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How To Transfer Funds From India To Abroad ? CA Sriram Explains Liberalised Remittance Scheme
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dear viewers many times we need to
transfer money outside of india
indian currency is not a freely
convertible currency you can't transfer
money as you wish like you can't walk
into a bank branch give indian rupees
and ask for a forex to transfer it into
a foreign exchange and remit to somebody
outside of india is governed by several
rules and regulations
in this episode we are going to talk to
you about how you can transfer money
from india
to a destination outside of india and
what are the rules and regulations that
are governing it this is nra money
clinic for you and i am dr chandra khan
but investment consultant and a
financial planner
[Music]
nri money clinic no hype just the right
advice
[Music]
dear viewers
to talk to you about the rules and
regulations which are governing
the movement of money from indian rupee
to a foreign exchange outside
i have brought to the studio my eminent
faculty chartered accountant ca sriram
c h sri ram is a familiar face on our
channel he is a practicing chartered
accountant a partner at nitin jc and co
he is an expert on international
taxation and various
issues pertaining to the taxation
welcome to this show mr c siram thank
you mr sriram many times people need to
transfer money from india to abroad
these days people go on tours
people study outside of india
maybe a family member is outside of
india suddenly there is a need
people get stuck there may not be a job
there could be various reasons because
of which they need to
transfer money outside of india and even
some people want to go abroad for taking
the medical assistance or people may
have
to invest outside of india this could be
the various reasons
how can a person transfer
the indian rupee that he has
into a forex and remitted outside of
india
what are the rules and regulations
which are there please bring it to the
knowledge of our audience
now
when a fund
which is in inr indian rupee is getting
transferred outside india
then there is a regulation
which is
commonly called as lrs okay liberalized
remittance scheme oh there is a name for
it it is called liberalized remittance
scheme okay so this is a scheme which
has been framed by rbi under fema
regulations
for transfer of funds
by a resident to a non-resident
okay okay a transfer of funds by a
resident to a non-resident so any
resident who wants to transfer any funds
outside in
of india to any other non-resident then
he can come under the scheme and without
much of a paperwork he can transfer the
funds outside of india for all the
permitted capital and current account
transactions okay and under the scheme
any person can transfer up to
2 lakh 50 000 usd okay
outside of india in a financial year
okay
so this is the scheme framed for the
transfer of funds
from india to outside of india by a
resident to a non-resident okay
so
lrs is only for residents or even an nra
can utilize it
under nrs this scheme actually
is framed for transfer of funds by a
resident to a non-resident okay so
in any transaction there can be
there will be two parties and
residential status of each person can be
different okay
say resident can transfer
funds to a another resident resident can
transfer person uh to a non-resident a
non-resident can transfer to a
non-resident or a non-resident can
transfer to a resident okay so now out
of these four type of transactions only
one transactions is covered under lrs
that is when a resident want to transfer
to another non-resident okay a recipient
being a non-resident remeter being a
resident that
transaction is covered under lrs
okay
let me quickly summarize here
liberalized remittance scheme
only a resident indian can remit money
it is not for non-resident indians
correct and the limit of transaction is
us dollar 250 000 u.s dollar per year
correct right correct and if somebody
has to transfer this money into another
currency let's say euro or yen or
canadian dollar or an australian dollar
how the limit is equivalent of u.s
dollar it is equivalent of us dollars
okay
one problem that might come here is
you say 250 000 u.s dollar
and the price of u.s dollar varies from
time to time
so how will the indian rupee equivalent
is
calculated here
on the date of transfer what is the
limit okay so that has to be determined
okay if somebody has transferred three
four times each time when he has
transferred it is calculated as a us
dollar equivalent and you total it up
correct so the scheme says it is 250 000
us dollar you could be sending it to
different currencies ultimately it
should fit into that 250 000 us dollar
correct so this scheme is not for an nra
to remit money from here to outside of
india this is purely for
residents to remit money outside of
india right so this could be useful for
somebody or if your children are
studying outside of india you want to go
outside for a medical treatment correct
or buy something uh
