Forex Facilities including the Liberalised Remittance Scheme for Residents – FAQ

Introduction :

The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Foreign Exchange Management Act, 1999 (FEMA), which came into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions. All transactions undertaken by a resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions.

In terms of Section 5 of the FEMA, persons resident in India1 are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by Central Government, such as remittance out of lottery winnings; remittance of income from racing/riding, etc., or any other hobby; remittance for purchase of lottery tickets, banned / proscribed magazines, football pools, sweepstakes, etc.; remittance of dividend by any company to which the requirement of dividend balancing is applicable; payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco and payment related to “call back services” of telephones.

Foreign Exchange Management (Current Account Transactions) Rules, 2000 – Notification [GSR No.381(E)] dated May 3, 2000 and the revised Schedule III to the Rules as given in the Notification G.S.R. 426(E) dated May 26, 2015 is available in the Official Gazette as well as, as an Annex to our Master Circular on ‘Miscellaneous Remittances from India–Facilities for Residents’ available on our website www.mastercirculars.rbi.org.in.

These FAQs may be referred to for general guidance. The Authorised Persons and their constituents may refer to respective circulars/ notifications for detailed information, if so needed.

Q 1. Who is an Authorized Dealer?

Ans. An Authorised Dealer is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities (the list of ADs is available on www.rbi.org.in) and normally includes banks.

Q 2. Who are authorized by the Reserve Bank to sell foreign exchange for travel purposes?

Ans. Foreign exchange can be purchased from any authorised person, such as Authorised Dealer (AD) Category-I bank and AD Category II. Full-Fledged Money Changers (FFMCs) are also permitted to release exchange for business and private visits.

Q.3. What is the Liberalised Remittance Scheme (LRS) of USD 2,50,000 ?

Ans. Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. Further, resident individuals can avail of foreign exchange facility for the purposes mentioned in Para 1 of Schedule III of FEM (CAT) Amendment Rules 2015, within the limit of USD 2,50,000 only. If an individual remits any amount under LRS in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 by the amount so remitted.

In case of remitter being a minor, the LRS declaration form must be countersigned by the minor’s natural guardian.

Q. 4. Can a resident individual make a rupee loan to a NRI/PIO who is a close relative of resident individual, by of crossed cheque/ electronic transfer?

Ans. A resident individual is permitted to make a rupee loan to a NRI/PIO who is a close relative of the resident individual (‘relative’ as defined in section 6 of the Companies Act 1956) by way of crossed cheque/ electronic transfer subject to the following conditions:

(i) The loan is free of interest and the minimum maturity of the loan is one year.

(ii) The loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 2,50,000, per financial year, available to the resident individual. It would be the responsibility of the lender to ensure that the amount of loan is within the Liberalised Remittance Scheme limit of USD 2,50,000 during the financial year.

(iii) The loan shall be utilised for meeting the borrower’s personal requirements or for his own business purposes in India.

(iv) The loan shall not be utilised, either singly or in association with other person, for any of the activities in which investment by persons resident outside India is prohibited, namely;

1. the business of chit fund, or

2. Nidhi Company ,or

3. agricultural or plantation activities or in real estate business, or construction of farmhouses, or

4. trading in Transferable Development Rights (TDRs).

Explanation: For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential / commercial premises, roads or bridges.

(v) The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c.

(vi) The loan amount shall not be remitted outside India.

(vii) Repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/ Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.

Q. 5. Can a resident individual make a rupee gift to a NRI/PIO who is a close relative of resident individual, by of crossed cheque/ electronic transfer?

Ans. A resident individual can make a rupee gift to a NRI/PIO who is a close relative of the resident individual [‘close relative’ as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 250,000 per financial year as permitted under the LRS for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances made by the donor during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.

Q. 6. Can the loans of Non-resident be repaid by resident close relatives?

Ans. Where an authorised dealer in India has granted loan to a non-resident Indian in accordance with Regulation 7 of the Notification No. FEMA 4/2000-RB dated May 3, 2000, such loans may also be repaid by resident close relative (‘relative’ as defined in section 6 of the Companies Act, 1956) of the Non-Resident Indian by crediting the borrower’s loan account through the bank account of such relative.

