Though the rupee is not freely convertible, the allowance / limit that Resident Indians have for making foreign investments, gifts and payments has been enhanced / increased over the years and now stands at a whopping US $250,000 per financial year. Also lately there has been substantial consolidation of various limits under one umbrella called the Liberalized Remittance Scheme or the LRS. This week’s article deals with the details of LRS as applicable currently.
Under the LRS, resident individuals including minors can remit funds up to a prescribed limit for any permitted capital and/or current account transaction or a combination of both. As earlier mentioned, currently such prescribed limit stands at US$ 250,000 or its equivalent per FY. AP (DIR) Circular 5 dt. 17.7.14 has clarified that the Scheme can also be used for acquisition of immovable property outside India.
Under LRS, the individual will have to designate a branch of a bank through which all the remittances under the Scheme will be made. For capital account transactions (like purchase of property), the applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance.
Remittance can be consolidated in respect of close family members subject to the individual members being compliant. However, clubbing is not permitted of other family members for capital account transactions such as opening a bank account, making investment, purchasing property, etc., if they are not the co-owners or co-partners of the transaction.
It is mandatory to have PAN. However, it need not be insisted upon for remittance made towards permissible current account transactions up to US$ 25,000. There are no restrictions on the frequency of remittances under LRS.
Individuals can also open, maintain and hold forex accounts with a bank outside India for putting through all transactions connected with or arising from remittances eligible under LRS.
Expenses incurred by individuals for the following purposes are included under LRS w.e.f. 26.5.2015. Remittances exceeding this limit require prior RBI approval.
Private visits to any country (except Nepal and Bhutan): Forex for travel abroad can be purchased from AD against rupee payment in cash below Rs. 50,000. Over this limit the entire payment should be made by way of a crossed cheque, banker’s cheque, pay order, demand draft, debit card, credit card or prepaid card only. On return from a foreign trip, travellers are required to surrender unspent forex held in the form of currency notes and travellers cheques within 180 days of return. However, they are free to retain it up to US$ 2,000, in the form of forex notes or TCs for future use or credit to their RFC Accounts.
Business trips to foreign countries: This is irrespective of the number of visits undertaken during the year. Visits in connection with attending of an international conference, seminar, specialised training, apprentice training, etc., are treated as business visits.
Gift or donation : Any Resident individual/ entity (trust; company; partnership firm, etc.), may remit up-to US$ 2,50,000 in one FY as gift to a person or as a donation to an organization outside India. It is clarified that a Resident cannot gift to another Resident, in forex, for the credit of the latter’s forex account held abroad under LRS.
Remittance of Salary: A person who is a Resident but not Permanently Resident in India and is a citizen of a foreign State other than Pakistan or is a citizen of India, who is on deputation to the office or branch of a foreign company or subsidiary or JV in India of such foreign company, may make remittance up to his net salary (after deduction of taxes, contribution to provident fund and other deductions).
It is clarified that salary includes earnings from stage shows and other earnings from modelling assignments and acting assignments etc.
Further, such an individual who has remitted his entire earnings and salary and wishes to further remit ‘other income’ may approach RBI through their AD bank for consideration.
Medical expenses or check-up abroad: Banks may allow amount exceeding the LRS limit provided the request is supported by an estimate from a hospital/doctor in India/abroad. Otherwise, a self-declaration in Form A2 and ‘Application cum declaration for purchase of forex’ is sufficient. In addition to the above, an amount up to the LRS limit per FY is allowed to a person for accompanying as attendant to the patient.
Miscellaneous Purposes: The Scheme also covers expenses incurred in going abroad for employment, Emigration, Maintenance of close relatives abroad, Studies abroad and any other current account transaction. However, for expenses in connection with emigration, medical treatment or studies abroad, individuals may be permitted to exceed LRS limit, if it is so required by the country of emigration, medical institute offering treatment or the university.
Rupee Loans (or Gifts) by Residents to NRI Close Relatives
A Resident individual may give a loan (or a gift) to a close NRI relative under the LRS by way of crossed cheque or electronic transfer, subject to —
Where a bank in India has granted loan to an NRI, a Resident close relative is permitted to repay the loan taken by NRI.
(The authors may be contacted at wonderlandconsultants@yahoo.com)
