In March 2023, remittances totaled $2.95 billion, up from $2.1 billion in February 2023 and $1.96 billion in March 2022. At the core of these payments lies LRS.
LRS’s full form in banking is the Liberalised Remittance Scheme, an initiative by the Reserve Bank of India (RBI). This scheme plays a crucial role in the banking sector, particularly for those looking to send money abroad.
Let’s discuss all things concerning the Liberalised Remittance Scheme and how it impacts you.
What is the Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme, the full form of LRS, is an initiative by RBI. Established in 2004, the LRS aims to simplify and streamline sending money abroad for anyone staying in India.
The LRS scheme limit was $2,50,000 per financial year (April-March) for permissible current or capital account transactions.
Over the years, the LRS has undergone several changes, the most significant being the increase in the LRS scheme limit from $5,000 to $2,50,000 in 2015.
The LRS has gained considerable traction among Indians. As per the latest data, Indians remitted about $27.14 billion in the financial year ending March 2023 under the scheme. This figure reflects its growing importance and popularity among resident individuals.
Let’s take a look at the eligibility criteria for the LRS scheme.
Who is eligible for LRS
- For people staying in India – All individuals who are staying in India, including minors, are eligible for the LRS scheme. To use the scheme, you need a valid Permanent Account Number (PAN). This requirement ensures transparency and allows the RBI to monitor transactions effectively.
If you are a resident of India, you can use this scheme to send money abroad for various permitted purposes. For minors, the remittance has to be managed by their natural guardians.
LRS is not applicable for below individual/ entities
- Non Resident Indians (NRIs)
- Partnership firms
- Hindu Undivided Families (HUFs)
Applicability of the LRS scheme
As the global economy becomes increasingly interconnected, the LRS will be crucial in facilitating overseas transactions for individuals staying in India.
Presently, the Liberalised Remittance Scheme is applicable for various purposes. Here’s a breakdown of some key areas where you can use the LRS –
- Private visits abroad be it a vacation or a business trip,
- Gifts – For gifting money to a loved one abroad on their birthday, festivals or even without a reason.
- Medical expenses abroad – For sending money abroad for medical treatment in foreign hospitals.
- Maintenance of close relatives – For maintenance of family/close relatives. This includes spouses, children, parents, siblings, etc.
However, it’s important to note that there are certain restrictions and limitations.
How to send funds abroad through the Liberalised Remittance Scheme?
Individuals staying in India can remit money abroad for travel, education, investment, medical treatment, and other purposes. Follow these steps to send money abroad via LRS –
- Know your LRS limit – Familiarise yourself with the current LRS limits set by the RBI. The limits may change over time, so checking the latest guidelines before initiating any remittance is essential.
- Select an Authorised Dealer (AD) – An AD is an RBI-approved bank or financial institution that can facilitate foreign exchange transactions. Choose one through which you want to make the remittance.
- Complete KYC requirements – Ensure you have completed the Know Your Customer (KYC) requirements with the AD. This typically involves providing identification documents such as your Aadhar card, passport, PAN card, address proof, etc.
- Provide the purpose of remittance – Inform the AD about the purpose of your remittance, such as education fees, travel expenses, medical treatment, or any other eligible reason under the LRS.
- Gather required documents – Depending on the purpose of remittance, you may need to submit relevant documents to support your request. For example, you may need to provide admission letters if it’s for education.
- Complete the LRS declaration form – Fill out the LRS declaration form provided by the AD. This form requires you to provide details such as the remittance amount, purpose, and other necessary information.
- Convert INR to foreign currency – Deposit the amount you want to remit in Indian Rupees with the AD. The bank will then convert this amount into foreign currency as per the prevailing exchange rate.
- Initiate the remittance – After completing all the necessary documentation and providing the required funds, the AD will initiate the remittance process and transfer the money to the designated foreign bank account.
- Obtain an acknowledgement – Once the remittance is completed, the AD will provide you with an acknowledgement or receipt of the transaction. Keep this document for your records and future reference.
For multiple currency options, choose an AD like IDFC FIRST Bank that allows you to send money in USD, GBP, EUR, AUD, CAD and many other currencies.
This guide discusses LRS’s full form in banking, eligibility, and all other key details. Understanding the Liberalised Remittance Scheme is crucial for anyone planning to send money abroad for education, investment, or to support a loved one. With IDFC FIRST Bank, this process becomes more straightforward and more efficient. Want to learn more about the LRS scheme and IDFC FIRST Bank services? Click here to get started.