Q. 7. What are the prohibited items under the Scheme?

Ans. The remittance facility under the Scheme is not available for the following:

1. Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

2. Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.

3. Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.

4. Remittance for trading in foreign exchange abroad.

5. Capital account remittances, directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.

6. Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

Q. 8. Under LRS are resident individuals required to repatriate the accrued interest/dividend on deposits/investments abroad, over and above the principal amount?

Ans. The investor can retain and reinvest the income earned on investments made under the Scheme. At present, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.

However, a resident individual who has made overseas direct investment in the equity shares and compulsorily convertible preference shares of a Joint Venture or Wholly Owned Subsidiary outside India, within the LRS limit then he/she shall have to comply with the terms and conditions as prescribed by our overseas investment guidelines under Notification No. 263/ RB-2013 dated August 5, 2013.

Q. 9. Can remittances under the LRS facility be consolidated in respect of family members?

Ans. Remittances under the facility can be consolidated in respect of close family members subject to the individual family members complying with the terms and conditions of the Scheme. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank account/investment/purchase of property, if they are not the co-owners/co-partners of the investment/property/overseas bank account.

Q. 10. Can one use the LRS for purchase of objects of art (paintings, etc.) either directly or through auction house?

Ans. Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.

Q.11. Is the AD required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

Ans. AD will be guided by the nature of transaction as declared by the remitter in Form A2 and ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’ and will thereafter certify that the remittance is in conformity with the instructions issued by the Reserve Bank in this regard from time to time.

Q.12. Can an individual, who has availed of a loan abroad while as a non-resident Indian repay the same on return to India, under this Scheme as a resident?

Ans. Yes, this is permissible.

Q. 13. Is it mandatory for resident individuals to have PAN number for sending outward remittances under the Scheme?

Ans. Yes, it is mandatory to have PAN number to make remittances under the Scheme. However, PAN card need not be insisted upon for remittance made towards permissible current account transactions up to USD 25,000.

Q. 14. In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends putting through the permissible transactions) at the time of his private visit abroad, whether the remitter can effect such an outward remittance against self-declaration?

Ans. Such outward remittance in the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.

Q. 15. Are there any restrictions on the frequency of the remittance?

Ans. There are no restrictions on the frequency of remittances under LRS. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 2,50,000.

Once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme, even if the proceeds of the investments have been brought back into the country.

Q. 16. Whether LRS facility is in addition to existing facilities detailed in para 1 of Schedule III of FEM (CAT) Amendment Rules, 2015?

Ans. No. The existing facilities detailed in Para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015, have been subsumed under the limit of USD 2,50,000 available to resident individuals per financial year under the LRS scheme w.e.f. May 26, 2015. However, for emigration; expenses in connection with medical treatment abroad and studies abroad, individuals may avail of exchange facility for an amount in excess of the overall limit prescribed under the LRS, if it is so required by a country of emigration, medical institute offering treatment or the university respectively.

Q. 17. What are the purposes under FEM (CAT) Amendment Rules, 2015, under which a resident individual can avail of foreign exchange facility?

Ans. Individuals can avail of foreign exchange facility for the following purposes within the limit of USD 2,50,000 only on financial year basis.

1. Private visits to any country (except Nepal and Bhutan)

2. Gift or donation.

3. Going abroad for employment

4. Emigration

5. Maintenance of close relatives abroad

6. Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up.

7. Expenses in connection with medical treatment abroad

8. Studies abroad

9. Any other current account transaction

Any additional remittance in excess of the said limit for the above mentioned purposes shall require prior approval of the Reserve Bank of India.

“Any other current account transaction” as given at (ix) above is to cover any other current account transactions which were available to individuals in the erstwhile Schedule III to FEM (CAT) Rules, 2000 dated May 3, 2000, and which do not appear above/ in Schedule III to FEM (CAT) Amendment Rules, 2015.

