What is the Liberalised Remittance Scheme (LRS)?

About the Liberalised Remittance Scheme (LRS):

• LRS allows Indian residents to freely remit up to USD $250,000 per financial year for current or capital account transactions or a combination of both. Any remittance exceeding this limit requires prior permission from the RBI.
• The scheme was introduced on February 4, 2004
• Who can remit funds under LRS?

• Only individual Indian residents, including minors, are permitted to remit funds under LRS.
• Corporates, partnership firms, HUF, trusts, etc., are excluded from its ambit. 

• Frequency of Remittances:

• There are no restrictions on the frequency of remittances under LRS. 
• Once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme.

• Types of transactions permitted:

• Opening of foreign currency account abroad with a bank;
• Acquisition of immovable property abroad, overseas direct investment (ODI), and overseas portfolio investment (OPI);
• Extending loans, including loans in Indian Rupees to non-resident Indians (NRIs) who are relatives as defined in the Companies Act, 2013;
• Private visits abroad (excluding Nepal and Bhutan); 
• Maintenance of relatives abroad;
• Medical treatment abroad;
• Pursuing studies abroad ;

• Tax liability on profit made: If any profit is made on foreign investments made under LRS, it is taxable in India based on how long the investment was held.

 

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Q1) What is Tax Collection at Source (TCS)?

Tax collection at source (TCS) is an extra amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account.

Source: From studying abroad to holidaying overseas: How foreign remittance will be taxed from July 1