Scheme of LRS
- Foreign Exchange Management Act 1999 (FEMA) restrict the drawal of forex except to the extent allowed by its Regulations.
- Under LRS, Indian Residents are allowed to remit prescribed amount (Per FY) of forex outside India to anyone for all permissible capital account transactions, without any prior approval of RBI. They just need to contact an Authorised Person/Dealer for this (i.e. Full Fledged Money Changer, Banks).
- LRS is available for Resident individuals including minors. Limit can be consolidated for whole family.
- For undertaking transactions under this Scheme, resident individuals may use the application-cum-Declaration Form (mentioning that funds belong to remitter and will not be used for prohibited purposes).
- It is mandatory to have PAN number to make remittances under the Scheme.
Permissible Transactions Under LRS
- LRS remittance can be made towards eligible current account and capital account transactions.
- Eligible current account transactions for the purposes of LRS are: Private Visit, Gift, Donation, Emigration, Medical Exps, Overseas business travel, Overseas Studies, Employment outside India, Maintenance for close relative.
- The permissible capital account transactions, for which the LRS limit is allowed, are: (i) Foreign Bank Account (ii) Property Purchase Outside India (iii) Investments in Shares, Mutual Funds etc (iv) Setting up of Wholly Owned Subsidiary/Joint Venture (v) Rupee Loan to Relative NRIs.
- To rationalize the current account and capital account transactions, and to facilitate ease of transactions for Resident Individuals, limit of all permitted current account transactions shall be subsumed under the overall limit of 250,000. Hence, resident individuals can now avail upto 250,000 USD per FY for permitted current account or capital account transaction or combination of both. However, for the purposes of Emigration, Medical Expenses Abroad, Studies Abroad, as per the requirement of country/medical institute/university, forex can be availed in excess of overall limit.
- This facility is not allowed for remittances wrt prohibited or illegal activities such as margin trading, lottery etc.
- AD is not allowed to extend funded/non-funded facilities to resident individuals to facilitate remittance under this scheme.
- For remittance under this scheme, the applicant should have maintained the bank account with the bank for more than one year before the remittance is being made.
- Remittance under this scheme is not allowed to countries notified as non-cooperative countries/territories by FATF.
- ADs will furnish on monthly basis information on the number of applicants and total amount remitted under the scheme to RBI.
This article is useful and relevant for all Resident Indians as well as NRIs. It also clarifies various general doubts & frequently asked questions of Individuals wrt Forex Drawal Laws, such as:
- What are the regulations for remitting forex for sending money abroad to buy immovable property abroad?
- Can I set up a company abroad without obtaining RBI Approval?
- I am an Individual. Can I make investments abroad? What are the regulations for making Investments Abroad?
- Can I lend money to my NRI relative? I am an NRI. Can I borrow money from my relatives in India?
- I am an Individual. Can I open a Bank account abroad? Can I deposit money in my Bank Account Abroad?
- I want to settle my children abroad in future. Can I buy some investments and property abroad?
- What are the limits of remitting foreign exchange abroad?
- I am an Individual resident in India. I have a wife and two small kids. What are my limit for remitting foreign exchange abroad for buying some investments, opening a bank account and purchasing an immovable property?
- Which are the countries, where I can remit forex under LRS scheme?
- What are the formalities for remitting forex under LRS Scheme?
- To whom should I contact, for remitting forex under LRS Scheme?