However, for purposes such as emigration; expenses in connection with medical treatment abroad and studies abroad, individuals may be permitted to avail of exchange facility for an amount in excess of the overall limit prescribed under the LRS, if it is so required by a country of emigration, medical institute offering treatment or the university respectively. (To be read along with Q 21, Q24 and Q25).

The AD bank may undertake the remittance transaction without RBI’s permission for all residual current account transactions which are not prohibited/ restricted transactions under Schedule I, II or III of FEM (CAT) Rules, 2000, as amended from time to time. It is for the AD bank to satisfy themselves about the genuineness of the transaction, as hitherto.

The resident individual needs to fill up the Form A2 as well as the ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’.

Q.18. How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?

Ans. For private visits abroad, other than to Nepal and Bhutan, any resident can obtain foreign exchange up to an aggregate amount of USD 2,50,000, from an Authorised Dealer or FFMC, in any one financial year, irrespective of the number of visits undertaken during the year. This limit has been subsumed under the Liberalised Remittance Scheme w.e.f. May 26, 2015. If an individual has already remitted any amount under the Liberalised Remittance Scheme in a financial year, then the applicable limit for travelling purpose for such individual would be reduced from USD 250,000 by the amount so remitted.

The resident individuals shall have to fill Form A2 and ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’ while availing foreign exchange for travelling purposes from AD banks and FFMCs.

No foreign exchange is available for visit to Nepal and/or Bhutan for any purpose. A resident Indian is allowed to take INR of denomination of Rs.100 or lesser denomination, to Nepal and Bhutan, without any limits. For denominations of Rs 500 and Rs1,000, the limit is Rs 25,000.

Further, all tour related expenses including cost of rail/road/water transportation charges outside India and remittances relating towards cost of Euro Rail; passes/tickets, etc. for Indian travellers, and overseas hotel/flight charges have been subsumed under the new enhanced limit of USD 250,000. The tour operator can collect this amount either in INR or in FCY.

Q. 19. How much foreign exchange can a resident send as gift / donation to a person resident outside India?

Ans. Any resident individual/ entity (trust; company; partnership firm, etc.), may remit up-to USD 2,50,000 in one financial year as gift to a person residing outside India or as donation to an organization outside India. Remittances exceeding the limit of USD 2,50,000 will require prior permission from the Reserve Bank. It is clarified that a resident cannot gift to another resident, in foreign currency, for the credit of the latter’s foreign currency account held abroad under LRS.

Further, general permission is available to persons other than individuals’ to remit towards donations up-to one per cent of their foreign exchange earnings during the previous three financial years or USD 5,000,000, whichever is less, for (a) creation of Chairs in reputed educational institutes, (b) contribution to funds (not being an investment fund) promoted by educational institutes; and (c) contribution to a technical institution or body or association in the field of activity of the donor Company. Any additional remittance in excess of the same shall require prior approval of the Reserve Bank of India.

Q. 20. How much foreign exchange is available to a person going abroad on employment?

Ans. A person going abroad for employment can draw foreign exchange up to USD 2,50,000 per financial year from any Authorised Dealer in India on the basis of self-declaration in Form A2 and ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’. This limit has been subsumed under the Liberalised Remittance Scheme w.e.f. May 26, 2015. If an individual remits any amount under the Liberalised Remittance Scheme in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 by the amount so remitted.

Q. 21. How much foreign exchange is available to a person going abroad on emigration?

Ans. A person going abroad on emigration can draw foreign exchange from AD Category I bank and AD Category II up to the amount prescribed by the country of emigration or USD 250,000. This amount is only to meet the incidental expenses in the country of emigration. Further, this remittance is not for undertaking any capital account transactions such as overseas investment in government bonds; land; commercial enterprise; etc. No amount of foreign exchange can be remitted outside India to become eligible or for earning points or credits for immigration.

Q. 22. How much foreign exchange can a person resident in India remit towards maintenance of close relatives abroad?

Ans. A person resident in India can remit up-to USD 250,000 per financial year towards maintenance of close relative (‘relative’ as defined in section 6 of the Companies Act, 1956) abroad. . This limit has been subsumed under the Liberalised Remittance Scheme w.e.f. May 26, 2015. If an individual remits any amount under the Liberalised Remittance Scheme in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 by the amount so remitted.

