Understand the benefits, rules, and regulations of LRS
A few decades ago, remitting funds abroad to educate your child or help in emergencies was cumbersome and time-consuming. To streamline outward remittances like these, the Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS) in 2004.
This article will give you insight into the LRS and help you understand which transactions the RBI allows and prohibits.
The Liberalised Remittance Scheme is what enables parents to send money to their child studying abroad. This scheme is available to any resident individual (adult or minor). You can send up to $2,50,000 abroad in each financial year. The LRS is unavailable to corporates, partnership firms, HUF or Charitable Trusts. The scheme enlists authorised dealers such as banks to facilitate foreign exchange between resident Indians and their beneficiaries abroad. For every transaction under the Liberalised Remittance Scheme, you will have to provide your PAN.
With economic liberalisation in the 1990s, India opened her doors to the world. On the 4th of February, 2004, the RBI introduced the Liberalised Remittance Scheme. The LRS is a result of the Tarapore Committee's recommendations.
LRS is the reason why millions of Indians like you can support their families abroad or send money for other purposes around the world.
The LRS includes a comprehensive list of purposes for which you can remit funds. The list is different for current account transactions and capital account transactions:
A resident individual can make remits up to $2,50,000 each financial year. There is no restriction on the number of transactions. However, you must maintain a capital account for at least one year before your first remittance.
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As per the latest RBI guidelines, the following remittances are prohibited under the LRS:
The Liberalised Remittance Scheme enables you to send money abroad the way you wish to by providing proper structure and guidelines. The LRS highlights legal channels through which you can remit funds.
The LRS empowers resident individuals to invest in foreign assets and build a better economic future for themselves and their families. For families with children studying abroad, LRS ensures a safe and efficient way of paying fees and meeting living expenses. Many Indians go abroad to seek necessary medical treatment. The LRS allows them to pay for it without the added hassle of too many protocols and paperwork.
The Liberalised Remittance Scheme applies to only Indian residents living in the country. While an NRI can hold a bank account in India, the remittance rules will differ.
An NRI can hold any of the following types of bank accounts in India:
RBI guidelines state that an NRI can remit up to $10,00,000 from India each financial year through their NRO account. In the case of an NRE or FCNR (B) account, there is no upper limit. However, there are restrictions on what type of inward remittances are allowed on the NRE and FCNR (B) account.
There are specific terms and conditions laid down by the RBI regarding NRI bank account in India. It is best to check the latest guidelines before proceeding to make remittances from such accounts.
The Liberalised Remittance Scheme provides an extensive and structured system for resident individuals who wish to remit money overseas. You can send money to your loved ones abroad or for other transactions the RBI allows. Remember to keep your PAN card information ready, since it is mandatory.
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