Investing in Blue Chip stocks of Overseas Company or owing an expensive house overseas has become easier. Reserve Bank of India has revised the limit of foreign spending under the Liberalised Remittance Scheme (LRS). But before knowing the enhanced limit, first we should know what is Liberalised Remittance Scheme and where we can use the remitted money.
1. What is Liberalised Remittance Scheme (LRS)?
Liberalised Remittance Scheme (LRS) allows all resident individuals, including minors, to freely remit up to USD 2,50,000 (Rs.1,50,00,000) per financial year (April – March) for certain transactions.
2. Where money remitted under LRS can and cannot be used?
Under the Scheme, resident individuals
- Can buy shares of listed as well as of unlisted companies;
- Can invest in the units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes etc. overseas;
- Can acquire any other assets including property outside India
- Can open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme.
The prohibited transactions include lottery, gambling, sweepstakes, betting, trading in FOREX, purchasing FCCBs issued by Indian companies etc.
3. How to remit money under LRS?
1. To start the outward remittance under Liberalised Remittance Scheme, you first need to visit your bank and notify them about your decision and the amount involved.
2. Banker will give you Form A2 along with the demand draft form. Form A2 is a declaration form which has to be filled with the complete and accurate details about the transaction.
Note: Bankers insist customers to furnish form 15CA/CB but this is not necessary for the remittance under Liberalised Remittance Scheme.
Additionally, if your bank account is not a year old, than bank will ask you to provide additional documents such as bank statements of other bank account for one year prior to the remittance or copies of the latest income-tax return or assessment order.
4. How much money can be remitted under Liberalised Remittance Scheme?
Reserve Bank of India (RBI) has recently enhanced the limit under Liberalised Remittance Scheme (LRS) to USD 250,000 per person per year.
The limits of Past couple of years under Liberalised Remittance Scheme are:
|Year 2015 (current year)||USD 2,50,000|
|Year 2014||USD 1,25,000|
|Year 2013||USD 75,000|
So, with this enhanced limit a family of four, including children, can remit up to USD 10,00,000 (Rs.6 crore).