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Sending Money Abroad from India: The Liberalized Remittance Scheme

Sending money abroad to India

In 2004, the Government of India along with the Reserve Bank of India formulated a scheme to facilitate the remittance of money outward from India. This scheme was called Liberalized Remittance Scheme. Under the Liberalized Remittance Scheme in its present form the Authorized Dealer (Both Cat I & II) can freely allow outward remittances by Resident Indians till US $ 250,000 in a financial year. However, this scheme is not available to Corporates, Hindu Undivided Families, Trusts, Partnership Firms and the like.

Permissible Transactions under Capital Account

The permissible capital account transactions by a resident individual under LRS are:

  1. Opening of foreign currency account abroad with a bank
  2. Purchase of property abroad
  3. Making investments abroad
    • Acquisition and holding shares of both listed and unlisted overseas company or debt instruments;
    • Acquisition of ESOPs (the Scheme is in addition to acquisition of ESOPs linked to ADR / GDR and acquisition of qualification shares);
    • Investment in units of Mutual Funds, Venture Capital Funds, unrated debt securities, promissory notes;
  4. Setting up Wholly Owned Subsidiaries and Joint Ventures (with effect from August 05, 2013) outside India for bona fide business subject to the terms & conditions stipulated in RBI notifications from time to time.
  5. Extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013.

Permissible Transactions under Current Account

The permissible transactions under the current account are:

  1. Private Visits – Private visits to any country other than Nepal & Bhutan are allowed the limit of US $ 250,000. Also there is no limits on the number of such visits.
  2. Gift or Donation – Any resident Indian can gift an amount within the limits of LRS.
  3. Going abroad for employment – Any resident while going abroad from India for employment can take with him foreign currency within the limits set by LRS.
  4. Persons who emigrate – Any resident when moving abroad for emigration can draw foreign currency as per the limits of LRS or up to that amount which is permissible by the country where he is emigrating.
  5. Maintenance of Close Relatives abroad – Again this is an allowed transaction under LRS. The definition of close relatives is governed by the definition of the same under the companies act 2013.
  6. Business Trips – All business trips and any number of times in a year shall have the limit of LRS.
    • But if the person is under deputation of a company and the expenses are borne by the company where the person is going under deputation, the of LRS will not apply & this will be outside the purview of LRS.
  7. Medical Treatment Abroad – A person travelling on medical grounds can also avail the LRS limit for carrying foreign currency abroad. However, if the traveler needs more foreign exchange due to certain medical conditions, a few more provisions are applicable for the same.
  8. Students pursuing Higher Studies – Students who are pursuing higher studies can avail amounts of foreign currency under the LRS limits. But if the requirement is more, based on the documentation, the same can be availed by the student. But this is at the discretion of the bank or foreign exchange company, who is disbursing such money.
  9. Purchase of Objects of Art – The remittances under LRS can be used to purchase objects of art, but subject to the foreign trade policy of the Indian government.
  10. Other provisions of LRS:
    • Negotiable instruments can be in the name of the sender or beneficiary of the money. It can also be in the name of the traveler. A self-declaration is required.
    • Opening of Banking Accounts with banks outside India are permissible
    • The person seeking to apply for LRS and take foreign currency, cannot be out of a credit facility of the bank, where the foreign currency is being sought.
    • Only permissible to conduct the same with FATF cooperative countries, under the capital account.
    • LRS is not applicable for specifically prohibited transaction under the RBI regulations.

Loan Facility for NRIs and PIOs

The Non Resident Indian(NRI) or Person of Indian Origin(PIO) can avail a loan from an Indian Resident, subject to certain conditions. The conditions are:

  1. The loan is interest free and the tenor is that of one year.
  2. The loan amount is within the limits of the LRS Limits.
  3. This loan would be used in meeting the NRI’s (Borrower) personal needs
  4. The loan will not be used for businesses abroad which by its nature are prohibited in India.
  5. The loan repayments should be credited to the NRO account and would be treated as eligible credits.
  6. The loan amount shall not be remitted outside India
  7. Repayment of this loan should be made by normal banking channels to the NRO/NRE/FCNR accounts.

Gift to NRIs or PIOs

Under the LRS Rupee gifts can be made to the NRI or PIO by a resident individual, subject to the limits of LRS.

Procedures & Forms of LRS

The procedural aspects and form A2 for sending the money under the provisions of LRS can be obtained from the RBI website under the Notifications section, or at the time of sending from the bank or non-banking company, as the case may be.

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