outside of india the assets and other
things what you said even so that is
where it is useful how to help a family
member who is stuck outside of india
suddenly utra want to transfer money
that is where the scheme will be used
correct and even also um purchase of
online
say items or say digital items they
purchase up for license or for some
software which is you know sold by a
non-resident vendor okay so everything
is covered under this so if they have to
buy something let's say i have to buy a
book from us or some something and i am
making an online
order for that so that is also governed
by lrs scheme yes okay
sriram you told me now
about
the money can be transferred on capital
account or for the current account
correct so this is a technical term the
chartered accountants can understand
correct what about the audience can you
explain them in a simple way what is
this capital account and current account
otherwise it becomes very complex see
correct now when we are talking about a
particular transaction as such
so under fema we are talking and we need
to see the rules of emma now under fema
a capital record transaction has been
defined
it says that any transaction which
alters
or dilutes or creates any asset or
liability
so that particular transaction will be
called as a capital account transaction
example for example
if i if a resident wants to open a
foreign bank account in foreign currency
abroad
so it creates an asset for him outside
of india that is called as a capital
account transaction
say his investment abroad into
mutual funds or shares of a foreign
company that will be called as a capital
account transaction
okay so at the same time if one resident
wants to lend money to a non-resident in
inr that is also called as a capital
account transaction or say
repayment of loans that is also covered
under a capital account transaction so
any transaction which is creating an
asset
or altering the value of the asset
or
which is creating a liability
or altering or diluting the liability or
diluting asset that will be covered
under the capital account transaction
okay so that means something is getting
created there or it is getting altered
you are either paying it off or you are
buying it or you are keeping it as for
future use this is a capital account
correct
and if it is a plain expenditure as such
okay or say plain income okay which got
generated out of the investment that you
made
they are all covered under current
account in fact the current account
has been defined the current account
transaction has been defined fema
negatively to say that any transaction
which is not a capital account
transaction is covered under
current account okay so
a transaction which comes as a capital
account is well defined correct if
something is not recorded then it is a
current account correct current account
transaction is as simple as that right
now you also said that
the
capital account or current account
transactions which are permitted by
fema
under that you can transfer the money
correct right correct so this is a very
broad universe
this is very broad universe
how will the person
who is remitting the money
he will come to know about what is
permitted or what is not permitted is
there a simpler way my audience can
understand
am i doing the right thing or wrong
thing see as far as capital account
transaction under fema are concerned
they have given some certain list
these are the capital account
transaction which are permitted ok
and how it has been permitted say for
example some transitions are permitted
with the prior approval of rbi or some
transactions are permitted with the
prior approval of central government
so this is this is well defined
so under fema ruling whatever there is a
golden rule we say normally that
a capital account transaction which is
permitted is always allowed and which is
not permitted is not at all allowed okay
so if you come to know that
our transaction is a capital account
transaction then you just need to go
through the list of capital account
transaction which is allowed under fema
okay and by what means it is allowed say
by with the prior approval or direct
whatever so
that is always allowed
if something is not
mentioned anywhere
under fema rules they are not at all
allowed
ok ok where it is comes to a current
account transaction it is the reverse of
that okay all the current account
transactions are freely allowed okay no
restrictions
no restrictions unless they are
specifically prohibited under fema ok
ok so if my understanding is correct
if somebody has to transfer money
outside of india
under capital account
that particular activity should be
listed there correct if it is not listed
there you are not permitted not at all
permitted right
in case of current account which is the
usual
spending purpose travel medical expense
and various other things
unless it is specifically mentioned that
you cannot transfer there everything
else is
permittable so this is what you call is
the golden rule yes
but my dear viewers my feeling is that
this is quite complex
