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R5: Liberalised Remittance Scheme (LRS)

Liberalised Remittance Scheme (LRS)

The Liberalised Remittance Scheme (LRS) is a facility provided by the Reserve Bank of India (RBI) that allows Resident Indians, including OCIs who have become Resident Indians for tax purposes due to their stay in India, to remit a certain amount of money during a financial year to another country for investment and expenditure.

Key Features

  • Remittance Limit: Resident individuals can remit up to $250,000 per financial year. This can be done in any number of transactions as long as the total amount does not exceed the limit.

  • Usage: The remitted amount can be used for both current account and capital account transactions. TDS is deducted on remittances above a certain limit.

Permitted Uses

The money under LRS can be used for:

  • Education abroad

  • Gifts

  • Donations

  • Maintenance expenses of close relatives abroad

  • Investment in equity, debt, or property abroad, following prescribed regulations

  • Travel for business, conferences, or training

  • Travel and expenditure for medical reasons for oneself

  • Travel as a companion for a person going abroad for medical treatment

  • Emigration purposes

  • Providing a loan to a close relative who is an NRI, as long as no interest is charged and the loan is at least for a year

  • Indian resident parents can gift money to their children who are NRI/OCI/PIO

Prohibited Transactions

Some transactions are not allowed under the LRS scheme:

  • Buying and selling of foreign exchange abroad

  • Purchase of lottery tickets or sweepstakes

  • Gifts from one Indian resident to another Indian resident, in foreign currency, to be credited in an account held abroad under LRS

  • Certain types of income transfers and remitting money to certain countries are restricted

Eligibility and Requirements

  • The LRS scheme is available only to individual Resident Indians. It is not available to Association of Persons, Body of Individuals, Companies, HUFs, LLPs, Partnership Firms, Societies, or Trusts.

  • Individuals need a PAN and must complete KYC for remittance. They should have maintained an account with the remitting bank for at least a year, and the bank must conduct due diligence for the account’s opening, maintenance, and operation.

NRIs and LRS

  • NRIs do not have resident savings accounts; they have NRE, NRO, or FCNR accounts. They can remit amounts abroad from these accounts subject to rules and documentation.

    • They can remit up to $1,000,000 from an NRO account.

    • There are no restrictions on remittance from NRE or FCNR accounts.

Benefits

The Liberalised Remittance Scheme helps Indian residents manage monetary transactions abroad, making their lives easier. It allows for expenses related to medical treatments, education, and other purposes, and provides a way to diversify investment portfolios by investing outside India.

For more details refer RBI website https://m.rbi.org.in/scripts/FAQView.aspx?Id=115

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