LIBERATED REMITTANCES SCHEME (LRS)
- The Liberalized Remittance Scheme (LRS) is an Indian government program that allows individuals to remit up to $250,000 per year without any prior permission from the Reserve Bank of India (RBI). The LRS was introduced in 2004 to promote foreign exchange outflows and to facilitate travel and education expenses of Indian citizens
- The Liberalized Remittance Scheme (LRS) is a framework established by the Reserve Bank of India (RBI), the central bank of India, that allows resident individuals to remit a certain amount of money outside the country for various purposes.
- The LRS enables individuals to diversify their investment portfolios, acquire assets abroad, and engage in permissible foreign exchange transactions
Here are some key features of the Liberalized Remittance Scheme:
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Eligibility: Resident individuals are eligible to use the LRS, which means individuals who are living in India for more than 182 days during the previous financial year.
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Permissible Transactions: Under the LRS, individuals can remit money abroad for a variety of purposes, including travel, education, medical treatment, investments, buying property, gifting to relatives, and donations to charitable organizations.
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Financial Limit: The scheme imposes a limit on the amount of money that can be remitted by an individual in a financial year. The limit is set by the RBI and is subject to change. The individual can remit up to this limit without requiring special permission.
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Foreign Exchange Management Act (FEMA): Transactions under the LRS are governed by the provisions of the Foreign Exchange Management Act (FEMA), which lays out the legal framework for foreign exchange transactions in India.
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Authorized Dealers: Transactions under the LRS are facilitated through authorized dealers (usually banks). Individuals need to approach these authorized dealers to carry out the remittances.
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Reporting Requirements: Individuals are required to comply with the reporting requirements set by the authorized dealers and provide necessary documentation for the specific purpose of the remittance.
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Prohibited Transactions: Certain types of transactions are not allowed under the LRS, such as remittances for speculative activities in the foreign exchange market or for trading in foreign exchange derivatives.
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Tax Implications: While the remittances made under the LRS are generally tax-neutral, any income earned from investments made using the remitted funds may be subject to tax in India.
The LRS is a popular scheme among Indian citizens who want to remit money abroad. It is relatively easy to use and does not require any prior permission from the RBI. However, there are some restrictions on the use of the LRS, such as the maximum amount that can be remitted per year.
The LRS is a good option for Indian citizens who want to remit money abroad for personal or business purposes. It is a convenient and hassle-free way to send money overseas.
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For Prelims: Remittances, Liberated Remittances Scheme (LRS), Exports, Imports, Reserve Bank of India (RBI) For Mains: 1.Discuss the significance of remittances in the context of developing economies. How do they impact the macroeconomic stability and social dynamics of recipient countries? 2.Examine the factors that contribute to the growth of remittances from the Indian diaspora. How can these remittances be leveraged to promote economic development in India? |
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Previous year Questions
1.Which of the following constitute Capital Account? (UPSC CSE 2013)
Select the correct answer using the codes given below: (a) 1, 2 and 3 Answer: (b) |