and it's not something which is easy to
digest or it is easy to remember or
research upon
probably
i personally feel whenever you have a
need to transfer money outside of india
liberalized remittance scheme is the
scheme under which you have to transfer
the money
but before you transfer the money
the best suggestion that i can think of
is contact a professional chartered
accountant
explain your situation
why you are transferring money and all
these details and let them take a
decision or guide you how you have to go
about is it a safer way of
handling this particular issue yes sir
it is always better to handle the
situation like this because
the rules are ever evolving
the rule what i am saying now
there is a framework i am not saying any
particular transaction which is allowed
or not allowed
but there is a framework that framework
will remain the same however if you see
the particular transaction which may be
allowed today may not be allowed
tomorrow absolutely or which is not
allowed today may get allowed tomorrow
absolutely even the limits can increase
or decrease and depending on the
evolving situation government of the day
may bring in restrictions or liberalize
that as a possibility it's best to take
the help of a professionals uh in this
particular market
mr shiram
for the benefit of our
audience
is it possible to tell
what is not permitted
to say all these are permitted it takes
a lot of time correct but let's say at
least the major headings under which the
money cannot be transferred
uh can you give some inputs around that
see certain transactions which are
normally
um done through gambling ah say for
example winning from a lottery or
running from horse race or horse riding
so they are all actually part of a
gambling
so
any income which is earned out of that
cannot be transferred outside india okay
so this is the major you know kind of
restriction restriction i can say okay
so apart from this there are certain
transactions which are
done to a particular country ah say for
example negative list negative list
there is a non-cooperative countries
fatf yes fatf they have a financial
action task force they have listed
certain countries as non-cooperative
countries north korea iran
so certain countries so you cannot make
any transaction to them so they are not
covered under lrc if any transaction
which is prohibited under fema that
cannot be done under lrs okay okay so it
is as simple as that so so the guiding
principle here is the fema analysis
frame under the uh the fema yeah so if
fema prohibits
doing certain thing
you just can't use an lr scheme at all
that's not possible so as i said it is
better to come to a chartered account
and check what is the status quo on that
particular date yes what is governing
and what is not permitted you can find
out and you can proceed on that right mr
sriram one of the
things that come to my mind is now we
have an lrs and we say that 250 000 us
dollar can be limited
to outside of india yes okay
if a resident wants to give a loan to a
non-resident
can he
use this lrs
buy forex and give a loan to somebody
else sir this lrs scheme as a whole
is not only for remittance of funds
outside of india by resident to unknown
resident
it is for all transactions
between a resident to unknown resident a
resident remember transferring fund to a
non-resident ah whether in inr or
foreign forex uh transaction that will
be covered under lrs
or money need not go outside of india no
no under the lr scheme as a whole let me
explain
here a little bit
my father is a resident i am an nra
any money my father gives me
will come under lrs whether he gives me
in india or whether he transfers money
to outside of india correct so that is
covered by lrs yes so it's just not that
i am buying a forex and only to buying
forex it is 250
no
not like that okay so this is the entire
framework of lrssh okay
however
when it comes to
giving of loans by a resident to a
non-resident
this restriction is still more stringent
okay
it can be given but it can be given only
in inr it cannot be given in foreign
exchange
at all so loan can be given
only in the indian currency yes you
can't buy a foreign currency no
but again this loan is restricted to
the overall limit under lrs 250 000 us
dollar or its equivalent yes
and loan can be transferred in inr from
a resident to a non-resident to the
nro account of non-resident only okay it
cannot be repatriated outside of india
who cannot repatriate outside of india
the receiver also cannot repatriate this
money
the remember also cannot repatriate if
it is in the nature of loan
the receiver also cannot repatriate if
it is in the nature of he can utilize it
in india for whatever
and is there a restriction on for this
resident indian who can he give the law
yes there are restrictions
only
a resident can transfer as a loan only
to a non-resident relative
okay that means the non-resident to whom
the loan is being given
should be a relative and the relative is
already defined under companies act so
either it is a sibling or parents
or children
spouse
or
spouses of children
