Liberalised Remittance Scheme

August 23, 2023

GS Paper III Indian Economy

Context: Outward remittances under the Reserve Bank of India’s (RBI’s) liberalised remittance scheme (LRS) surged by 50.64 per cent to $9.1 billion in the April-June quarter of 2023–24.

About Liberalised Remittance Scheme(LRS):

LRS is part of the Foreign Exchange Management Act (FEMA) 1999 which lays down the guidelines for outward remittance from India.
It was introduced by the Reserve Bank of India in 2004.
Amount allowed: Under LRS, all resident individuals, including minors, are allowed to freely remit up to USD 250,000 per financial year (April – March). This can be for any permissible current or capital account transaction, or a combination of both.
The Scheme is not available to:
- Corporations, Partnership Firms, Hindu Undivided Family (HUF), Trusts etc.

Hindu Undivided Family (HUF):

Under Hindu Law, a HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.

Remitted Money can be used for:
- Expenses related to travelling (private or for business), medical treatment, study, gifts and donations, maintenance of close relatives and so on.
- Investment in shares, debt instruments, and to buy immovable properties in the overseas market.
- Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.
Prohibited Items:
- Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
- Remittance for trading in foreign exchange abroad.
- Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.
- Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

What has changed with the RBI’s circular Dated 22.06.2023?

As per the Circular dated 22.06.2023, the RBI has allowed the authorized persons to facilitate remittances by resident individuals for payment of fees to foreign universities or foreign institutions in Indian Financial System Code( IFSCs) for pursuing specified courses.
This remittance will be treated as remittance under the purpose ‘studies abroad’ as mentioned in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

News Source: Business Standard