Q. 23. How much foreign exchange is available for a business trip?

Ans. For business trips to foreign countries, resident individuals/ individuals having proprietorship firms can avail of foreign exchange up to USD 2,50,000 in a financial year irrespective of the number of visits undertaken during the year. This limit has been subsumed under the Liberalised Remittance Scheme w.e.f. May 26, 2015.

Visits in connection with attending of an international conference, seminar, specialised training, apprentice training, etc., are treated as business visits. Release of foreign exchange exceeding USD 2,50,000 for business travel abroad, irrespective of the period of stay, by residents require prior permission from the Reserve Bank.

However, if an employee is being deputed by a company and the expenses are borne by the company, then such expenses shall be treated as residual current account transactions and may be permitted by the AD bank, without any limit, subject to verifying the bonafides of the transaction.

Q. 24. How much foreign exchange can be drawn for medical treatment abroad?

Ans. AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000 or its equivalent to resident Indians for medical treatment abroad on self-declaration basis in Form A2 and ‘Application cum declaration for purchase of foreign exchange under LRS of USD 250,000’, without insisting on any estimate from a hospital/doctor in India/abroad. However, a person visiting abroad for medical treatment can obtain foreign exchange from AD banks exceeding the above limit, provided the request is supported by an estimate from a hospital/doctor in India/abroad.

In addition to the above, an amount up to USD 250,000 per FY is allowed to a person for accompanying as attendant to a patient going abroad for medical treatment/check-up.

Q. 25. What is meant by ‘any other current account transaction” as given at item no. (ix) of para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015?

Ans. “Any other current account transaction” as given at item no. (ix) of Rules ibid is to cover any other current account transactions which were available to individuals in the erstwhile Schedule III to FEM (CAT) Rules, 2000 dated May 3, 2000, and which do not appear in Para 1 to Schedule III to FEM (CAT) Amendment Rules, 2015.

Q. 26. Resident individuals (but not permanently resident in India) can remit up to net salary after deduction of taxes. However, if he has exhausted the limit of USD 2,50,000 as net salary remittance and desires to remit any other income under LRS is it permissible as the limit will be over and above USD 2,50,000?

Ans. A person who is resident but not permanently resident in India and

(a) is a citizen of a foreign State other than Pakistan; or

(b) is a citizen of India, who is on deputation to the office or branch of a foreign company or subsidiary or joint venture in India of such foreign company,

may make remittance up to his net salary (after deduction of taxes, contribution to provident fund and other deductions).

Explanation: For the purpose of this item, a person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which does not exceed three years, is a resident but not permanently resident. It is clarified that salary includes earnings from stage shows and other earnings from modelling assignments and acting assignments etc.

Further, resident individuals (but not permanently resident in India) who have remitted their entire earnings and salary and wish to further remit ‘other income’ may approach RBI through their AD bank for consideration with documents.

Q. 27. Whether the limit of USD 2,50,000 per financial year as mentioned in Para 1 of Schedule III of FEM (CAT) Amendment Rules, 2015 is also applicable to person other than individuals?

Ans. Yes, the limit of USD 2, 50,000 is applicable to persons other than individuals (such as corporates, trusts; etc.) who wish to avail of facilities under Para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015. Such entities will have to fill up the Form A2 while remitting foreign exchange.

However, all residual current account transactions undertaken by such entities are otherwise permissible without any specified limit as hitherto. All such residual current account transactions, irrespective of the amount, are to be disposed off at the level of AD Category I bank, as hitherto. It is for the AD Category I bank to satisfy themselves about the genuineness of the transaction.

Q. 28. How much foreign currency can be carried in cash for travel abroad?

Ans. Travellers going to all countries other than (a) and (b) below are allowed to purchase foreign currency notes / coins only up to USD 3000 per visit. Balance amount can be carried in the form of travellers cheque or banker’s draft. Exceptions to this are (a) travellers proceeding to Iraq and Libya who can draw foreign exchange in the form of foreign currency notes and coins not exceeding USD 5000 or its equivalent per visit; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States who can draw entire foreign exchange (up-to USD 250, 000) in the form of foreign currency notes or coins.