so here the relative is as defined in
the company's act yes this is another
complexity this is not uh
uh what relative is explained in uh
gifts case we don't know what we talked
about so where there is a much broader
order
but here it is as defined in the
company's act correct so
so
lrs scheme covers loans yes correct you
can give a loan to a non-resident under
lrs yes but condition is it you can't
buy forex correct you have to remit
money to an nr account and you can give
it only to a relative correct and it has
to be utilized in india it should be
utilized in india yes and such loans
should be interest free okay
such a loan should be interest free
and it it should have a minimum maturity
period of one year
okay so you give me a
a relative of mine gives me a loan
so the ten years would be minimum one
year yes and i should not be paying any
interest or he should not be receiving
any
interest so it's not a commercial
consideration it's purely an arrangement
correct right
i have no i cannot take a loan from my
friend at all correct but if so if a
friend of mine urgently
wants some money i i want certain money
from my friend he gives me money and
next month i'll give it back to him will
it be treated as a loan or
it will be treated as a loan only
but these transactions are not covered
under lrs ok
ok these transitions are not all covered
under lrs okay
so
actually speaking if this kind of
transaction happens then we need to see
the other criteria's under fema okay
whether it will be allowed or not but it
is not covered under lrs
how it is so the best way is if this
kind of transactions are not alone
better you refrain from doing such kind
of an activity than to find out whether
it is permitted or not how we can come
about it instead of getting it to that
argument
restrict ourselves to what is permitted
under the law that's the best course
anybody could follow on that correct mr
sriram
one another
thing that comes to your mind is often
people need to give gifts to somebody
else
i have to give a gift to my son
and my son lives outside of india
will
lrs be used for that and are there any
restrictions on giving gifts
can you tell me the brief
the points under which the gifts can be
transferred
a
restaurant
transferring to a non-resident relative
okay
as a gift
is covered under lrs okay
and
such transactions can be done either in
inr or even
forex and within the overall limit of
2.5
lakh usd that
payments can be done it can be given so
it should be gift so so the relative can
buy a forex and transfer it to the
non-resident in the indian
as well as he can transfer it to the nro
account both are permitted permitted the
only thing is upper limit of
annual
transfer has to be added here correct
okay
one another case scenario which emerges
in case of uh some of the past nrs they
were working as nris outside
they come back
and because of their forex needs they
have maintained the rfc account fcnr
accounts get converted to rfc account
they are maintained rfc account
now if somebody is having money in an
rfc account and now he is a resident
correct
will lrs cover remittances from rfc
account
is the same rules and regulations follow
that or is there a different set of
rules and regulation for rfc account no
any payment made out of india from rfc
account because rfc account is just a
you know
account which is uh maintaining funds in
foreign currency yeah so that a person
has a response account yes but you are
holding a foreign currency account
that's it so
if a resident wants to transfer from rfc
account his rfc account to an account
outside of india to are non-resident
that is also covered under lrs
and
within whatever the guidelines given
under lrs if it is a permitted
transaction he can do it ok so only
the saving for him is he need not
purchase a foreign currency he has
already has a foreign currency that's it
right so any transfer from rfc also is
covered under lrs so the same set of
rules and regulations so no question of
buying a forex it is already there
that's it okay mr sriram we understood
all these things
now we come to the actual part of how to
remit
what is the step-by-step process
what is the documentation that needs to
be done where should a person go
are there any complications how to go
about it can you briefly tell the
audience
see
first of all in any transition which a
remitter wants to transfer funds he has
to identify what is the nature of
transaction
and there will be particular forms such
as form a2
that is the one particular type of form
which needs to be submitted
while transferring funds from india to
outside of what is this year to form
it's a simple form under fema yeah what
does that cover
what is the amount uh from whom the
funds will be transferred to whom it
will be transferred to which account
which will be transferred okay and in
which
foreign currency it has to be bought and
transferred and
certain other criteria such as what is
the nature of transaction that needs to
be declared under that form a2 okay so
it has the complete detail it's you can
