Liberalised Remittance Scheme
Overview
The Reserve bank of india has allowed the individuals by way of Limited Remittance scheme, to
make remittances of foreign exchange in india or outside india upto certain limit without
any approval from RBI or AD.
The LRS is only applicable to the individuals and entities like corporate, LLP, Trust, HUF
cannot take benefit of LRS.
The current limit of LRS as specified by RNI is USD 250000 per financial year. If an
individual wants to make remittance more than the mentioned limit then he has to take the
approval of RBI.
Capital Account Transactions Permissible under LRS
Permissible Capital Account Transactions under LRS are as follows:
- To open a foreign currency account with a bank abroad
- purchasing property abroad
- making investments abroad- acquiring and holding shares of listed or unlisted overseas
company or debt instruments; or acquiring the qualification shares of an overseas
company for holding the Director’s post; acquiring foreign company shares in lieu of
professional services rendered or in lieu of remuneration of Director; investment in
Venture Capital Funds, unrated debt securities, Mutual Funds units, promissory notes
- setting up of Joint Ventures and Wholly Owned Subsidiaries outside India for bonafide
business subject to the terms & conditions as specified by the RBI
- extending loans including loans in Indian Rupees to relative Non-resident Indians (NRIs)
Restrictions on Liberalised Remittance Scheme (LRS)
- The LRS Scheme is not available in case of making capital account remittances to
countries which are identified as non-co-operative countries and territories by
Financial Action Task Force (FATF).
- In Case of entities and individuals which are identified as posing significant risk of
committing acts of terrorism as advised separately by the RBI to the banks, if the
remittances is made than that is also not permitted.
- Lottery Tickets, Sweeps, Stakes, Prescribed magazines
- Remittances made for margin / margin calls to overseas exchange / counterparty
- Purchase of FCCB in overseas secondary market issued by indian companies
- Trading in Foreign exchange abroad
Documentation under Liberalised Remittance Scheme (LRS)
The individual who is desirous of taking advantage of LRS must designate one branch of an
Authorised dealer through which all his transactions will be routed. Further, the following
documentation needs to be completed by the remitter:
- Furnish Form A2
- Provide PAN of the Remitter
What is included in the LRS Limit
The limit of remittance upto USD 250000 as provided under the LRS also includes the current
account transactions remittances as follows as available to resident individuals under FEMA
laws :
- private visit
- going abroad on employment
- studies abroad
- business trip
- gift / donation
- medical treatment abroad
- emigration
- maintenance of close relatives abroad
Further, the Remittances under the Scheme can also be consolidated in respect of family
members subject to the condition that the individual family members has complied with its
terms and conditions.
However, in case of capital account transactions such as opening a bank
account/investment/purchase of property, clubbing is only permissible by other family
members, if they are the co-owners or co-partners of the overseas bank account/
investment/property.
Consequences where excess Remittance is required
In case the remittance of more than USD 250000 is required then the remitter must be required
to take prior permission from the Reserve Bank of India and after that the required foreign
exchange will be remitted.
How Rajput Jain and Associates can Assist
We are a Chartered Accountant consulting firm offering all kinds of Consultancy and
Compliances Services in relation to Limited Remittance Scheme. We have empanelled various
experts to provide the expert advisory and Compliances services for Limited Remittance
Scheme
The services that we offer in relation to Limited Remittance Scheme includes the following:
- FEMA Compliances related to Limited Remittance Scheme.
- Applying to RBI in relation to approval for Limited Remittance Scheme, if required
- Submission of documents to AD for release of remittance.
- Drafting of documents for approval from RBI
- Advising various routes for acquisition of immovable property in or outside india,
- Liaisoning with AD Bank and RBI in relation to Limited Remittance Scheme