The Reserve Bank of India (RBI) is responsible for the financial oversight in the country. It issues currency and manages all the foreign exchange in addition to handling the financial system of the country. RBI manages the foreign exchange market in the country and ensures that it is developed in an orderly fashion. RBI controls as well as limits the flow of money out of the country. Any excessive outflow of rupees can destabilize the currency market and could damage the economy. It is important to understand LRS meaning before you remit money out of the country.
What is LRS?
First and foremost, it is important to learn what is the LRS scheme. LRS is the abbreviation of Liberalized Remittance Scheme. LRS governs the remittances made from India to other countries. A remittance is any money that is sent overseas by an Indian individual. There can be an inward remittance or an outward remittance. In the case of inward remittance, you transfer money to India from abroad. LRS RBI only deals with outward remittances.
The Liberalized Remittance Scheme requires all the remittances to be declared properly through forms and the transaction should be carried out through an authorized dealer. It is because of the LRS scheme that the money, which you send from India to another country, has a certain cap.
Why is LRS Important?
The LRS has made it convenient for Indian citizens to remit money in different countries. It has made a huge difference to the life of people and one main reason for sending money abroad was to support the Indian students who are pursuing their education. As per the LRS scheme, Indians can buy shares or property in markets that are outside the country. For an Indian citizen who wants to send money abroad for whatever reason, it is important to know what LRS is and to comply with the requirements of the same.
What is the current LRS Limit?
The annual limit for remittance is USD 2.5 lakh annually or an amount equivalent to it in other currencies. You can make a remittance for the below-mentioned reasons.
- Tourism and travel
- Paying for education abroad
- Medical treatment overseas
- Purchase of property or shares
- Gifts and donations to beneficiaries
- Maintenance of family members who live abroad
It is important to follow the appropriate procedure for each remittance. You will need to give a purpose code for it and the code for different remittance types will be detailed on the back of the form, which you will complete as per the rules.
What type of Remittance is not allowed in LRS?
As per the Liberalized Remittance Scheme, there are certain types of remittances, which are not allowed, or have further controls. If you want to remit an amount, which exceeds the given limit, you will have to take permission from the RBI. In addition, there are countries, which do not allow you to remit money. You cannot remit the money, which has originated from certain sources that include:
- Company dividends
- Lottery winnings
- Proceeds from gambling
- Interest payments on certain non-resident rupee bank accounts
Keep the LRS limit in mind before you remit money outside India.