Private Client Series
Series 1 | Article 6
When it comes to transferring wealth overseas, resident Indians are allowed to remit money for various current account transactions under the Liberalised Remittance Scheme (LRS). The scheme permits resident individuals to remit up to USD 250,000 per financial year (April-March) for permissible current and capital account transactions, or a combination of both. This article focuses on what resident Indians can send overseas and how much they can spend while abroad under current account transactions.
Understanding Current Account Transactions
Under Indian law, specifically the Foreign Exchange Management (Current Account Transactions) Rules, 2000, current account transactions are those that involve foreign exchange payments for purposes other than capital account transactions. These include personal remittances, travel, education, medical expenses, and other similar expenses. The Liberalised Remittance Scheme (LRS) encompasses a wide range of such transactions, allowing residents to freely send money abroad within the set limit of USD 250,000. Here’s a breakdown of the permitted uses:
1. Private Visits
Resident individuals can obtain foreign exchange up to USD 250,000 per financial year for private visits to any country except Nepal and Bhutan. This amount covers all travel-related expenses, such as transportation, lodging, and other tour-related costs. Even if multiple visits are made during the year, the aggregate limit of USD 250,000 applies.
2. Gift/Donation
Individuals may remit up to USD 250,000 per financial year as a gift to someone residing outside India or as a donation to an overseas organisation. This enables resident Indians to support family members abroad or contribute to causes they care about globally.
3. Going Abroad for Employment
For those seeking employment overseas, the LRS allows them to draw foreign exchange up to USD 250,000 per financial year. This can cover expenses related to relocation and initial settlement in the foreign country.
4. Emigration
If a resident Indian is planning to emigrate, they are permitted to remit up to USD 250,000 or the amount prescribed by the country of emigration, whichever is higher. This remittance can cover various emigration expenses, but any additional funds needed must be for incidental expenses in the country of emigration.
5. Maintenance of Relatives Abroad
Resident individuals can remit up to USD 250,000 per financial year for the maintenance of close relatives residing abroad. Here, "relative" is defined under Section 2(77) of the Companies Act, 2013, which includes a broad range of familial relationships.
6. Business Trips
Residents can avail of up to USD 250,000 per financial year for business-related travel, including attending conferences, seminars, and specialised training abroad. If an employee's travel expenses are borne by their employer, such expenses are considered outside the LRS and are subject to different regulations.
7. Medical Treatment
Individuals may remit up to USD 250,000 per financial year for medical treatment abroad without requiring an estimate from a doctor or hospital. If the medical expenses exceed this limit, additional amounts can be remitted based on the estimated cost provided by the medical institution.
8. Studies Abroad
Students heading overseas for studies can remit up to USD 250,000 per financial year. This limit may be exceeded if the foreign institution provides an estimate requiring more funds, in which case, additional remittances can be made.
Spending While Overseas
For residents travelling abroad, the LRS also covers spending during the trip. Whether for personal or business reasons, expenses such as accommodation, meals, local travel, and other incidentals fall under the permissible limits of the LRS. However, it is important to note that while the LRS allows significant flexibility, any remittance exceeding the USD 250,000 limit requires prior approval from the Reserve Bank of India (RBI). At present, money expended on an International Credit Card while overseas is excluded from the overall LRS limit of USD 250,000. However, this appears to be a temporary relief and expenditures on International Credit Cards are likely to be included in the near future.
Documentation and Compliance
When making remittances under the LRS, residents must ensure compliance with the RBI’s Know Your Customer (KYC) guidelines and other applicable regulations. Remitters are required to submit Form A2 and declare that the funds being remitted are within the prescribed limits and will not be used for prohibited purposes, such as investments in certain types of real estate or margin trading.
Always ensure that all necessary documentation is in place and that you are fully aware of the permissible limits and purposes under the LRS before proceeding with any remittances.
About the Author
Pranay Mangharam is a founding member of MZD Legal Consultancy. He leads the firm's private client; technology; and transaction advisory practices. Pranay advises high-net-worth individuals, closely held businesses, and family offices on a range of private matters including their investments, succession planning, transborder holdings, etc. He can be contacted at pranay@mzdlegal.inÂ
About MZD Legal Consultancy
MZD Legal Consultancy is a boutique law firm in Mumbai, India. The firm was established in 2011 and comprises professionally qualified lawyers with varied levels of experience and expertise in specific practice areas. To know more, click here www.mzdlegal.in
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