The Liberalized Remittance Scheme (LRS) is a facility provided by the RBI for all resident individuals including minors to freely remit upto a certain amount in terms of US Dollar for current and capital account purposes or a combination of both. Hence under the LRS, individuals are allowed to spend money in foreign countries for specific purposes like education, tourism, asset purchase etc. The remittance limit is set for a financial year. Regulations for the scheme are provided under the FEMA Act 1999.
Under LRS, remittances can be made for overseas education, travel, medical treatment, apart from maintenance of relatives living abroad, gifting and donations. The money can be remitted for the purchase of shares and property as well. These share and property purchases are the main capital account purposes allowable under the LRS. Individuals can also open, maintain and hold foreign currency accounts with overseas banks for carrying out transactions.
The LRS was launched in 2004 and is updated with increasing or decreasing the limit for remittances as well as the purposes for which remittances is to be made. For example, when the country has sufficient foreign exchange reserve and the rupee is stable, the RBI allows higher remittances. On the other hand, when the country is facing capital outflows, RBI is coming out with restricted or reduced remittance amount.
The Reserve Bank has raised the upper limit for foreign exchange remittances under the LRS to $ 250,000 per person per year. This enhancement in remittance limit comes after a review of the external sector outlook and is a part of macro prudential management, the central bank has noted in the press release declaring the policy change.
At the same time, the LRS rules specify certain restrictions. Remittances can’t be used for trading on the foreign exchange markets, margin or margin calls to overseas exchanges and counterparties and the purchase of Foreign Currency Convertible Bonds issued by Indian companies abroad.
Similarly, sending money to certain countries and entities is also barred. Individuals are not allowed to send money to countries identified as ‘non cooperative jurisdictions’ by the Financial Action Task Force. Remittances are also prohibited to entities identified as posing terrorist risks.
What is the limit of money availed for making private visit abroad?
For private visits abroad, other than to Nepal and Bhutan, any resident can avail foreign exchange up to an aggregate amount of USD 2,50,000, from an Authorised Dealer or FFMC (Full Fledged Money Changer), during a financial year. This is irrespective of the number of visits undertaken during the year. This limit has been integrated under the Liberalised Remittance Scheme w.e.f. May 26, 2015.