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    Liberalised Remittance Scheme

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    Jahnavi tiwari
    LRS, or the Liberalised Remittance Scheme, allows resident individuals to freely remit up to $250,000 per year for permitted current and capital account transactions. It was introduced by the RBI in 2004 to facilitate fund transfers abroad. Eligible individuals include resident individuals and minors, and can use LRS for private visits, gifts, employment, education, and medical expenses abroad. Permissible capital account transactions include opening foreign currency accounts, purchasing property, investing in shares/mutual funds, and setting up business ventures abroad. Individuals must designate an authorized dealer bank branch and submit form A2 for remittances under LRS.

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    Liberalised Remittance Scheme

    Uploaded by

    Jahnavi tiwari
    42 views11 pages
    LRS, or the Liberalised Remittance Scheme, allows resident individuals to freely remit up to $250,000 per year for permitted current and capital account transactions. It was introduced by the RBI in 2004 to facilitate fund transfers abroad. Eligible individuals include resident individuals and minors, and can use LRS for private visits, gifts, employment, education, and medical expenses abroad. Permissible capital account transactions include opening foreign currency accounts, purchasing property, investing in shares/mutual funds, and setting up business ventures abroad. Individuals must designate an authorized dealer bank branch and submit form A2 for remittances under LRS.

    Original Description:

    Introduction to the Liberalised Remittance Scheme

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    LRS, or the Liberalised Remittance Scheme, allows resident individuals to freely remit up to $250,000 per year for permitted current and capital account transactions. It was introduced by the RBI in 2004 to facilitate fund transfers abroad. Eligible individuals include resident individuals and minors, and can use LRS for private visits, gifts, employment, education, and medical expenses abroad. Permissible capital account transactions include opening foreign currency accounts, purchasing property, investing in shares/mutual funds, and setting up business ventures abroad. Individuals must designate an authorized dealer bank branch and submit form A2 for remittances under LRS.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    42 views11 pages

    Liberalised Remittance Scheme

    Uploaded by

    Jahnavi tiwari
    LRS, or the Liberalised Remittance Scheme, allows resident individuals to freely remit up to $250,000 per year for permitted current and capital account transactions. It was introduced by the RBI in 2004 to facilitate fund transfers abroad. Eligible individuals include resident individuals and minors, and can use LRS for private visits, gifts, employment, education, and medical expenses abroad. Permissible capital account transactions include opening foreign currency accounts, purchasing property, investing in shares/mutual funds, and setting up business ventures abroad. Individuals must designate an authorized dealer bank branch and submit form A2 for remittances under LRS.

    Copyright:

    © All Rights Reserved
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    of 11

    Liberalised

    Remittance
    Scheme
    By Jahnavi Tiwari – Summer
    Trainee
    What is LRS?

    LRS stands for Liberalised Remittance Scheme

    LRS was introduced by RBI, as a liberalization measure to facilitate resident individuals to remit
    funds abroad for permitted current or capital account transactions or combination of both.

    It was first introduced on February 4,2004 and has been subject to several revisions over the
    years.

    Under this scheme, Resident individuals are allowed to remit freely up to USD 250,000 per
    financial year.
    The LRS limit over the years
    Who is 1. Resident individuals

    eligible to 2. Minors (LRS declaration form must be


    countersigned by the minor’s natural
    remit funds guardian)
    under LRS? 3. LRS is not available to corporates,
    partnership firms, HUF, trusts, etc
    1. Private visits to any country (except Nepal and Bhutan)

    2. Gift or donation

    Permissible 3. Going abroad for employment

    current 4. Emigration

    account 5. Maintenance of close relatives abroad

    transactions 6. Overseas business trip

    7. Expenses in connection with medical treatment abroad

    8. Studies abroad
    1. Opening of foreign currency account abroad with a bank
    outside India

    2. Purchase of property abroad

    Permissible
    capital 3. Investments in shares, securities, mutual funds, etc abroad

    account
    transactions 4. Setting up wholly owned subsidiaries (WOS) and Joint
    Venture (JV) abroad for bonafide business subject to
    stipulated terms and conditions

    5. Extending loans in INR to NRIs who are relatives as defined


    in Companies Act, 2013
    Requirements for remitting foreign
    exchange
    1. The individual will have to designate a branch of an AD
    through which all the remittances under the Scheme will
    be made.

    2. The individual must furnish Form A-2 regarding the


    purpose of the remittance and declare that the funds
    belong to him and will not be used for purposes prohibited
    or regulated under the Scheme.

    3. Permanent Account Number (PAN) is mandatory for all


    transactions under LRS.
    Prohibitions under LRS
    Remittance for any prohibited activities such as margin trading, lottery, etc.

    Remittance for purchase of Foreign Currency Convertible Bonds issued by Indian Companies in the overseas
    secondary market

    Remittance for trading in foreign exchange abroad

    Capital Account remittances, directly or indirectly to countries identified by the Financial Action Task Force
    (FATF) as “Non co-operative countries and territories”, from time to time

    Remittance directly or indirectly to those individuals and entities identified as posing significant risk of committing
    acts of terrorism as advised separately by the RBI to the banks
    Modes of Transfer

    2 methods of money transfer that


    are approved by RBI

    Wire transfer Demand Draft


    (SWIFT) (Foreign Currency
    Demand Draft)
    The process of money transfer
    Approach the Individual is required to designate a single branch of AD
    Authorised through which all the remittances under the scheme will have
    to be made.
    dealer

    • PAN card is mandatory for all transactions.


    • Bank should ensure all the KYC guidelines have been complied
    Documentation with
    • Filling up of form A2

    Choose mode of Individual can choose between a wire transfer (SWIFT)


    or a FCDD
    transfer
    a. Remittances under this scheme can be made in any freely
    convertible foreign currency and not just USD.
    b. There are no restrictions on the frequency of remittances under
    LRS. However, the total amount of foreign exchange purchased
    from or remitted through, all sources in India during a financial year
    should be within the cumulative limit of USD 2,50,000.
    c. Individual may avail facility in excess of the limit prescribed for

    Few more
    purpose of emigration, medical treatment and studies outside, if it is
    so required by the country of emigration, medical institute offering
    treatment or the university respectively but subject to certain

    facts about
    conditions. In other cases, prior RBI permission is required to remit
    funds exceeding USD 2,50,000/-

    LRS
    d. Remittances under LRS can be consolidated in respect to current
    account transactions of family members (including minors) subject
    to individual family members complying with LRS terms and
    conditions.
    e. Repatriation is not mandatory. If someone has invested across
    shares and mutual fund schemes abroad, the LRS rules allow the
    investor to retain and reinvest the income earned in that country. It
    is not necessary for the investor to repatriate the accrued interest or
    dividends on the deposits and investments made abroad

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