Liberalised remittance scheme

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  • 1. Liberalized Remittance SchemeBy Reserve Bank of India
  • 2. The Reserve Bank of India hadannounced a Liberalised RemittanceScheme (the Scheme) in February 2004as a step towards further simplificationand liberalization of the foreignexchange facilities available to residentindividuals. As per the Scheme, residentindividuals may remit up to USD200,000 per financial year for anypermitted capital and current accounttransactions or a combination of both.The Scheme was operationalised videA.P. (DIR Series) Circular No. 64 datedFebruary 4, 2004.(updated up to January 20, 2012)
  • 3. Under the Liberalised RemittanceScheme, all resident individuals,including minors, are allowed to freelyremit up to USD 200,000 per financialyear (April – March) for any permissiblecurrent or capital account transaction ora combination of both.Under the Scheme, resident individualscan acquire and hold immovableproperty or shares or debt instrumentsor any other assets outside India,without prior approval of the ReserveBank. Individuals can also open,maintain and hold foreign currencyaccounts with banks outside India forcarrying out transactions permittedunder the Scheme.
  • 4. The remittance facility under the Scheme is notavailable for the following:i) Remittance for any purpose specifically prohibitedunder Schedule-I or any item restricted underSchedule II of Foreign Exchange Management(Current Account Transactions) Rules, 2000;ii) Remittance from India for margins or margin callsto overseas exchanges / overseas counterparty;iii) Remittances for purchase of FCCBs issued byIndian companies in the overseas secondary market;iv) Remittance for trading in foreign exchange abroad;v) Remittance by a resident individual for setting up acompany abroad;vi) Remittances directly or indirectly to Bhutan,Nepal, Mauritius and Pakistan;vii) Remittances directly or indirectly to countriesidentified by the Financial Action Task Force (FATF) as“non co-operative countries and territories”, fromtime to time; andviii) Remittances directly or indirectly to thoseindividuals and entities identified as posing significantrisk of committing acts of terrorism as advisedseparately by the Reserve Bank to the banks.
  • 5. The facility under the Scheme is inaddition to those already available forprivate travel, business travel, studies,medical treatment, etc., as described inSchedule III of Foreign ExchangeManagement (Current AccountTransactions) Rules, 2000.The resident individual investors canretain and re-invest the income earnedon investments made under theScheme. The residents are not requiredto repatriate the funds or incomegenerated out of investments madeunder the Scheme.
  • 6. Remittance under this scheme is on agross basis (net of repatriation fromabroad. Remittances under the facilitycan be consolidated in respect of familymembers subject to the individualfamily members complying with theterms and conditions of the Scheme.
  • 7. Remittances under the Scheme can beused for purchasing objects of artsubject to compliance with the extantForeign Trade Policy of the Governmentof India and other applicable laws.AD will be guided by the nature oftransaction as declared by the remitterand will certify that the remittance is inconformity with the instructions issuedby the Reserve Bank, in this regard fromtime to time. The Scheme can also beused for remittance of funds foracquisition of ESOPs.
  • 8. The remittance under the Scheme is inaddition to acquisition of ESOPs linkedto ADR/GDR and to acquisition ofqualification shares.A resident individual can invest in unitsof Mutual Funds, Venture Funds,unrated debt securities, promissorynotes, etc. under this Scheme. Further,the resident can invest in such securitiesthrough the bank account openedabroad for the purpose under theScheme.An individual, who has availed of a loanabroad while as a non-resident Indiancan repay the same on return to India,under this Scheme as a resident
  • 9. It is mandatory to have PAN number tomake remittances under the Scheme.There is no restriction on the frequency.However, the total amount of foreignexchange purchased from or remittedthrough, all sources in India during afinancial year should be within thecumulative limit of USD 200,000.
  • 10. The individual will have to designate abranch of an AD through which all theremittances under the Scheme will bemade. The applicants should havemaintained the bank account with thebank for a minimum period of one yearprior to the remittance. If the applicantseeking to make the remittance is a newcustomer of the bank, AD should carryout due diligence on the account.Further, the AD should obtain bankstatement for the previous year fromthe applicant to satisfy themselvesregarding the source of funds.
  • 11. Once a remittance is made for anamount up to USD 200,000 during thefinancial year, he would not be eligibleto make any further remittances underthis scheme, even if the proceeds of theinvestments have been brought backinto the country.The remittances can be made in anyfreely convertible foreign currencyequivalent to USD 200,000 in a financialyear.Investment by resident individual inoverseas companies is subsumed underthe Scheme of USD 200,000. Therequirement of 10 per cent reciprocalshareholding in the listed Indiancompanies by such overseas companieshas since been dispensed with.
  • 12. For further details on International transactionsContact us atTAXPERT |||vinay@taxpertpro.com09769134554 ||| 09769033172Mumbai ||| Delhi ||| Calcutta ||| SydneyVisit us at