RBI’s Liberalised Remittance Scheme (LRS) is the door through which Indians can route their dollars abroad. Whether you are considering investing abroad, going on an international vacation, or even sending your children for studies abroad, the RBI’s LRS is a single stop for all your concerns related to foreign exchange. RBI LRS essentially covers the various aspects of forex-related concerns such as how many dollars can one remit abroad, how many dollars can one carry from India, etc.
Liberalized Remittance Scheme (LRS) is about the remittances that a resident individual is allowed to make on annual basis. In addition to remittances, one can also avail foreign exchange facility ( medical expense or while traveling) which also comes under the purview of LRS.
So, if you want to buy US stocks, go on an international vacation or send money to children abroad, LRS rules will be applicable in each instance.
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Before making an international transaction, one needs to convert the Indian rupee into Dollars for the purpose of investing or spending abroad. The rules governing such transactions come under the ambit of Liberalised Remittance Scheme (LRS). Simply put, as an Indian resident, you need to buy dollars using Indian rupees (INR) from an authorized dealer (the bank) in India. The dollars can then be spent abroad or remitted abroad for acquiring property or other assets such as US shares. The remittance can be in any freely convertible foreign currency other than dollars.
Currently, under the LRS rules, any resident individual including a minor ( countersigned by a guardian) is allowed to remit up to 2.5 lakh US dollars (USD 2,50,000 ) in each financial year. At an exchange rate of Rs 76 to a dollar, it is about Rs 1,90,00,000 or Rs 1.90 crore. There is no restriction on the frequency of transactions in a year. Even if one brings the remitted amount back in the same year, no further remittance will be allowed as the limit pertains to each financial year.
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The rules clearly mention that one can remit foreign exchange (forex ) only for any permissible current account transactions or capital account transactions or a combination of both.
If you wish to invest abroad in shares, property etc, the LRS rules will define them as capital account transactions. Only certain capital account transactions are allowed under LRS rules such as opening a bank account abroad i.e. a Foreign Currency Account, purchasing real estate property overseas, for making investments overseas which includes investing in shares, mutual funds, and debt instruments amongst others.
Importantly, if someone has invested across shares and mutual fund schemes abroad, the LRS rules allow the investor (unless it is an overseas direct investment ) to retain and reinvest the income earned in that country. It is not necessary for the investor to repatriate the accrued interest or dividends on the deposits and investments made abroad.
