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Liberalised Remittance Scheme (LRS) was announced by RBI dated February 04, 2004, as a simplified and liberalised foreign exchange facility for the resident individuals (RIs), not for HUF, partnership firm, and trusts etc.
LRS of India’s reserve bank allows resident individuals to consign a definite amount of money throughout a financial year to another country for investment and expenditure. According to the mainstream regulations, resident individuals may consign up to $250,000 per financial year. This amount can be used to pay expenses associated with travelling, medical treatment, studying, gifts and donations, preservation of close relatives and so on.
The remitted amount can also be charged in shares, debt instruments, and buying immovable properties in overseas markets. Individuals can also open, continue and hold foreign currency accounts with a bank outside India for carrying out transactions permitted under the scheme.
However, LRS regulates buying and selling foreign exchange abroad, purchasing lottery tickets or sweepstakes, prohibited magazines and so on, or any prohibited items under schedule II of Foreign Exchange Management Rules. We can’t make remittances directly or indirectly to countries identified by the Financial Action Task Force as “non-co-operative countries and territories”.
Capital account transactions permissible under LRS
Following are the LRS permissible capital account transactions:
Permissible current account transaction under LRS
Following are the LRS permissible current account transactions:
Other expenses and remittances permissible under LRS
Besides personal expenses, LRS can be used for the following purposes:
Prohibited transactions under LRS
Following transactions are permitted under LRS:
Foreign asset disclosure under ITR forms
Remittance of fund under LRS is under the automatic route, and investment can be made overseas. The requirement for disclosing foreign assets under income tax return are mandated as part of Income-tax forms as Schedule FA. It covers:
The LRS facility is a genuinely generous facility to remit funds out of India. It shall be used carefully to compile all requirements under the scheme, which gets updated from time to time.
At AJSH, we assist our clients with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about the LRS scheme, kindly contact us.
