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Liberalized Remittance Scheme (LRS) | ND Savla & Associates
Liberalized Remittance Scheme (LRS)
1. Background & Limit
The Liberalized Remittance Scheme (LRS), introduced by RBI in February 2004, allows Resident Individuals (RIs) to remit up to
USD 2,50,000 per financial year for any permitted capital or current account transactions.
Any remittance exceeding this limit requires prior RBI approval, except certain special transactions such as medical treatment or education where AD banks may permit additional remittance.
2. Eligibility
- Available only to Resident Individuals (including minors)
- Not permitted for corporates, HUFs, partnership firms, LLPs, or trusts
3. Permissible Transactions Under LRS
Below is a summary of key transactions allowed under LRS across current and capital account categories:
Private Visits Abroad
Permitted for all personal travel, excluding Nepal and Bhutan. Travel, hotel, and tour expenses count toward the LRS limit.
Gifts
Rupee or foreign currency gifts allowed within the LRS limit. Rupee gifts must be credited to the recipient’s NRO account.
Donations
Residents can donate up to USD 2,50,000 per FY to overseas organizations.
Employment Abroad
Individuals moving overseas for work may draw up to USD 2,50,000 from an AD Bank.
Emigration Expenses
Permissible up to USD 2,50,000 or the amount required by the foreign authority.
Maintenance of Relatives
Funds can be remitted up to LRS limit for maintenance of close relatives abroad.
Business Trips
International conferences, training & business meetings permitted. If employer pays, LRS does not apply.
Medical Treatment
No estimate needed up to LRS limit; AD Bank may allow more with medical documentation.
Studies Abroad
Fees allowed up to LRS limit; excess allowed based on university estimate without RBI approval.
Purchase of Art
Permitted subject to compliance with Foreign Trade Policy.
Foreign Bank Accounts
Residents may open, hold, and maintain foreign accounts without RBI approval.
Overseas Property
Residents may acquire property abroad using LRS funds, including pooling limits within family.
ODI / OPI Investments
Permissible under Overseas Investment Rules & Regulations, 2022.
Loans to NRI/PIO Relatives
Interest-free loans allowed to relatives; funds must credit NRO A/c; minimum 1-year maturity.
IFSC Transactions
Permitted subject to fulfilment of specific FEMA conditions.
4. Prohibited Transactions
- Remittance for lottery, betting, margin trading
- Purchase of FCCBs in overseas markets
- Trading in foreign exchange overseas
- Remittances to FATF non-cooperative countries
- Remittances to individuals/entities flagged for terrorism risks
5. Procedure for Remitting Funds Under LRS
- Designate a single AD Bank for all LRS remittances each FY
- Maintain account with AD Bank for at least 1 year (capital transactions)
- Submit Form A2 declaring purpose of remittance
- PAN mandatory for all LRS transactions
- Submit supporting documents as required by the Bank
6. Other Important Points
- No restriction on number of remittances per FY
- Borrowed funds cannot be remitted for capital account transactions
- Clubbing allowed only if remitters are joint owners of the asset
- Unspent foreign exchange must be repatriated within 180 days unless reinvested
- Residents must maintain records of foreign assets and reinvestments
- TCS applies to LRS transactions as per Income Tax Act
Need Expert Guidance for LRS Remittances?
ND Savla & Associates assists with LRS eligibility, documentation, tax computation, Form A2, TCS guidance & bank coordination.
Contact ND Savla
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