How much money can an Individual transfer out of India?

The Reserve Bank of India (RBI) in its monetary policy review enhanced the limit under Liberalized Remittance Scheme (LRS) to $250,000 per person per year from existing limit of 125,000 USD. 

RBI had reduced the eligibility limit for foreign exchange remittances under LRS to $75,000 in 2013 as a macro-prudential measure. With stability in the foreign exchange market, this limit was enhanced to $125,000 in June 2014 without end-use restrictions, except for prohibited foreign exchange transactions such as margin trading, lotteries and the like. 

It was in 2004 that the Reserve Bank of India (RBI) announced the Liberalized Remittance Scheme to facilitate the Indian Residents to transfer funds abroad without its prior permission. 

Under this scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 (or its equivalent freely convertible foreign currency) per financial year (April – March). 

This scheme is applicable to people like you and me; not for NRIs. If you wish to send money abroad for the following purposes, you can do so without the prior approval of RBI 

Purpose of remittance:

  • For travel, studies, medical treatment etc.
  • To acquire shares or debt instruments in listed or unlisted companies  or any other assets including acquisition of immovable property directly or indirectly outside India
  • To invest in Mutual funds, Venture funds, unrated debt securities, promissory notes, etc
  • To gift or to give donations
  • To acquire ESOPs in overseas companies (in addition to acquisition of ESOPs linked to ADR/GDR)
  • Repayment of loan taken while an individual was a Non Resident Indian
  • To open, maintain and hold foreign currency accounts with banks outside India for carrying out any  permitted transactions

Prohibited transactions: Some of them are –

  • Purchase of lottery tickets/sweep stakes!
  • To use as margin money for trading in overseas stock exchanges
  • To use for trading in overseas stock exchanges
  • To purchase Foreign Currency Convertible Bonds (FCCB) issued by Indian Companies abroad
  • For setting up a company abroad ( however, with effect from August, 2013, to set up a Joint Venture or a Wholly Owned Subsidiary outside India is permitted)
  • Remittance directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan

FAQ

Q1: A Resident individual gifts money in Indian rupees to their NRI relatives and such amount is credited to the NRO account of the relative for an onward transfer outside India. Is the overall limit of USD 125000 applicable for this transaction? 

Yes. Gift in Indian rupees (by way of crossed cheque or electronic transfer) is also to be considered while calculating the overall limit of USD 125000 

Q2: Can Resident Individual give loans to NRIs?

Yes. The resident individual can lend money by way of crossed cheque or electronic transfer within the overall limit of USD 125000 per financial year. However, the loan should not be remitted out of India. Secondly the loan should be interest free and have a maturity of minimum one year. 

Q3: Should the interest or dividend earned on overseas investments be remitted back to India?

No. the investment along with interest or dividend can be retained and reinvested abroad. 

Q4: Can the resident Individual open bank account abroad?

Yes. Resident Individuals are allowed to open and hold bank accounts abroad.

This post was originally written on 11-08-2014 and updated on 4-01-2015

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If you are looking for Certificate from chartered accountant Bangalore for foreign remittance, please email your requirement to prakasha@balakrishnaandco.com

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 28+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional, Registered Valuer (F&SA) and Social Auditor.Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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