For travellers proceeding for Haj/ Umrah pilgrimage, full amount of BTQ entitlement (USD 250, 000) in cash or up to the cash limit as specified by the Haj Committee of India, may be released by the ADs and FFMCs.

Q 29. How much Indian currency can be brought in while coming into India?

Ans. A resident of India, who has gone out of India on a temporary visit may bring into India at the time of his return from any place outside India (other than Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000. A person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes, in denomination not exceeding Rs.100. Any person resident outside India, not being a citizen of Pakistan and Bangladesh and also not a traveller coming from and going to Pakistan and Bangladesh, and visiting India may bring into India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 25,000 while entering only through an airport.

Any person resident in India who had gone to Pakistan and/or Bangladesh on a temporary visit, may bring into India at the time of his return, currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 10,000 per person.

Q. 30. How much foreign exchange can be brought in while visiting India?

Ans. A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000 or its equivalent and/or the value of foreign currency alone exceeds USD 5,000 or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

Q.31. How many days in advance one can buy foreign exchange for travel abroad?

Ans. Permissible foreign exchange can be drawn 60 days in advance. In case it is not possible to use the foreign exchange within the period of 60 days, it should be immediately surrendered to an authorised person. However, residents are free to retain foreign exchange up to USD 2,000, in the form of foreign currency notes or TCs for future use or credit to their Resident Foreign Currency (Domestic) [RFC (Domestic)] Accounts.

Q.32. Can one pay by cash full rupee equivalent of foreign exchange being purchased for travel abroad?

Ans. Foreign exchange for travel abroad can be purchased from an authorized person against rupee payment in cash below Rs.50,000/-. However, if the sale of foreign exchange is for the amount equivalent to Rs 50,000/- and above, the entire payment should be made by way of a crossed cheque/ banker’s cheque/ pay order/ demand draft/ debit card / credit card / prepaid card only.

Q.33. Is there any time-frame for a traveller who has returned to India to surrender foreign exchange?

Ans. On return from a foreign trip, travellers are required to surrender unspent foreign exchange held in the form of currency notes and travellers cheques within 180 days of return. However, they are free to retain foreign exchange up to USD 2,000, in the form of foreign currency notes or TCs for future use or credit to their Resident Foreign Currency (Domestic) [RFC (Domestic)] Accounts.

Q.34. Should foreign coins be surrendered to an Authorised Dealer on return from abroad?

Ans. The residents can hold foreign coins without any limit.

Q 35. What are the documents required for withdrawal/remittance of foreign exchange for purposes mentioned in para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015?

Ans. RBI will not prescribe any documentation to be submitted to ADs except the ‘Application cum Declaration for purchase of foreign exchange under LRS of USD 250,000’ for purchase/ remittance of foreign exchange under the Liberalised Remittance Scheme and Form A2. All other documentation may be done as advised by the Authorised Dealer.

The different limits stipulated [as in Schedule III of FEM (CAT) Amendment Rules, 2015] for various current account transactions like travel; gift; maintenance of close relatives; etc. have been subsumed within the LRS limit of USD 250, 000. Individuals remitting under Schedule III to FEM (CAT) Amendment Rules, 2015 will have to fill up the Form A2 and ‘Application cum Declaration for purchase of foreign exchange under the Liberalised Remittance Scheme of USD 250,000’.

Authorized dealers need not obtain any document, including Form A-2, except a simple letter from the applicant (containing the basic information, viz., names and the addresses of the applicant and the beneficiary, amount to be remitted and the purpose of remittance) as long as the foreign exchange is being purchased for a permissible current account transaction (not included in the Schedules I and II of Government Notification on Current Account Transactions), and the amount does not exceed USD 25000 or its equivalent and the payment is made by a cheque drawn on the applicant’s bank account or by a Demand Draft. AD banks shall prepare dummy A-2 so as to enable them to provide purpose of remittance for statistical inputs for Balance of Payment.

