Clarification - Increase in the
limit from USD 75,000 to USD 125,000 for resident individuals under Liberalized
Remittance Scheme (LRS) {Notification No. "RBI/2014-15/132 A.P. (DIR
Series) Circular No.5 dated 17th July, 2014}
Before going into the revision made in Liberalized Remittance
Scheme, let us know what it is actually?
The Reserve Bank of India had announced a Liberalized
Remittance Scheme (the Scheme) as per the powers conferred on it under FEMA
Act, 1999 in February 2004 as a step towards further simplification and
liberalization of the foreign exchange facilities available to resident
individuals. Under the Liberalized Remittance Scheme, all resident individuals,
including minors, are allowed to freely remit up to USD 125,000 per financial
year (April – March) for any permissible current or capital account transaction
or a combination of both. Under the Scheme, resident individuals can acquire
and hold shares or debt instruments or any other assets including property
outside India, without prior approval of the Reserve Bank. Individuals can also
open, maintain and hold foreign currency accounts with banks outside India for
carrying out transactions permitted under the Scheme. It is mandatory to have
PAN number to make remittances under the Scheme. The remittances can be made in
any freely convertible foreign currency equivalent to USD 125,000 in a
financial year. This is a big blow which will encourage investments outside
India which has been taken after longtime, as several restrictions have been
imposed on the outflow of capital outside India when the rupee plummeted last
year. It is pertinent to note that the CAD of India was 4.7% of GDP, which has
nosedived to 0.2% of CAD during Q4 of FY14.
However, the aforesaid scheme is not applicable on t