How to Transfer Money Abroad under LRS with BookMyForex?
BookMyForex offers a convenient and secure platform to send money to 150+ countries. Go to the BookMyForex website and follow the below-mentioned steps to effortlessly book your remittance order online:
Step 1: Order Details: Select your city and the destination country, then input the amount you wish to send. Click “Book this Order” to proceed.
Step 2: Customer Details: Confirm the remitter’s information using the Aadhar card and PAN card.
Step 3: Eligibility Check: Indicate the purpose of your remittance and verify your eligibility. Upload necessary documents such as PAN card, remitter’s photo with address proof, etc.
Step 4: Order Processing: Input beneficiary details including name, address, bank name, routing number, bank address, account number, and Swift code.
Step 5: Review Order: Review all order details and proceed to make payment using Net Banking, NEFT/RTGS, or UPI.
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