AD bank shall have to necessarily collect declarations from each traveller (of a group or a customised tour package) relating to compliance with the extant LRS limit, before allowing remittances from the tour operator’s INR or Special Foreign Currency account.

Q.36. Is there any category of visit which requires prior approval from the Reserve Bank or the Government of India?

Ans. Dance troupes, artistes, etc., who wish to undertake cultural tours abroad, should obtain prior approval from the Ministry of Human Resources Development (Department of Education and Culture), Government of India, New Delhi.

Q.37. Whether permission is required for receiving grant/donation from abroad under the Foreign Contribution Regulation Act, 1976?

Ans. The Foreign Contribution Regulation Act, 1976 is administered and monitored by the Ministry of Home Affairs whose address is given below:

Foreigners Division, Jaisalmer House, 26,Mansingh Road, NewDelhi-110011

No specific approval from the Reserve Bank is required in this regard

Q.38. Who is permitted to hold International Credit Card (ICC)/ATM/Debit card for undertaking foreign exchange transactions?

Ans. Banks authorised to deal in foreign exchange are permitted to issue International Debit Cards (IDCs) which can be used by a resident for drawing cash or making payment to a merchant establishment overseas during his visit abroad. IDCs can be used only for permissible current account transactions and the usage of IDCs shall be within the LRS limit.

AD banks can also issue Store Value Card/Charge Card/Smart Card to residents traveling on private/business visit abroad which can be used for making payments at overseas merchant establishments and also for drawing cash from ATM terminals. No prior permission from Reserve Bank is required for issue of such cards. However, the use of such cards is limited to permissible current account transactions and subject to the LRS limit.

Resident individuals maintaining a foreign currency account with an authorised dealer in India or a bank abroad, as permissible under extant Foreign Exchange Regulations, are free to obtain International Credit Cards (ICCs) issued by overseas banks and other reputed agencies. The charges incurred against the card either in India or abroad, can be met out of funds held in such foreign currency account/s of the card holder or through remittances, if any, from India only through a bank where the card-holder has a current or savings account. The remittance for this purpose, should also be made directly to the card-issuing agency abroad, and not to a third party. It is also clarified that the applicable credit limit will be the limit fixed by the card issuing banks. There is no monetary ceiling fixed by the RBI for remittances, if any, under this facility. The LRS limit shall not apply to the use of ICC for making payment by a person towards meeting expenses while such person is on a visit outside India.

Use of ICCs/ ATMs/ IDCs can be made for travel abroad in connection with various purposes and for making personal payments like subscription to foreign journals, internet subscription, etc. However, use of ICCs/ATMs/Debit Cards is NOT permitted for prohibited transactions indicated in Schedule -1 of FEM (CAT) Amendment Rules 2015 such as purchase of lottery tickets, banned magazines etc.

Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not permitted.

Q.39. Is it required to follow complete export procedure when a gift is sent outside India?

Ans. A person resident in India is free to send outside India (export) any gift article, which may be free to be exported as per the extant Foreign Trade Policy, of value not exceeding Rs.5,00,000/- in value, subject to the exporter submitting a declaration that goods / gift are not more than Rs.5,00,000/- in value. Such gifts may be sent outside India without furnishing the declaration in Form EDF/ SOFTEX, as the case may be.

Q.40. How much jewellery can be carried while going abroad?

Ans. Taking personal jewellery out of India is as per the Baggage Rules, governed and administered by Customs Department, Government of India. While no approval of the Reserve Bank is required in this case, approvals, if any, required from Customs Authorities may be obtained.

Q.41. Can a resident extend local hospitality to a non-resident?

Ans. A person resident in India is free to make any payment in Indian Rupees towards meeting expenses, on account of boarding, lodging and services related thereto or travel to and from and within India, of a person resident outside India, who is on a visit to India.

