What is the Liberalised Remittances Scheme (LRS)?
Source : Indian Express
GS II : Indian Economy
Overview
- About Liberalised Remittances Scheme (LRS)
- Who may send money under the LRS?
- Permitted transaction types
Why in News ?
Twenty per cent tax on Liberalised Remittances Scheme (LRS) of the Reserve Bank of India is set to kick off soon.
Key Facts
About Liberalised Remittances Scheme (LRS)
- LRS allows Indian residents to freely remit up to USD $250,000 per financial year for current or capital account transactions or a
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- Any remittance exceeding this limit requires prior permission from the RBI.
- The scheme was introduced by RBI on February 4, 2004.
Who may send money under the LRS?
- The LRS only permits individual Indian residents, including minors, to remit payments.
- Corporate entities, partnership businesses, HUFs, trusts, etc. are not included in its scope.
- The frequency of remittances under LRS is not constrained.
- A resident individual would not be entitled to make any more remittances under this plan after making one for up to USD 2,50,000 during the financial year.
Permitted transaction types
- Opening of foreign currency accounts abroad with a bank
- Acquisition of immovable property abroad, overseas direct investment (ODI), and overseas portfolio investment (OPI)
- Extending loans, including loans in Indian Rupees to non-resident Indians (NRIs) who are relatives as defined in the Companies Act, 2013
- Private visits abroad(excluding Nepal and Bhutan)
- Maintenance of relatives abroad
- Medical treatment abroad
- Pursuing studies abroad
- The Union Budget 2023 introduced a Tax Collection at Source (TCS) for outward foreign remittance under LRS (other than for Education and medical purpose) of 20% on the entire value.
Tax liability on profit made: If any profit is made on foreign investments made under LRS, it is taxable in India based on how long the investment was held.
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