Understanding the Liberalised Remittance Scheme (LRS) for Indian Nationals
Indians sending money abroad have a few days left in this financial year to make full use of the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). Sending Indian Rupees abroad for buying international stocks, properties, or for meeting your child’s foreign education requires adherence to the guidelines set by the RBI. Indian nationals must comply with the LRS rules when sending any outward remittances.
Under the RBI’s Liberalised Remittance Scheme (LRS), every resident, including minors (with a guardian’s countersignature), is allowed to remit up to 2.5 lakh US dollars (USD 2,50,000) per fiscal year. To avail of this limit for the current financial year, individuals must ensure they remit by March 31, 2025. At an exchange rate of Rs 86 to a dollar, this amounts to approximately Rs 2,15,00,000 or Rs 2.15 crore.
If an individual remits 2.5 lakh dollars before March 31 and continues this process at the start of the next fiscal year, a total of 5 lakh dollars can be remitted abroad per individual over a short period. Indian residents can purchase dollars from authorized dealers using Indian Rupees (INR), which can then be utilized to acquire assets such as US shares or for other expenditures abroad. The rules clarify that foreign exchange (forex) can only be remitted for permissible current account transactions, capital account transactions, or a combination of both.
A significant portion of the remittances by Indians is directed towards financial assets abroad. Data from October 2024 indicates a remarkable 78% year-on-year increase in overseas equity and debt investments under the Liberalised Remittance Scheme (LRS). For those considering diversifying into US stocks, the initial step involves utilizing an international brokerage platform. After converting INR to dollars, investors can achieve diversification in their stock portfolio by adding shares from global companies.
The process is straightforward: it begins with opening an international trading account in India. The brokerage firm assists in fulfilling LRS formalities, completing KYC requirements, and facilitating the transfer of funds from an Indian bank to the newly established foreign bank account. Once this is accomplished, individuals are well-positioned to purchase top US stocks from India.
If you have already made a remittance under the RBI’s Liberalised Remittance Scheme (LRS), it’s crucial to be aware of new developments regarding unused foreign exchange.
According to a recent RBI rule, any foreign exchange that remains unstated abroad must be returned within a specified timeframe. As per the RSM Astute Consulting Newflash report, effective from 24 August 2022, any foreign exchange that is realized, unspent, or unused and not reinvested must be repatriated and surrendered to an authorized person within 180 days from the date of receipt, realization, purchase, acquisition, or return to India.
Taking timely and compliant action ensures that you can fully leverage the benefits of the LRS while adhering to regulatory guidelines.