Liberalized Remittance Scheme

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1. Background:

(LRS) was introduced by Reserve Bank of India in 2004 as a step towards further simplification and liberalization of the foreign exchange facilities available to residents. LRS limit has been revised in stages as under:

Date	Feb 4, 2004	Dec 20,2006	May 8, 2007	Sep 26, 2007	Aug 14, 2013	Jun 3, 2014	May 26, 2015 (Current)
LRS Limit (USD)	25,000	50,000	1,00,000	2,00,000	75,000	1,25,000	2,50,000

2. Current Limit:

i. Resident Individuals (RIs) permitted to remit outside India upto USD 250,000/- per Financial Year (FY) (April – March), from RIs own funds (and not borrowed funds). The facility is available to each family member (including minor) and thus a family of four members can remit up to USD 10,00,000/- every FY.

3. Permissible Transactions:

Available for making remittance upto USD 2,50,000 per FY for any current or capital account transactions or combination or both.

3.1 Facilities for RIs

Purpose	Nature of Transactions	Conditions/ Points to be kept in mind
Private Visit	Current Account	Other than to Nepal and Bhutan. Irrespective of number of visits during the FY. All tour related expenses including cost of transportation outside India and overseas hotel/ lodging expenses shall be included under LRS.
Gift	Current Account	RI can make a rupee gift to a NRI/PIO (who is a relative*) by way of crossed cheque/ electronic transfer. Gift amount should be credited to NRO a/c. RI cannot gift to another RI, in foreign currency to the credit of latter's foreign currency a/c held outside India.
Donation	Current Account
Going abroad for employment	Current Account
Emigration	Current Account	RI wanting to emigrate can draw foreign exchange from bank upto the amount prescribed by the country of emigration or USD 2,50,000/- whichever is lower. Remittance outside India in excess of above limit allowed only towards meeting incidental expenses in the country of immigration and not for earning points or credits to become eligible for immigration by way of overseas investments in government bonds, land, commercial enterprises etc.
Maintenance of close relatives* abroad	Current Account
Business trip	Current Account	Attending international conference, seminar, specialized training, apprentice training, etc. are treated as business visits. Irrespective of the number of visits undertaken during FY.
Medical treatment outside India	Current Account	For amount exceeding specified limit, AD category bank can allow remittance based on the estimate from doctor in India or hospital/ doctor abroad without approval from RBI, A person who has fallen sick after proceeding abroad may also be released foreign exchange by an AD category bank (without prior RBI approval) for medical treatment. In addition USD 2,50,000/- per FY is allowed to person accompanying as attendant to a patient going abroad for medical treatment/ check-up.
Students pursuing studies outside India	Current Account	AD category bank can remit upto the limit specified without insisting on any estimate from the foreign university. Remittance exceeding USD 2,50,000/- may be allowed (without prior RBI approval) based on estimate received from the institution abroad.
Purchasing objects of art	Current Account	Subject to provisions of other applicable laws such as the Extant Foreign Trade Policy of the Government of India.
Open, maintain and hold foreign currency a/c outside India	Capital Account
Purchase of property outside India	Capital Account	Investor, who has remitted funds under LRS can retain, reinvest the income earned on the investments. At present, the RI is not required to repatriate the funds or income generated out of investments made under the Scheme.
Investments in shares, securities and mutual funds outside India	Capital Account	Investor, who has remitted funds under LRS can retain, reinvest the income earned on the investments. At present, the RI is not required to repatriate the funds or income generated out of investments made under the Scheme.
Setting up Wholly Owned Subsidiaries (WOS) and Joint Ventures (JV) outside India	Capital Account	For bonafide business Subject to other terms and conditions. Refer the FEMA (Transfer or issue of any Foreign Security) Regulations, 2004 for permissibility, compliance and reporting requirements.
Extending Loans	Capital Account	Loan can be given to NRI/ PIO close relative*. Mode of transfer should be crossed cheque/ electronic transfer and credited to NRO a/c of NRI/ PIO. Loan amount shall not be remitted outside India. Repayment of loan shall be made by way of inward remittances through normal banking channels or debit to NRO/NRE / FCNR a/c of the borrower out of sale proceeds of shares/ securities/ immovable property against which loan was granted. Loan should be free of interest and minimum maturity of the loan is one year. Purpose of loan should be meeting borrower's personal requirements or business purposes in India. It should not be utilized for activities in which investments by persons resident outside India is prohibited namely: i. Business of chit fund, or ii. Nidhi Company, or iii. Agricultural or plantation activities or in real estate business, or construction of farm houses, or iv. Trading in Transferable Development Rights (TDRs).

4. Prohibited Purposes:

LRS is not available for the following:

• remittances for any prohibited activities such as margin trading, lottery, etc.;
• RI cannot gift to another RI, in Foreign Currency for the credit of the latter’s foreign currency account held abroad under LRS;
• Remittances by family members can be invested jointly in banking accounts, shares and securities and property outside India only when each of the remitter is jointly holding such asset.
• Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories” (as available from FATF website www.fatf-gafi.org. or as notified by RBI.)
• Remittances 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 AD category banks.
• AD category banks shall not extend any kind of credit facilities to RIs to facilitate capital account remittances under LRS.

5. Compliance Requirements for actual transfer of funds/ Remittance procedure:

• RI will have to designate an AD category bank branch through which all the remittances under LRS for that FY will be made.
• The applicants should have maintained the bank account with the AD category bank for a minimum period of one year prior to the remittances for capital account transactions.
• If the applicant seeking to make the remittance is a new customer of the AD category bank, bank should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD category bank should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained.
• RI applicant should furnish an application cum declaration in the Form A2. In case of remitter being a minor, the Form A2 must be countersigned by the minor’s natural guardian.
• RIs can also purchase foreign exchange from a full-fledged money changer (FFMC) for private/ business visits. Foreign exchange thus purchased from an FFMC should also be reckoned within the overall LRS limit and declared accordingly in the application-cum-declaration form submitted to the AD category bank.
• PAN card is mandatory for capital account transaction remittances.