A foreign exchange remittance is the process of sending money from one country to another. This topic covers the rules and schemes that allow resident individuals in India to send money abroad (outward remittance) and to receive money from abroad (inward remittance).
The primary law governing all foreign exchange transactions in India is the Foreign Exchange Management Act (FEMA), 1999.
Outward Remittances: The Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme (LRS) is a facility provided by the RBI that allows resident individuals to freely remit money abroad up to a certain limit in a financial year for any permissible current or capital account transaction.
Feature | Details |
Eligibility | All resident individuals, including minors. |
Annual Limit | Up to USD 250,000 (two hundred fifty thousand US dollars) per financial year (April-March). This is the most important figure to remember. |
PAN Card | Submitting a PAN card is mandatory for all transactions under the LRS. |
Permissible Transactions under LRS
An individual can use the LRS facility to send money abroad for a wide variety of reasons. These include:
- Private visits to any country (except Nepal and Bhutan).
- Gift or donation.
- Going abroad for employment.
- Emigration (moving to another country).
- Maintenance of close relatives living abroad.
- Travel for business, or for attending a conference or specialised training.
- Expenses for medical treatment abroad.
- Studies abroad.
- Investment in shares and property overseas.
Prohibited Transactions
There are some transactions for which remittances are strictly not allowed under the LRS. These include:
- Remittance for any purpose illegal under Indian law.
- Remittance to countries identified as non-cooperative by the Financial Action Task Force (FATF).
- Remittance for trading on the foreign exchange markets.
- Remittance for purchasing lottery tickets or banned magazines.
Inward Remittances
Inward remittance is money received in India from a person residing abroad. India is one of the world’s largest recipients of inward remittances.
Common Channels for Receiving Money
- Wire Transfer (SWIFT): A secure method for transferring large amounts of money between bank accounts internationally.
- Online Money Transfer Operators: Companies like Western Union, MoneyGram, and modern fintech platforms like Wise or Remitly.
- Rupee Drawing Arrangements (RDA): A system where foreign exchange companies abroad partner with banks in India to facilitate remittances.
These transactions are also monitored under FEMA, and banks must report large inward remittances to the authorities.