Remittance abroad by Resident Indian

Under the Liberalized Remittance Scheme as prescribed in the FEMA, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both. The LRS is a scheme that allows resident individuals in India to remit a certain amount of money abroad for various permissible current and capital account transactions. The LRS is primarily intended for facilitating the remittance of funds for current account transactions like travel, education, medical treatment, etc., and for making investments in financial assets abroad. The following are the permissible Capital account transactions under LRS viz. Opening of a foreign currency account abroad with a bank outside India, Purchase of property abroad, Investments in shares, securities, mutual funds, etc abroad. However, you cannot use the remittances for margin trading, buying lottery tickets, real estate, etc.?

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However, the Rule restrains resident individuals from keeping money in offshore bank accounts beyond six months. The rule requires them to 'invest' the unused money remitted from India in foreign securities, mutual funds, properties, and other permitted assets. However, 'FDs' are not included as permitted investments under the revised Liberalised Remittance Scheme (LRS) . While the new regulations allow an individual to invest in unlisted shares of overseas companies (as long as the entity is not into financial services and subject to other conditions on control and ownership), investment is not allowed in unlisted debt instruments. FDs will be out-of-bounds under LRS as it is construed as 'unlisted debt instruments'. Not to mention, the $250,000 limit may fall short for a resident who aspires to, say, buy a home overseas, undergo a medical procedure, or study abroad. Hence, to meet such expenses, many high net-worth individuals (HNIs) are accumulating forex by sending up to $250,000 every year, even when there was no bona fide expense. Again, this needs to be invested. Further, a foreign bank will have a requirement of maintenance of minimum balance, but the new LRS framework does not provide flexibility to retain excess funds in the bank account beyond a period of 180 days. Buying a House/Flat outside India with the offer to pay every year USD2,50,000 is also not permitted as such an arrangement is considered as a loan, and the Scheme does not permit remittance to repayment of the borrowed loan.

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