Liberalised Remittance Scheme
The Reserve Bank of India had announced a Liberalized Remittance Scheme (the Scheme) in February 2004 as a step towards further simplification and liberalization of the foreign exchange facilities available to resident individuals. As per the Scheme, resident individuals may remit up to USD 200,000 per financial year for any permitted capital and current account transactions. The Scheme was operationalised vide A.P. (DIR Series) Circular No. 64 dated February 4, 2004. The Reserve Bank of India has received feedback on the Scheme from Authorised Dealer banks and the Foreign Exchange Dealers Association of India and based on the discussions, clarifications on various operational issues of the Scheme are being given below :
Q1. Provide an illustrative list of capital account transactions permitted under the scheme?
The remittance under the Scheme is available to the resident individuals for any permitted current or capital account transactions or a combination of both. Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India. However, it was clarified that remittance from India for margins or margin calls to overseas exchanges / overseas counterparty are not allowed under the Scheme.
The remittance facility under the Scheme is also not available for the following:
i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
iii) Remittances made directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories” from time to time.
iv) 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.
Q2. Whether this facility is in addition to existing facilities detailed in Schedule III under remittances?
The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can be also be used for these purposes. However, gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 200,000 per financial year under the Scheme.
Q3. Whether resident individuals under this Scheme have to repatriate the accrued yield on deposits/investments abroad, over and above the principal amount?
The investor can retain and reinvest the income earned on investments made under the Scheme. Currently, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.
Q4. Whether remittance under the Scheme is on gross basis or net basis (net of repatriation from abroad)?
Remittance under this scheme is on a gross basis.
Q5. Whether minors can also avail of the remittance facility?
The facility is available to all the resident individuals including minors.
Q6. Whether remittances under the facility can be consolidated in respect of family members?
Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.
Q7. Whether the Scheme can be used for purchase of objects of art (paintings etc) either directly or through auction house?
Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.
Q8. Whether small value remittance of USD 5000/- (gifts, donation etc) is in addition to LRS of US $ 200,000/-?
Remittance against gifts and donations cannot be made separately and have to be made under the Scheme only and therefore no separate limits for gift and donation are available.
Q9. Whether the AD is required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?
AD will be guided by the nature of transaction as declared by the remitter and will certify that the remittance is in conformity with the instructions issued by Reserve Bank.
Q10.Whether under this scheme a customer can remit funds for acquisition of ESOPs?
The Scheme can also be used for remittance of funds for acquisition of ESOPs.
Q11. Whether the scheme is in addition to acquisition of ESOPs linked to ADR/GDR (i.e USD 50,000/- for a block of 5 calendar years)?
The remittance under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR.
Q12. Whether the Scheme is in addition to acquisition of qualification shares (i.e USD 20,000/- as 1% of paid up capital of overseas company whichever is lower)?
The remittance under the Scheme is in addition to acquisition of qualification shares
Q13. Whether a resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes etc under this scheme?
A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc under this Scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme.
Q14. Whether an individual, who has availed of a loan abroad while a non-resident can repay the same on return to India, under this Scheme as a resident?
This is permissible.
Q15. Whether it is mandatory for resident individuals to have PAN number for sending outward remittances under the Scheme?
It is mandatory to have PAN number to make remittances under the Scheme.
Q16. In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends putting through the permissible transactions) at the time of his private visit abroad, whether against self declaration of the remitter such an outward remittance can be effected?
Such outward remittance in the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.
What is the Liberalised Remittance Scheme of USD 200,000?
This is a facility extended to all resident individuals under which, they may freely remit upto USD 200,000 per fianancial year for any permissible current or capital account transaction or a combination of both.
Who is eligible to avail of this Liberalised Remittance Facility?
The facility is available to resident individuals only.
Is there any frequency for the remittance?
There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during the current financial year should be within the limit of USD 200,000/-.
What are the purpose/s for which remittance can be made under the Scheme?
This facility is available for making remittance/s for any permissible current or capital account transaction or a combination of both. It is not available for purposes specifically prohibited (Schedule I) or regulated by the Government of India (Schedule II) of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Can residents avail of this facility for acquiring immovable property and other assets abroad?
Yes. Individuals are free to use this Scheme to acquire and hold immovable property, shares or any other asset outside India without prior approval of Reserve Bank.
Can individuals open foreign currency account abroad for making remittance under the Scheme?
Yes. Individuals are free to open, hold and maintain foreign currency accounts with a bank outside India for making remittances under the Scheme without the prior approval of Reserve Bank. The account can be used for putting through any transaction connected with or arising from remittances under the Scheme.
What is the impact of the Scheme on the existing facilities for private/business travel, studies, medical treatment etc./items covered in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000?
The facility under the Scheme is in addition to those already available under Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Can an individual send remittance under the Scheme to any country?
Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan. The facility is also not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories, from time to time.
For the current list of such countries/ territories please visit www.fatf-gafi.org.
Further, remittance under the facility cannot be made to individuals and entities identified as posing significant risk or committing acts of terrorism as advised to banks by Reserve Bank from time to time.
What are the requirements to be complied with by the remitter?
The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. He has to furnish an application-cum-declaration in the specified format regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.
If an investment of USD 200,000 rises in value within the year, can one book profits and invest abroad again?
The investor is free to book profit or loss abroad and to invest abroad again. He is under no obligation to repatriate the funds remitted abroad.
Can an individual, who has repatriated the amount remitted during the financial year, avail of the facility once again?
Once a remittance is made for an amount upto USD 200,000 during the financial year, he would not be eligible to make any further remittances under this route, even if the proceeds of the investments have been brought back into the country.
Can remittances be made only in US Dollars?
The remittances can be in any currency equivalent to USD 200,000 in a financial year.
Last year, resident individuals could invest in overseas companies listed on a recognised stock exchange abroad and which has the shareholding of at least 10 per cent in an Indian company listed on a recognised stock exchange in India. Does this condition still exist?
Investment by resident individual in overseas companies is subsumed under the Scheme of USD 200,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.
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