Q. 42. Can residents purchase air tickets in India for their travel not touching India?

Ans. Residents may book their tickets in India for their visit to any third country. For instance, residents can book their tickets for travel from London to New York, through domestic/foreign airlines in India. However, the same (air tickets) would be a part of the traveller’s overall entitlement of USD 250,000

Q. 43. Can a resident open a foreign currency denominated account in India?

Ans. Persons resident in India are permitted to maintain foreign currency accounts in India under the following three Schemes:

a. Exchange Earners Foreign Currency Accounts:-

All categories of resident foreign exchange earners can credit up to 100 per cent of their foreign exchange earnings, as specified in the Schedule to Notification No. FEMA 10/2000-RB dated 3rd May, 2000 as amended from time to time, to their EEFC Account with an Authorised Dealer in India. The 100 per cent credit is however, subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. Funds held in EEFC account can be utilised for all permissible current account transactions and also for approved capital account transactions as specified by the extant Rules/Regulations/ Notifications/ Directives issued by the Government/RBI from time to time. The account is maintained in the form of a non-interest bearing current account.

b. Diamond Dollar Account (DDA):-

Under the scheme of Government of India, firms and companies dealing in purchase / sale of rough or cut and polished diamonds / precious metal jewellery plain, minakari and / or studded with / without diamond and / or other stones, with a track record of at least 2 years in import / export of diamonds / coloured gemstones / diamond and coloured gemstones studded jewellery / plain gold jewellery and having an average annual turnover of Rs. 3 crores or above during the preceding three licensing years (licensing year is from April to March) are permitted to transact their business through Diamond Dollar Accounts. It may be noted that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. Such firms and companies may be allowed to open not more than five Diamond Dollar Accounts with their banks.

c. Resident Foreign Currency Accounts : –

A person resident in India may open, hold and maintain with an Authorised Dealer in India a Resident Foreign Currency (RFC) Account to keep their foreign currency assets which were held outside India at the time of return can be credited to such accounts. The foreign exchange received as (i) pension of any other superannuation or other monetary benefits from the employer outside India; (ii) received or acquired as gift or inheritance from a person referred to sub-section (4) of section 6 of FEMA, 1999 or (iii) referred to in clause (c) of section 9 of the Act or acquired as gift or inheritance there from or (iv) received as the proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority; may also be credited to this account.

RFC account can be maintained in the form of current or savings or term deposit accounts.

The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India.

d. Resident Foreign Currency (Domestic) Account:-

A resident Individual may open, hold and maintain with an Authorized Dealer in India, a Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, Bank notes and travellers cheques, from any of the sources like, payment for services rendered abroad, as honorarium, gift, services rendered or in settlement of any lawful obligation from any person not resident in India. The account may also be credited with/opened out of foreign exchange earned abroad like proceeds of export of goods and/or services, royalty, honorarium, etc., and/or gifts received from close relatives (as defined in section 6 of the Companies Act, 1956) and repatriated to India through normal banking channels. The account shall be maintained in the form of Current Account and shall not bear any interest. There is no ceiling on the balances in the account. The account may be debited for payments made towards permissible current and capital account transactions. It may be noted that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.

Q.44. Can a person resident in India hold assets outside India?

Ans. In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.

Further, a resident individual can also acquire property and other assets overseas under the Liberalised Remittance Scheme.

Q.45. Para 5.4 of AP DIR Circular 106 dated June 01, 2015 states that the applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance for capital account transactions. Whether this restriction applies to current account transactions?

Ans. No. The rationale is that remittance facility is up to the LRS limit of USD 250, 000 for current account transactions under Schedule III of FEM (CAT) Amendment Rules, 2015, such as for private and business visits which can also be provided by FFMCs. As FFMCs cannot maintain accounts of remitters the proviso (as mentioned in para 5.4 of the circular ibid) has been confined to capital account transactions. However, FFMCs, are required to ensure that the “Know Your Customer” guidelines and the Anti-Money Laundering Rules in force have been complied with while allowing the current account transactions.

Q.46. Are there any restrictions towards remittances to Mauritius and Pakistan for permissible current account transactions?

Ans. No. However, capital account remittances for capital account transactions, directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time; and remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks are not permissible.

Q.47. Can FFMCs now provide remittance facilities to their customers?

Ans. FFMCs cannot provide remittance facilities to their customers.

