Liberalised Remittance Scheme is a scheme introduced by RBI as a liberalization measure to facilitate Resident Individuals (RI) to freely remit funds up to USD 2, 50,000/- outside India in a financial year (April to March) for any permissible current or capital account transaction or a combination of both. The remittances can be made in any freely convertible foreign currency. The following are the permissible capital account transactions that an individual is permitted to remit under LRS;
- opening of foreign currency account abroad with a bank;
- purchase of property abroad;
- making investments abroad- acquisition and holding shares of both listed and unlisted overseas company or debt instruments;
- acquisition of qualification shares of an overseas company for holding the post of Director; acquisition of shares of a foreign company towards professional services rendered or in lieu of Director’s remuneration; investment in units of Mutual Funds, Venture Capital Funds, unrated debt securities, promissory notes;
- setting up Wholly Owned Subsidiaries and Joint Ventures (with effect from August 05, 2013) outside India for bonafide business subject to the terms & conditions stipulated in Notification No FEMA.263/ RB-2013 dated March 5, 2013;
- Extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013.
From February 2021 onwards residents are also allowed to make remittances to IFSCs under LRS. The liberalized remittance scheme (LRS) does not envisage the extension of the fund and non-fund-based facilities by the AD banks to their resident individual customers to facilitate remittances for capital account transactions under LRS. However, AD banks may extend fund and non-fund-based facilities to resident individuals to facilitate current account remittances under the Scheme. The individual will have to designate a branch of an AD through which all the capital account remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. This restriction is not applicable to current account transactions under LRS. Further, Permanent Account Number (PAN) is mandatory for all transactions under LRS.
The remittance facility under the Scheme is not available for the following;
- Purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) Or any item restricted under FEMA Rules 2000 in respect of current account transactions.
- Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.
- Remittances for purchase of Foreign Currency Convertible Bonds (FCCBs) 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- cooperative countries and territories”, from time to time.
- Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.