FAQs related with LRS Scheme (USD 2,50,000 per FY)

FAQs related with Liberalised Remittance Scheme (USD 2,50,000 per FY)

Q1. What is the Liberalised Remittance Scheme of USD 2,50,000?

Ans .: Under the Liberalised Remittance Scheme, resident individuals, including minors, are permitted to remit up to USD 2,50,000 per financial year (April–March) for permissible current and capital account transactions, or a combination thereof.

The Scheme was introduced on 4 February 2004 with an initial limit of USD 25,000, which has been progressively enhanced in line with economic conditions. Key points Applicable only to resident individuals, Not available to corporates, partnership firms, LLPs, HUFs, trusts, etc. & For minors, the LRS declaration must be countersigned by the natural guardian

Q2. What are the prohibited transactions under Liberalised Remittance Scheme?

Ans .: Remittances are not permitted for Items prohibited under Schedule I (e.g., lottery tickets, proscribed magazines), Transactions restricted under Schedule II of FEMA (CAT) Rules, 2000, Margin trading / margin calls abroad, Purchase of FCCBs in overseas secondary markets, Foreign exchange trading abroad, Capital account remittances to FATF non-cooperative countries, Remittances to individuals/entities identified as terrorism-related, Foreign currency gifts by a resident to another resident for credit to overseas accounts

Q3. What purposes are allowed under FEM (CAT) Amendment Rules, 2015?

Ans .: Within the LRS limit of USD 2,50,000 per FY, foreign exchange can be availed for Private visits (excluding Nepal & Bhutan), Gifts or donations, employment, emigration, maintenance of close relatives abroad, business travel, conferences, training, medical treatment abroad, Education abroad, Any other permissible current account transaction.

Authorized dealer banks may process residual current account transactions without RBI approval, subject to due diligence.

Q4. Is income earned abroad under Liberalised Remittance Scheme required to be repatriated?

Ans .: Income earned on overseas investments may be retained and reinvested abroad. Unused or unspent foreign exchange (unless reinvested) must be repatriated within 180 days. Additional repatriation requirements under Overseas Investment Rules, 2022 must be complied with

Q5. Can Liberalised Remittance Scheme limits be consolidated for family members?

Ans .: Yes, remittances may be consolidated for family members subject to individual compliance with Liberalised Remittance Scheme conditions. However: Clubbing is not permitted for capital account transactions unless joint ownership exists. Consolidation is permitted for acquisition of immovable property abroad by relatives

Q6. Is the AD bank required to verify the transaction purpose?

Ans .: Yes. AD banks rely on Form A2 declarations and certify compliance with RBI instructions. However, ultimate responsibility lies with the remitter for FEMA compliance.

Q7. Is PAN mandatory under Liberalised Remittance Scheme?

Ans .: Yes. PAN is mandatory for all Liberalised Remittance Scheme transactions.

Q8. Are there limits on the frequency of remittances?

Ans .: No restriction on frequency. However, total remittances in a financial year must not exceed USD 2,50,000, irrespective of repatriation of proceeds.

Q9. Can remittances exceed USD 2,50,000 for salary earners not permanently resident in India?

Ans .: Such individuals may approach RBI through their AD bank with supporting documents for consideration.

Q10. Does the one-year banking relationship requirement apply to all remittances?

Ans .: No. The one-year account requirement applies only to capital account transactions. Current account transactions can also be facilitated by FFMCs, subject to KYC/AML norms.

Q11. Are remittances to Mauritius and Pakistan allowed?

Ans .: Yes, for permissible current account transactions, subject to FATF and RBI restrictions.

Q12. What are the key compliance requirements for remitters?

Ans .: Designate one AD bank for capital account transactions

• Maintain bank account for minimum one year (capital account)
• Submit Form A2
• Provide source of funds (bank statements / ITR)
• Declare funds are not for prohibited purposes

Q13. Can remittances be made only in USD?

Ans .: No. Remittances can be made in any freely convertible foreign currency.

Q14–15. Are there restrictions on overseas investments?

Ans .:No minimum rating or quality norms prescribed

• Investments must comply with Overseas Investment Rules & Regulations, 2022
• Investors must exercise due diligence

Q16. Can AD banks provide loans for LRS remittances?

Ans .:Not permitted for capital account transactions. Permitted for current account transactions

Q17–18. Can residents open foreign currency accounts in India under LRS?

Ans .: No., Foreign currency accounts in India or OBUs cannot be treated as overseas branches.

Q18. Are Forms 15CA / 15CB mandatory for all remittances?

Ans .: Tax compliance must be ensured as per Income-tax Act. RBI does not prescribe TDS procedures; AD banks must ensure applicable tax laws are followed.

Q19.  LLP-sponsored education expenses – covered under LRS?

Ans .:No. LLP is a separate legal entity. Such remittances are outside the partner’s LRS limit.

Q20. what is LRS applicability to sole proprietors? 

Ans .: A sole proprietor and individual are the same legal person. The USD 2,50,000 limit applies collectively, not separately.

Q21. Is RBI approval required to open overseas bank accounts under LRS?

Ans .:No.RBI approval is not required to open overseas bank accounts under LRS

Q22. Facilities under Schedule III for non-individuals

Ans. Specified limits apply for Donations, Commission payments, Consultancy services, Pre-incorporation expenses, Any excess requires prior RBI approval.

Q23. Loans and gifts to NRI/PIO relatives? 

Ans. Permitted subject to Interest-free loan, minimum 1-year maturity; Within LRS limit; Credit to NRO account; No remittance outside India; Usage restricted to permitted purposes