Liberalised Remittance Scheme
Liberalised Remittance Scheme
Subject: Economy
Section: External Sector
Outward forex remittances under the Reserve Bank of India’s liberalised remittance scheme (LRS) hit an all time high in FY22 as Indians splurged on overseas education and international travel.
Outward Remittances:
Outward remittance is a transfer of funds in the form of foreign exchange by a person from India, to a beneficiary outside India (except for Nepal and Bhutan) for any bonafide purposes as permissible under Foreign Exchange Management Act (FEMA), 1999.
Purpose:
- Cover educational costs
- Cover living expenses of a family member
- Pay for travel trips taken
- Medical treatments
- Buying assets abroad
- Gifting or donating to an individual or organisation
About Liberalised Remittance Scheme (LRS):
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely 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.
The Scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions.
Individuals can avail of foreign exchange facility for the following purposes within the LRS limit of USD 2,50,000 on financial year basis:
- 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 is not covered under the definition of current account in FEMA 1999.
The Scheme is not available to corporates, partnership firms, HUF, Trusts etc. The remittance facility under the Scheme is not available for the following:
- Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweepstakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
- Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.
- Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.
- Remittance for trading in foreign exchange abroad.
- Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.
- Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.
Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.