RBI Proposes Rs 50 Lakh Sub-Limit For Certain Overseas Remittances Under LRS

The Reserve Bank of India (RBI) has proposed a separate annual cap of Rs 50 lakh on certain overseas remittances made by resident individuals under the Liberalised Remittance Scheme (LRS). The reported proposals could change the limits applicable to certain overseas payments, depending on the categories specified in the final rules.

Under the existing framework, resident individuals can remit up to $250,000, or around Rs 2 crore, in a financial year from April to March for permitted purposes. The proposed restriction could introduce a lower limit for specific categories of spending, even when an individual has not exhausted the overall annual allowance.

Proposed Cap Could Cover Business Travel And Pilgrimages

According to a Zee Business report, business travel and pilgrimages could fall within the proposed Rs 50 lakh sub-limit. Education and medical expenses are likely to be excluded. The final list of transactions covered by the restriction has not been confirmed.

If implemented, the sub-limit would operate alongside the existing $250,000 annual ceiling. 

For instance, an individual could have sufficient room under the overall LRS allowance but still face a Rs 50 lakh restriction on a category covered by the new rule.

The proposal could impact individuals who make large overseas payments for business trips or other specified purposes. Its impact on foreign investments would depend on whether these transactions are included in the final framework.

Existing LRS Rules Cover Multiple Overseas Payments

The LRS allows resident individuals to transfer money abroad for permitted current and capital account transactions. These include private travel, gifts, donations, overseas education, medical treatment, employment abroad, emigration and the maintenance of close relatives living overseas.

The scheme also covers eligible overseas investments, including direct purchases of foreign stocks, bonds and other permitted assets. However, investments in international mutual funds offered in India do not count towards an individual’s LRS limit because the investment is made through a domestic fund.

Remittances from non-resident Indian accounts are governed by separate rules. The LRS also does not permit certain transactions, such as lottery ticket purchases, margin payments to overseas exchanges and foreign exchange trading abroad.

RBI Proposal Has No Confirmed Implementation Date

The Rs 50 lakh sub-limit is a proposal, and no effective date has been announced. The final rules will determine which transactions face the restriction and whether overseas investments require additional regulatory approval.

In the meantime, resident individuals will have to differentiate between the overall limit on remittance and any sub-limit that may be imposed on any particular category of remittance.