LIBERALISED
REMITTANCE SCHEME - ECONOMY
News:
Does LRS limit apply to
NRO account?
What's
in the news?
●
Outward remittances under the Reserve Bank
of India’s (RBI) Liberalised Remittance Scheme (LRS) registered a
month-on-month growth of 28 per cent to $2.4 billion in December, mainly due to
higher spending by Indians on overseas travel.
Key
takeaways:
●
In the first nine months of FY24, the
total outward remittance was around $25 billion.
●
Indians spent US$ 267.56 million on
education abroad in the reporting month, compared to $207.55 million in
November.
Liberalised
Remittance Scheme:
Backdrop:
●
The scheme was introduced in February 2004
and its regulations are provided under Foreign
Exchange Management Act (FEMA), 1999.
Features:
●
It allows resident individuals to remit a
certain amount of money during a financial year to another country for
investment and expenditure.
●
According to the prevailing regulations,
resident individuals may remit up to $250,000
per financial year.
Eligible
persons:
●
LRS is open to everyone including non-residents, NRIs, persons of Indian
origin (PIOs), foreign citizens with PIO status and foreign nationals of Indian
origin.
●
The Scheme is not available to corporations, partnership firms, Hindu Undivided
Family (HUF), Trusts etc.
●
The definition of relatives under LRS has
been now aligned with the definition of relative with the definition given in Companies Act, 2013 instead of
Companies Act, 1956.
Permitted
activities:
●
Under LRS, individuals can make
remittances for overseas education, travel, medical treatment, maintenance to
relatives living abroad, gifting and donations.
●
The remitted money can be used for
purchase of shares and property as well.
●
Individuals can also open, maintain and
hold foreign currency accounts with overseas banks for carrying out
transactions under it.
Prohibited
activities:
●
Under LRS, remittances cannot be used for trading on foreign
exchange markets, purchase of Foreign Currency Convertible Bonds issued abroad
by Indian companies and margin or margin calls to overseas exchanges and
counterparties.
●
Similarly, individuals are not allowed to
send money to countries identified as ‘non cooperative jurisdictions’ by the
Financial Action Task Force (FAFT).
●
It also prohibits remittances to entities
identified as posing terrorist risks.