say it's an information sheet yes who is
paying to whom which account which
country how much amount
and uh what does does a person also have
to tick for what purpose he is limiting
that yes
the purpose of remittance also has to be
mentioned okay and
pan of the remitter okay the person who
is remitting who is the resident that is
compulsory okay that needs to be
provided okay so all this information
would be collected in
form which is uh you know prescribed for
the purpose of transaction
for a particular transaction okay so if
i have to transfer money to somebody
outside of india and if i am a resident
i will walk into one of the bank
branches which deals in forex
related uh transactions or maybe i'll
walk into a money exchange correct
and submit my a2 form right right and
correctly uh give everything details
everything correct and then i am allowed
to transfer it is as simple as that yes
the bankers will help most of the times
okay so
so any bank which deals in
we call it as authorized dealers in
india right
so not much of exchanges are there in
india like uh it is there outside of
india here it's usually the bank
portals or the bank branches which deal
in the forex right so the form that you
need to be filling is an a to form so
fill the a to form and give it to the
authorized dealer which could be your
bank or exchange like a thomas cook or
any other money exchange
and you can transfer it under the lrs
mr c round this a two form you said you
have to
fill and give correct what i suggest is
that
we will add this a to form in the
description box of our video here people
can go through it
and as i saw there are a lot of
things to be ticked there is there any
precaution people have to take while
filling this a to form and giving it to
the
the
forex dealer see the correct information
has to be filled in a to form any form
whatever your has to submit
it is always better to give the correct
information in the form ok in that
actually all both remembers remittances
whose remedy their details anyway it has
to be properly filled up apart from that
the very important thing here is
to check the right box
when the i mean for the purpose of
you know transaction what you're doing
say
you're trans you're transferring
remittance for the purpose of medical
treatment okay or say traveling abroad
okay or for maintenance of your family
abroad okay so there are certain codes
given by rbi for each type of
transaction it is very important for an
individual
to tick the right box there so you can
you can't be ticking just like anything
and do it but be very very specific why
you are transferring this money it could
be helping your child it could be
helping your brother or whatever it is
or even your investment it can be
investment so be very very specific and
take the right boxes correct if you
don't take the right book so then the
chances are that your transaction may
not go through correct or may be
questioned at a later point correct this
is one of the actually
very important things which needs to be
taken into consideration okay
one another question that comes to my
mind is
because of this scheme it has become
simpler and it is more or less clearly
defined what can be done and what cannot
be done right is there a need for a
chartered accountants certificate or
something like that
see when we transfer money from nro to
nrv yes so a cs certificate was required
in case of lrs transaction
uh is there a need for somebody to go to
a chartered account and get a signature
and give it to the authorized dealer yes
yes it depends on the nature of
transaction not every transaction not
every transaction okay there are two
forms under
income tax act this is different
because it is uh looking into the tax
aspect now okay
so there are two forms one is form 15 ca
and form 15 cb okay so
this is the similar as you know for
transfer of funds from nr nre okay so
there also we need to see what is the
type of transaction
so
there are 33 transaction which is listed
under the income tax rules for which
this entire form itself is not required
ah okay okay there are 33 items and
there is a rba code also for that
so such as say payment for the medical
treatment
payment for the education purpose
payment as a gift payment as a donation
or say investment abroad
or say
payment towards
purchase of some
goods or article
so for
most of these
items there are list
detailed list
and there is a rba code for that for
those particular transaction there is no
requirement of any form 15 ca or vb 15
cb not not required ok
apart from this if there are transaction
there are certain things which needs to
be taken into consideration whether it
is a amount which is being transferred
whether already charged to tax or not
charge to tax
if it is not charged tax only form 15 ca
part d would attract if it is chargeable
to tax then there can be three types of
things 15 ca and 15 cb may be in
combination may be required okay so this
depends on the particular transaction if
the amount of remittance is
uh by a resident or non-resident and the