Q.48. What are the requirements to be complied with by the remitter?

Ans. The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance for capital account transactions only. . For remittances pertaining to permissible current account transactions, if the applicant seeking to make the remittance is a new customer of the bank, Authorised Dealers should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. He has to furnish the ‘application-cum-declaration for purchase of foreign exchange under the LRS of USD 250,000’ in the specified format along with Form A-2 regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.

Q.49. Can remittances be made only in US Dollars?

Ans. The remittances can be made in any freely convertible foreign currency.

Q.50. Are intermediaries expected to seek specific approval for making overseas investments available to clients?

Ans. Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.

Q.51. Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in?

Ans. No ratings or guidelines have been prescribed under the Liberalised Remittance Scheme of USD 2,50,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.

Q.52. Whether credit facilities (fund or non-fund based) in Indian Rupees or foreign currency can be extended by AD banks to resident individuals?

Ans. No, LRS does not envisage extension of credit facility by the AD banks to their resident individual customers to facilitate remittances for capital account transactions under LRS.

However, AD banks may extend funded and non-funded facilities to resident individuals to facilitate current account remittances under the Scheme.

Q.53. Can bankers open foreign currency accounts in India for residents under LRS?

Ans. No, banks in India cannot open foreign currency accounts in India for residents under the Scheme.

Q.54. Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of the bank outside India for the purpose of opening of foreign currency accounts by residents under the Scheme?

Ans. No, for the purpose of the Scheme, an OBU in India is not treated as an overseas branch of a bank in India.

Q.55. Are individuals resident in India permitted to include non-resident close relatives as joint holder(s) in their resident bank accounts?

Ans. Individuals resident in India are permitted to include non-resident close relative(s) (‘relatives’ as defined in section 6 of the Companies Act, 1956) as joint holder(s) in their resident bank accounts on ‘former or survivor’ basis. However, such non-resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder.

Q.56. Can a Non-Resident Indian (NRI) open NRE/FCNR (B) account with their resident close relative?

Ans. Non-Resident Indian (NRI), as defined in FEMA Notification No. 5/ 2000-RB dated May 3, 2000 may be permitted to open NRE/FCNR(B) account with their resident close relative (‘relative’ as defined in Section 6 of the Companies Act , 1956) on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder.

Q.57. Is meeting of medical expenses of a NRI close relative, in India, by Resident Individuals permitted?

Ans. Where the medical expenses in respect of NRI close relative [‘relative’ as defined in section 6 of the Companies Act, 1956) are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may be covered under the term “services related thereto” under Regulation 2(i) of Notification No. FEMA16/ 2000-RB dated May 3, 2000.

Q.58. What is the reporting format to be complied with by the ADs?

Ans. AD banks have to report remittances under LRS on a monthly basis to External Payments Division, Foreign Exchange Department, Central office, Mumbai, in Online Returns Filing System (ORFS).

Q.59. Whether documents viz 15 CA, 15 CB have to be taken in all outward remittance cases including remittances for maintenance etc.?

Ans. In t/o A. P. (Dir Series) circular No. 151 dated June 30, 2014, Reserve Bank of India will not issue any instructions under the FEMA, regarding the procedure to be followed in respect of deduction of tax at source while allowing remittances to the non-residents. It shall be mandatory on the part of Authorised Dealers to comply with the requirement of the tax laws, as applicable.

General Information: For further details/guidance, please approach any bank authorised to deal in foreign exchange or contact Regional Offices of the Foreign Exchange Department of the Reserve Bank.

1 A ‘person resident in India’ is defined in Section 2(v) of FEMA, 1999 as :

A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include

(A) a person who has gone out of India or who stays outside India, in either case –

for or on taking up employment outside India, or

for carrying on outside India a business or vocation outside India, or

for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

(B) a person who has come to or stays in India, in either case, otherwise than

for or on taking up employment in India ,or for carrying on in India a business or vocation in India, or

for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period any person or body corporate registered or incorporated in India,

an office, branch or agency in India owned or controlled by a person resident outside India,

an office, branch or agency outside India owned or controlled by a person resident in India

Source : RBI.Org