The Liberalized Remittance Scheme (LRS) is a great way to take advantage of the opportunities offered by the Indian government to encourage foreign currency inflows. The scheme allows individuals to remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both. This blog post will provide a Vested overview of the scheme and explain how you can take advantage of it.
Overview of the Liberalized Remittance Scheme.
The Liberalized Remittance Scheme (LRS) refers to the scheme introduced by the Reserve Bank of India (RBI) in February 2004, which allows resident individuals to freely remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both.
Resident individuals include Indian citizens as well as foreign citizens who are staying in India for more than one year on a student visa, employment visa, business visa, or medical visa. Under the LRS scheme, resident individuals can freely remit money abroad for various purposes such as studying overseas, medical treatment, business travel, and emigration.
In addition, resident Indians can also avail of the facility to maintain foreign currency accounts overseas (known as Non-Resident External Accounts or NRE accounts) and freely remit funds between these accounts and their Resident Foreign Currency (Domestic) Accounts (RFCDAs).
Benefits of the Liberalized Remittance Scheme.
The main benefit of the LRS is that it provides greater flexibility to resident Indians with respect to their foreign exchange transactions. Prior to the introduction of LRS, residents were only allowed to remit up to USD 3,000 per annum for all purposes.
Under LRS, they can now remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both without having to obtain prior approval from the RBI. This limit was increased from USD 1 lakh in October 2011 and again in November 2014.
Another key benefit of LRS is that it has made it much easier for resident Indians to maintain foreign currency accounts overseas. Earlier, they were required to obtain prior approval from RBI before opening such an account. However, under LRS they can do so without any restrictions.