Having a clear purpose of simplifying and liberalizing the foreign exchange facilities to the Indian residents, the Reserve Bank of India came up with the Liberalized Remittance Scheme (LRS) in 2004. The scheme has successfully claimed a wonderful impact on the foreign remittance, which can be made freely today by the Indian residents in exchange of $200,000 for every financial year.

Those who made remittance under the said scheme – are free to invest in share market, mutual fund or foreign investment even without getting a prior approval by RBI. More and more, remittance made under the scheme can also be used for purchasing a property overseas.

However, the scheme has been observed to have created lots of confusions in terms of what it can actually be used for, required documents and many such things. Let’s have a detailed description about the scheme that has been mentioned below.

Where the scheme can be used

1. Investment in share market, mutual funds, securities, bonds oversees
2. Purchasing property in overseas
3. Opening and maintaining bank account overseas
4. Making donation and gifts abroad

What are not granted under the LRS

1. Purchasing lottery tickets and other explicitly prohibited transaction by RBI
2. Remittance from India – not allowed – for margin calls to overseas exchange
3. Establishing company overseas
4. Business activity or trading in overseas exchange
5. Purchasing of FCCBs issued by companies located in India

Moreover, the LRS scheme also offered a separate limit for other remittances that include travel, health or education.

1. For private travel – $ 10,000 per financial year
2. Travel for business purpose – $25,000 for every trip
3. For study – $100,000 for every academic year
4. For medial expenses – $100,000 per financial year

The remittance follows restriction to some countries like Pakistan Nepal, Bhutan, Mauritius and many more. You can search for a complete list of such countries enlisted by the government by accessing the relevant site.

In order to be verified by the bank while making a remittance, you need to submit your self declaration form mentioning the purpose of remittance.

Important steps of fund remittance following LRS

1. First and foremost find the bank. The account holders for less than one year will have to provide either copies of bank statement or last year or latest copies of IT return
2. Submission of declaration form (also treated as an application form)
3. Submission of fund for remittance

Apart from the above documents, some banks may also demand for other documents that include Form 15CA and 15CB, so this must also be taken into account.