Liberalized remittance scheme (LRS) is a facility provided by RBI for all resident individuals including minors to freely remit up to certain amount in terms of US Dollar for overseas education, travelling abroad for business and private visits, patients for medical treatment, or to a person for accompanying as attendant to patient abroad, gifting and donation, investments in shares and property, maintenance to close relatives living abroad. However, the Reserve Bank of India (RBI) has now narrowed the definition of relatives to immediate relatives such as parents, spouses, children and their spouses under the ‘maintenance of close relative’ category of Liberalised Remittance scheme. This is to check outflow of funds and prevent misuse of facility).
The rules for carrying foreign exchange abroad under LRS are revised from time to time by Reserve Bank of India. At present, LRS limit for all resident individuals is US Dollars 2, 50,000 or in any convertible currencies equivalent to USD 250000/- with effect from May 26, 2015.
The travellers going abroad for business and private visits may purchase foreign currency and currency from Authorised dealers like AD Category banks and Full-Fledged Money Changers (FFMCs) are also permitted to release exchange for business and private visits. The resident Indians can buy foreign exchange maximum 180 days in advance of travelling. Hitherto the LRS transactions are permitted by banks based on declaration made by remitter. Now under tightened reporting norms, daily reporting system by Authorised Dealer (AD) banks of transactions undertaken by individuals under LRS has been placed, which will be accessible to all the other ADs. It will be mandatory for banks to upload daily transaction-wise information undertaken by them under LRS.
Restrictions for remittance under LRS scheme
Under LRS, remittances cannot be used for trading on foreign exchange markets, purchase of Foreign Currency Convertible Bonds issued abroad by Indian by Indian companies and margin or margin calls to overseas exchanges and counterparties. Further, individuals are not allowed to send money to countries identified as ‘non cooperative jurisdictions’ by Financial Action Task Force (FAFT) and remittances to entities identified as posing terrorist risks.