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When it comes to money, there are a lot of things that we take for granted. We assume that our money is safe, that we can use it however we want, and that it will always be there when we need it. But for many people around the world, these assumptions don't hold.
In particular, remittances - the money that people send to family and friends in other countries - are often subject to strict limits and regulations. This can make it very difficult for people to access the money they need when they need it.
But what exactly are remittances? And what is the annual limit of remittances to/from India? Read on to find out.
What is a Remittance?
Foreign remittance is simply the process of sending money from one country to another. In India, there are a few ways you can go about doing this.
For instance, you can use a bank transfer, an online money transfer service, or even a mobile wallet. Inward remittances are transfers of money into India, while outward remittances are transfers of money out of India.
The Reserve Bank of India (RBI) has placed limits on the amount of money that can be remitted into and out of India in a financial year. These limits are known as the Foreign Inward Remittance Limit (FIRL) and the Foreign Outward Remittance Limit (FORL).
Foreign Inward Remittance
Foreign Inward Remittance is money that is transferred into India from a foreign country. There are two types of inward remittances – personal and non-personal.
Personal inward remittances are transfers of money made by an individual for their own personal use. This could be for things like medical expenses, education fees, or family maintenance.
Non-personal inward remittances are transfers of money made by a foreign company or organisation into India. This could be for things like business investments, charitable donations, or foreign aid.
Foreign Outward Remittance
Foreign Outward Remittance is money that is transferred out of India to a foreign country. As with inward remittances, there are two types of outward remittances – personal and non-personal.
Personal outward remittances are transfers of money made by an individual for their personal use. This could be for things like medical expenses, education fees, or family maintenance.
Non-personal outward remittances are transfers of money made by an Indian company or organisation to a foreign country. This could be for things like business investments, charitable donations, or foreign aid.
The Annual Limit of Remittance to/from India (Liberalised Remittance Scheme)
The RBI has placed a limit on the amount of money that can be remitted into and out of India in a financial year.
For the 2022-2023 financial year, the limit is US$250,000 (approx. INR 2,04,50,250) per person. This limit applies to both personal and non-personal remittances.
What is the Liberalised Remittance Scheme?
The Liberalised Remittance Scheme (LRS) is a scheme introduced by the Reserve Bank of India (RBI) in 2004 that allows Indian residents to remit up to US$2,50,000 (INR 2,04,50,250) per financial year for any permissible current or capital account transaction.
Under the LRS, you can open and maintain foreign currency accounts with banks outside India for carrying out transactions. This includes:
- Payments relating to trade in goods and services;
- Investments abroad in permitted capital instruments;
- Send money abroad up to USD 2,50,000 (INR 2,04,50,250) in aggregate per financial year;
- Go on private visits and holidays abroad, including visits to relatives/ friends, etc., and
- Meet expenses towards medical treatment abroad not exceeding USD 2,50,000 (INR 2,04,50,250) in aggregate per financial year.
Furthermore, tax collected at the source (TCS) of 5% is also levied on all transactions above the Rs. 7 lakh threshold mark.
Key Takeaway
Understanding the foreign inward and outward remittance limits are important for individuals and businesses in India.
These limits help to regulate the flow of money into and out of the country, and they can impact things like currency values and exchange rates.
We hope this blog post has been informative and helpful in getting you started with foreign remittances in India!
FAQs
How much money can be transferred abroad annually?
The Reserve Bank of India (RBI) has a limit of $2,50,000 (approx. INR 2,04,50,250) per financial year for foreign remittances. This includes both personal and business-related transactions.
Any remittance amount that crosses this limit requires you to take prior permission from the RBI itself.
What are the documents required for sending money abroad?
If you're looking to send money abroad from India, you'll need to have the following documents:
1. A passport
2. A PAN card
3. An outward remittance form
4. A bank statement or cancelled cheque leaf
5. Documents supporting the purpose of the transaction (e.g. invoices, tickets, etc.)
6. Form A2 for purchasing foreign currency
7. Adherence to KYC and anti-money laundering guidelines
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