Obligations a Remitter must fulfil under the Liberalised Remittance Scheme.
Under the established guidelines, a resident individual can transfer up to USD 250,000 per fiscal year for any authorised transactions, whether related to the current or capital account or a mix of both. For all remittances under this Scheme, the individual must appoint a branch of an Authorised Dealer (AD). The individual intending to remit must complete Form A2 to acquire foreign exchange under the Liberalised Remittance Scheme (LRS). The resident must share their Permanent Account Number (PAN) to facilitate these remittances.
The resident individuals or remitters need to adhere to the following compliance measures:
Repatriation and Surrender of Unutilised Foreign Exchange
An investor who has made remittances under LRS can retain and reinvest the earnings from these investments. However, any received, realised, unused, or unspent foreign currency, unless reinvested, must be repatriated and surrendered to an authorised person within 180 days from receipt, realisation, purchase, acquisition, or return to India.
Adherence to New ODI Regulations
Resident individuals who have made overseas direct investments in accordance with the Foreign Exchange Management Act (FEMA) provisions are required to comply with the Foreign Exchange Management (Overseas Investment) Rules, Regulations, and Directions, all established in 2022.
Maintenance of Bank Account under LRS
A remittance applicant must have maintained a bank account with the Authorised Dealer Bank for at least one year before making capital account transactions.
Due Diligence for New Bank Customers:- For applicants who are new customers to the bank, Authorised Dealers must perform due diligence when opening, operating, and maintaining the account.
Bank Statements Requirement:- Authorised Dealers must obtain bank statements for the previous year from the remittance applicant to ensure the source of funds. If the bank statement is unavailable, the latest Income Tax Assessment Order or Tax Return filed by the applicant should be obtained.
PAN Requirement for LRS Transactions
Providing the Permanent Account Number (PAN) is mandatory for all transactions made under the LRS through Authorized Persons. This requirement was not insisted on for permissible current account transactions up to USD 25,000 in the past.
Form A2 Declaration under LRS
Applicants seeking to make remittances under LRS must submit an application and declaration using Form A2 to the Authorised Dealer or full-fledged money changer (FFMC). This declaration assures that the funds belong to the remitter and will not be used for prohibited purposes. This statement must accompany the application.
Please note that resident individuals can also acquire foreign exchange from an FFMC for private or business trips. The foreign exchange purchased from an FFMC must be considered within the overall LRS limit of USD 250,000 and declared in the application form submitted to the Authorised Dealer Bank.
Read also from us Permissible Current Account Transactions under Liberalized Remittance Scheme (LRS)
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