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

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Frequently Asked Questions (Faq)

  • Is Limited Remittance Scheme is available to HUF, corporates, Trusts, partnership firms, etc.?

    No, the scheme is available only to resident Individuals and is not available to HUF, corporates, Trusts, partnership firms, etc.

  • What is the current limit of remittance under Limited Remittance Scheme?

    The current limit of remittance under Limited Remittance Scheme is USD 250000.

  • Can one resident gift foreign currency to another resident for credit to the foreign currency account held abroad under LRS?

    One resident individual is not allowed to gift to another resident individual the foreign currency, for the purpose of credit to the foreign currency account held abroad under LRS.

  • Is LRS Scheme is available to Minor also?

    The Liberalised Remittance scheme is available to Minor also, subject to the comdition that the Form A2 of minor must be countersigned y the guardian of the minor.

  • In which currency the remittance can be made in LRS?

    The remittances can be made in any freely convertible foreign currency.

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