Every rupee you send abroad for investment flows through a regulatory framework called the Liberalised Remittance Scheme, or LRS.
The RBI introduced LRS in 2004 to allow Indian residents to send money abroad for permitted purposes without needing prior approval. Under LRS, a resident Indian can remit up to $250,000 per financial year. This limit applies per individual and is tracked across all banks using your PAN. If you send $100,000 through HDFC in June and $100,000 through ICICI in November, you have used $200,000 of your annual limit, because the RBI tracks it by PAN, not by bank.
The financial year runs from April to March and the limit resets every April.
When you initiate a transfer, your bank asks you to declare the purpose using an RBI purpose code. For most Vested investors, the relevant codes are S0001 for investment in equity capital and S0025 for purchase of ETFs and mutual funds abroad. For partner bank transfers through Vested, the purpose code is pre-tagged. For other banks you select it during the outward remittance flow in net banking.
Your bank also asks you to fill Form A2, which is your declaration that the remittance is within the $250,000 limit, from a legitimate source, and for a permitted purpose. For partner bank transfers through Vested this is embedded digitally. For other banks it is part of the net banking outward remittance process.
Every LRS transaction is reported by your bank to the RBI with your PAN attached. This creates a complete audit trail and also links to TCS collection, which we cover in Chapter 4.
Comments
Login or register to join the conversation.