Jigar M. Patel
International Tax Attorney
With substantial liberalization of Current Account Transactions in Foreign Exchange (Forex) for resident individuals, the same can now be liberally acquired for a host of purposes, without seeking any prior approval of RBI. The regulations governing the same are covered under the Liberalized Remittance Scheme (LRS), which was introduced in 2004.
Freedom for Remittances up to USD 2,50,000
Under the LRS, all Resident Individuals (including minors) are freely allowed remittances up to USD 2,50,000 per Financial Year (April to March), for any permitted Current or Capital Account transactions or a combination of both. Remittances can be consolidated in respect of a resident’s family members as well. There is no upper limit on the number of times remittance can be made under the LRS. However, the total amount remitted during a financial year cannot exceed USD 2,50,000. For FY 2023-24, investment through the LRS route was at a significant high of more than USD 28 billion.
Purchase of Immovable Property, Shares & Securities outside India
Under this Scheme, Indian residents can freely acquire and hold immovable property, shares (listed or otherwise), units of mutual funds, debt instruments, securities or any other assets outside India, without the prior approval of RBI.
Freedom to Operate Foreign Bank Accounts
Resident Individuals can also open, maintain and hold Foreign Currency Accounts with a Bank outside India for coordinating remittances and investments, without prior approval of RBI.
Gifts, Donations & Art Purchases Permitted
Resident Individuals can also use the limit of USD 2,50,000 under this Scheme for making any Gifts or Donations to any Person Outside India or for maintenance of close relatives living abroad. Remittances can also be used for purchasing Objects of Art, subject to the provisions of other applicable laws.
Travel, Study or Medical Treatment Abroad also covered
The separate limits prescribed earlier for availing Forex for purposes of travel, studies or medical treatment abroad have now been subsumed under the overall limit of USD 2,50,000 per Financial Year.
International Credit Cards not covered within the USD 2,50,000 limit
Resident Indians can use International Credit Cards (ICCs) for incurring expenses, while on visit outside India, to the extent of the card limit without any monetary ceiling. However, ICCs cannot be used for purchase of prohibited items like lottery tickets, banned magazines or call-back services. Currently, payments by ICCs are not included in the limit for LRS.
Compliance for Overseas Investments under Schedule FA of ITR
Indian tax residents (ordinarily resident in India – R&OR) are required to report their foreign assets and investments in their Income-tax Return (ITR) in Schedule FA (schedule of foreign assets) and undertake associated compliance, even if they do not have any foreign income for that particular year. Willful failure to declare information relating to foreign income and assets in the return of income can invite prosecution under the Black Money Act. Therefore, individuals remitting funds outside through LRS need to keep this is mind and ensure that they do not miss out on the same.
TCS Liability in case of Remittances under LRS
It needs to be borne in mind that remittances under LRS have been covered within the scope of the liability for Tax Collection at Source (TCS) at prescribed rates under the provisions of Sec. 206C of the Income-tax Act. Credit for such TCS is however available to a taxpayer against the tax payable by him on his taxable income.
