Want to send money abroad? Know the benefits of LRS

Under LRS, all resident individuals, including minors, can remit up to $2,50,000 per financial year for any permissible transaction. There are no restrictions on the frequency of remittances, and also no transaction-specific sub-limits under LRS.

Among the permitted transactions for which foreign exchange can be remitted, are private travel (except to Nepal and Bhutan), travel for business or medical treatment, gifts or donations, maintenance of close relatives abroad, studies, and overseas investments. On the other hand, prohibited transactions include remitting money for purchase of lottery tickets, for margin calls to overseas exchanges / counterparties, and for purchase of assets in countries identified as non-cooperative by the Financial Action Task Force.

“Certain transactions are prohibited under law, and the same restrictions have been incorporated even under the LRS,” says Neeraj Agarwala, partner, Nangia Andersen India.

To be able to remit money, the individual must have a valid PAN and should be able to provide adequate documents to prove the genuineness of the transaction, says Agarwala.

As for investments made abroad, he says, “Investing in the shares of a private company is permitted under the LRS. But one needs to ensure that they comply with the ODI (overseas direct investment) guidelines. So, the monetary limit comes from the LRS, and the compliances and other regulations come in from the ODI scheme.”

While the LRS limit applies at an individual level, family members can club together their permissible limits. Agarwala says RBI has now specifically permitted pooling of funds for the purchase of immovable property outside India. “So, if I purchase a property for $4,00,000, then I can remit $2,50,000 and the balance can be remitted by my wife. After the recent amendment, she need not be a co-owner in the property.”

RBI data on LRS shows ‘maintenance of relatives’ and ‘gifts’ among the top spend categories after travel and studies abroad.

According to Agarwala, for the purpose of LRS, the same definition of relative as under the Companies Act, 2013, is applicable. This includes father, mother, spouse, siblings, etc. “In absence of any specific instructions on what is covered under ‘maintenance’, this would typically mean the cost of lodging, travel, medical and education expenses of close relatives.”

Again, ‘gift’ has not been defined. “So, any money transferred out of love and affection, and not as consideration for any services received would qualify as a gift,” adds Agarwala.