amount what is being transferred is less
than five lakh iron
then only for form 15 ca party a would
have surprised there is no requirement
of form 15 cb so the requirement of 15 c
and cb may be linked to filling of
form a2 yes so you tick certain boxes
when you tick certain boxes and if some
of the transactions might require 15 c a
and c
but for most of the transactions which
happen on a routine basis uh what you
described already correct so in such
cases for 15 cscb is not required may
not be required required so it is only
in few transactions specified uh
kind of transactions that 15 c and 50 cb
could be required in a normal routine
transactions
these 15 cacb is not required anybody
can walk into an authorized dealer
provide a2 form and
make sure that you are within that
transferable limit and it should be
easily transferred yes right yes
recently there was some news that if
somebody has to transfer money from
india to abroad
they have to put pay some taxes this
issue was there in the newspaper and it
created a lot of commotion
that we have to pay such a huge amount
of taxes
what is this tax on remittances which
are outside of india can you throw some
light on that yes
now this is the reits and amendment came
in only with effect from first october
2020 okay so any transaction by a
resident to a non-resident which is
covered under lrs okay
which is covered under alarms and the
amount which is being transferred is
during the financial year exceeds the
seven lakh rupees okay it's iron lag
which probably was equated to about ten
thousand dollars yes right so if any
amount which is being transferred over
and above this transaction the this
specified amount
then
the authorized dealer will collect
five percent
as tcs over and above the amount being
transferred so it is tcs it is not taxed
tax collected at source preventive
taxation yes okay it's a tax collector
at source okay and
on the remitters account the authorized
dealer will transfer
it to the income tax department just
like when we buy a vehicle or something
like that these persons will do tcs it's
a similar thing yes so it's a large size
transaction when it crosses the
threshold of seven lakh rupees correct
so the the
forex dealer will deduct that five
percent tax and remits to the government
correct and you have to while filing the
tax return your chartered accountant or
you have to ah declare this and see how
it needs to be treated under the income
tax correct so it is not a specific tax
which is levied on a remittance no it is
a tcs and five percent is the rate okay
however if it is an education loan okay
and education loan is taken and the fund
is being transferred for the purpose of
education okay then that five percent
tcs has been reduced to 0.5 percent
because it is see
i want to transfer funds to my son who
is studying abroad
so at that time i take education loan
his name and transfer the funds
okay so at that time see anyway that is
a loan what i have taken yeah and if i
have to pay over and above that five
percent is very burdensome for me so the
remitter has to give a documentary
evidence to say that this money has come
by way of an education loan correct and
that waiver will be applied yes so only
in case of education loan this tcs is
brought down to 0.5 percent 0.5 percent
yes in the normal course it is 5
of the amount which is which leading
succeeding seven lakh yes okay so if it
is above seven lakhs five percent is
collected on the entire amount or only
the amount which is in excess of seven
only the amount in excess of seven lakhs
on that five percent will be collected
okay if somebody remits 15 lakhs
uh first seven lakhs they need not
collect any uh tcs seven to fifteen
lakhs another eight lakhs will suffer a
tcs of eight percent five percent oh
sorry um the eight lakhs will separate
uh tcs of five five percent yes and it
will reflect on your 26 years yes and
while filing the return of income if you
are supposed to pay any taxes you can
adjust this thesis towards the payment
of that tax okay if the tcs rejected is
collected is in excess of the tax
payable that can be claimed as a refund
it's just like follows the principle of
tedious yes right okay
mr srinam thank you very much for all
these inputs
many of the doubts that were there in
the minds of our audience
how to transfer money from india to
outside of india has been put to rest
with this piece of information thank you
very much again for coming to the
studios and providing all this
information thank you you're welcome
dear viewers to summarize it is the
liberalized remittance scheme which you
have to utilize if you have to transfer
money from india to outside of india
your limit is
250 000 u.s dollar or its equivalent
you have to follow the rules which have
been levied under the female law
your best advice to take the help of a
chartered accountant whenever there is a
need to transfer money under lrs to
someone outside of india
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helped you to understand this minefield
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