The Reserve Bank of India has introduced the Liberalised Remittance Scheme aka LRS way back in 2004. The main reason behind the introduction of LRS was to regulate the flow of Indian rupees out of India. As we have already come to the 21st-century number of residents and non-residents Indians travelling and working across the world has increased.
Hence the scheme has become much more significant than ever these days. Here in this article, we have discussed everything you must know about the Liberalised Remittance Scheme. So, scroll through to get all the information.
Transfer of Money out of India is a cumbersome process and requires a lot of approvals. However, considering the increase in the level of globalisation and the requirement of transfer of funds across countries, this process needs to be simplified.
Through the Liberalised Remittance Scheme (“LRS”), the RBI allows residents and non-resident Indians to freely remit money out of India, up to given threshold, with the help of authorised dealers and Indian banks.
LRS specifies a threshold limit which is freely transferable during the year and such threshold limit is to be counted for every Financial year (April to March).
Limit for transfer of funds has been revised over the period of time and at present, such threshold limit is $250,000 per fiscal year out of India. Threshold limit of $ 250000 includes Capital Account and Current Account transactions.
Such limit is available to all individuals including minors, However, in case of minors, Form A2 must be countersigned by minor’s natural Guardian.
Any resident of India holding a PAN card alongside other documents can avail the scheme. Even the minors having the appropriate documents can use the LRS. Primarily, through the LRS scheme, one can send money for any of the following purposes,
Not only the cases mentioned above, but through LRS, one can remit his/her salary in India after taxes. But the upper cap is up to $250,000 in this case as well.
There are certain Capital Account Transactions that are allowed under the LRS. Have a look at the list below to get a clear idea,
Introduction of the LRS scheme is nothing but a small step that the Government of India has taken towards pulling apart the controls on foreign exchange movements in and out of the country. Inside a liberalised economy, capital controls don't have any place.
But a country like India, which depends heavily on the imports of critical goods it's obvious that we spend much more on the foreign exchange than we earn. Hence it is quite obvious that freeing up remittance can actually ruin the exchange rates.
That's the reason while keeping an eye on the situation currently, the Reserve Bank of India has tweaked the rules. For example, in the middle of 2013, India was going through a large account deficit. The LRS limit was cut down to $75,000. Since then, it has been hiked again in a few phases.
You can send money as many occasions as you want within a financial year (April-March). But the total limit of $250,000 has to be maintained.
Though the limit is designated in USD, you can remit the money in any convertible foreign currency that your authorised dealer offers.
A permanent account number, or PAN, is compulsory for all the transactions you make under the LRS.
Read more about TCS on Foreign remittances through Liberalised Remittance Scheme (LRS) and on Selling of Overseas Tour Packages @ 5%
