• By ADMIN
• Posted 24 May, 2024
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FAQ on the Liberalised Remittance Scheme (LRS)

1. What is the Liberalised Remittance Scheme (LRS) for resident individuals?

The LRS allows resident individuals to freely remit up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital account transactions or a combination of both. This scheme is not available to corporates, partnership firms, HUFs, Trusts, etc.

2. How has the LRS limit changed over time?

Since its inception on February 4, 2004, the LRS limit has been revised multiple times based on economic conditions:

- Feb 4, 2004: USD 25,000

- Dec 20, 2006: USD 50,000

- May 8, 2007: USD 100,000

- Sep 26, 2007: USD 200,000

- Aug 14, 2013: USD 75,000

- Jun 3, 2014: USD 125,000

- May 26, 2015: USD 250,000

3. Who can use the LRS?

All resident individuals, including minors, can use the LRS. If the remitter is a minor, the Form A2 must be countersigned by the minor’s natural guardian.

4. Can family members consolidate their remittances under LRS?

Yes, remittances under LRS can be consolidated among family members, but clubbing is not allowed for capital account transactions unless the family members are co-owners or co-partners of the overseas account/investment.

5. What transactions are not allowed under LRS?

Transactions not permissible under FEMA and remittances for margins or margin calls to overseas exchanges or counterparties are not allowed under LRS.

6. What are the permissible capital account transactions under LRS?

Under LRS, resident individuals can:

- Open a foreign currency account abroad

- Acquire immovable property abroad

- Make Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI)

- Extend loans in INR to NRIs who are relatives

7. What current account transactions are included under the LRS limit of USD 2,50,000?

The USD 2,50,000 limit includes remittances for:

- Private visits abroad

- Gifts and donations

- Going abroad for employment

- Emigration

- Maintenance of relatives abroad

- Business trips

- Medical treatment abroad

- Studies abroad

8. Can residents purchase objects of art under LRS?

Yes, residents can use LRS for purchasing objects of art, subject to other applicable laws such as the Foreign Trade Policy.

9. Can individuals open foreign currency accounts abroad under LRS?

Yes, individuals can open, maintain, and hold foreign currency accounts with a bank outside India for making remittances under LRS without prior approval from the Reserve Bank of India.

10. Are loans to NRIs/PIOs covered under LRS?

Yes, resident individuals can lend to NRIs/PIOs who are relatives, subject to certain conditions such as the loan being interest-free, having a minimum maturity of one year, and the total amount not exceeding the LRS limit.

11. Can resident individuals make remittances to International Financial Services Centres (IFSCs) in India under LRS?

Yes, remittances can be made to IFSCs in India for permissible investments and for paying fees for studies abroad as specified. Resident individuals can also open Foreign Currency Accounts (FCAs) in IFSCs.

12. Are there any restrictions on the use of LRS?

Yes, LRS cannot be used for:

- Remittances for purposes prohibited under Schedule I or restricted under Schedule II of Foreign Exchange Management (Current Account Transaction) Rules, 2000.

- Capital account remittances to countries identified by the Financial Action Task Force (FATF) as non-cooperative.

- Transactions involving individuals or entities posing significant risks of terrorism.

13. What documentation is required for remittance under LRS?

Individuals must designate a branch of an Authorised Dealer for all LRS remittances and provide Form A2 for the purchase of foreign exchange. Providing a Permanent Account Number (PAN) is mandatory.

14. What happens to unused foreign exchange under LRS?

Unused foreign exchange should be repatriated and surrendered to an authorised person within 180 days from the date of receipt, unless reinvested. Compliance with Foreign Exchange Management (Realisation, repatriation, and surrender of foreign exchange) Regulations, 2015, is required.

15. What are the operational instructions for Authorised Persons regarding LRS?

- Authorised Persons must comply with the provisions of FEMA and ensure KYC and Anti-Money Laundering guidelines are followed.

- Maintain records for RBI verification.

- Ensure remittances are made from the funds of the individual seeking the remittance.

- Report remittances in FETERS and maintain necessary documentation.

For detailed guidance and any specific queries, individuals and Authorised Persons should refer to the Master Direction on Liberalised Remittance Scheme by the Reserve Bank of India.