Before 2004, remitting funds to overseas countries for emergencies was a challenging and time-consuming process. Prior approval from the Reserve Bank of India was mandatory for executing remittance transactions those days. After realizing the importance of remittances across countries, RBI introduced Liberalized Remittance Scheme on February 4, 2004.
Through this article, you can understand more about LRS, approved purposes, taxability, etc.
| Key Points | Explanation within the purview of RBI guidelines |
| What is LRS? | RBI extended this facility to allow resident Indian Citizens to send money up to USD 2,50,000 to anywhere in the World without any prior approval for the permitted purposes on a Financial Year. |
| Situations lead to LRS | RBI entrusted the Tarapore committee with studying and reporting on international remittances, and based on the committee recommendations, LRS came into effect. The very purpose behind the introduction of LRS was to streamline outward remittance. |
| LRS by entities | LRS is only for resident Indian citizens or individuals. Corporates, Partnership firms, Trusts, etc., cannot do remittance under LRS. |
| Minor | Minor can do the remittance under LRS provided LRS declaration form must be countersigned by remitter’s natural guardian. |
| Prohibited purposes | Income earned from hobbies like racing, riding, purchasing lottery tickets, banned magazines, football pools, sweepstakes, etc. |
| Approved purposes | All Private visits to any country (except Nepal and Bhutan), Gift or donation, employment, Emigration, Maintenance of close relatives abroad, Travel for business, attending a conference or specialized training, and expenses in connection with medical treatment and Studies abroad. |
| Above USD 2,50,000 | One can remit above 2, 50,000 on RBI’s prior approval. |
| Pan Card | Pan Card is mandatory for every resident individual to carry out remittance transactions under LRS. |
| Frequency of the remittances | There are no restrictions on the count of transactions under LRS. But, the total amount of transactions should not exceed USD 2,50,000 in a financial year. |
| Remittance Countries, territories, and Individuals | Remittance directly or indirectly is not allowed to the countries and territories listed as non – cooperative countries by the Financial Action Task Force (FATF) and to those individuals identified as posing a significant risk of committing acts of terrorism as advised by the Reserve Bank separately. |
| TCS on LRS Remittances | 5% TCS (Tax collected at Source) applicable on remittances under Liberalized Remittance Scheme above Rs.7 lakh. This new rule is applicable from October 1, 2020. |
| Remittance by sole proprietor under LRS | The owner of the business can send the money under LRS. A sole proprietor who wishes to send money can do that by debiting his current account. Let it be a sole proprietor by debiting the current account or an individual by debiting the Savings account; both limits together or separately cannot cross USD 2,50,000. |
The most crucial aspect of Liberalized Remittance Scheme was that resident Indians can now remit freely for the purposes authorized by RBI as per the limits approved. But you should ensure that you are approaching the most trusted and authorized agents like Unimoni Financial Services for easy and hassle-free remittance experiences.
