Home / Market / Stock-market-news /  Remittances: A note of caution

Time and again, there have been reports on transfers being made outside India that have run into issues with the tax and regulatory authorities. Indian foreign exchange regulations are quite strict and it is important to be aware of these regulations while making any transfers/remittances outside India.

The Reserve Bank of India (RBI), the apex bank in India and the regulator of foreign exchange dealings has laid down guidelines on remittance of funds outside India. There are separate guidelines for residents and non-residents.

Resident individuals are allowed to remit an aggregate sum of $250,000 per financial year (April to March) for any permissible current account or capital account transaction under the Liberalised Remittance Scheme (LRS) without any approval from RBI. This scheme is applicable only to resident individuals. A person is said to be resident in India if he/she has been in India for more than 182 days in the preceding financial year. However, following persons cannot be deemed to be resident in India even if they have been in India for more than 182 days in the preceding financial year:

a. Persons who have come to or stays in India otherwise than for taking up employment in India or to carry on any business in India or with an intention to stay in India for an uncertain period.

b. Persons who have gone outside India for taking up employment or to carry out any business outside India or has an intention to stay outside India for an uncertain period.

Permissible transactions include travel outside India, donations, gifts, maintenance of close relatives abroad, business trips, studies outside India, medical treatment abroad, purchasing immovable property abroad, foreign investments, rupee loan to NRI/PIO close relatives (subject to certain conditions) etc.

Transactions prohibited include purchase of lottery tickets, purchase of foreign currency convertible bonds issued by Indian companies in the overseas secondary market, etc.

The limit is relaxed in certain cases, such as individual going outside India for medical treatment or for pursuing studies. For an amount exceeding the limit of $250,000, authorized dealer (authorized banks) can remit funds under general permission based on estimates from a doctor in India or hospital/doctor abroad. Similarly, in case of students, remittances beyond $250,000 requires an estimate from a foreign university/institution.

The bank remitting the funds under LRS needs to be satisfied on the genuineness of the transaction before remitting the funds.

Non-resident individuals are allowed to open four types of bank accounts in India, viz.

a)Non-resident (external) rupee account (NRE account) scheme;

b)Foreign currency (non-resident) account (banks) scheme;

c)Non-resident ordinary rupee account (NRO account) scheme; and

d)Special non-resident rupee account.

From our experience, generally the non-resident Indians (NRIs) open an NRE account or NRO account.

NRE account can be opened by citizens of India living abroad and by foreign citizens who are of Indian origin. The permissible credits in an NRE account are remittances from outside India, income from investments made in India, current income, etc. Funds from an NRE account are freely repatriable in nature.

NRO account can be opened by any non-resident (including foreign national) for carrying out bona fide rupee transactions. The account can be credited with inward remittances from outside India, legitimate dues in India and rupee gift/loan made by a resident to a NRI/PIO relative subject to the limit prescribed under LRS. Only current income such as rent, pension, interest, etc. can be remitted from an NRO account outside India. Apart from current income, balances in the NRO account may be repatriated abroad or to a NRE account only up to $1 million in a financial year (April to March). Repatriation of an amount in excess of $1 million may be permitted by RBI under the approval route in exceptional circumstances.

All remittances made outside India are required to be made net of applicable taxes. While remitting funds overseas, a Form A2, a Chartered Accountant’s certificate in Form 15CB and a self-declaration in Form 15CA are required to be furnished to the bank, confirming that applicable taxes have been deducted and deposited into the government treasury.

The bankers remitting the funds from NRO/NRE account may call for additional documents to substantiate that the funds being remitted from India are from genuine sources and adequate taxes have been paid.

Keeping in view the increased scrutiny by tax and regulatory authorities in the recent past, it is advisable that due care and caution is exercised while remitting funds overseas from India, to avoid any disputes and litigation at a later date.


1. Is it mandatory to have a PAN while making overseas remittance under LRS?

Yes, it is mandatory to have a PAN while making overseas remittances under LRS. However, for remittances up to $25,000 per financial year for permissible current account transactions, PAN is not mandatory.

2. Can an NRI receive gift from a resident relative in his NRO account?

Yes, an NRI/PIO can receive gift from a resident relative. However, the amount cannot exceed the limit prescribed under LRS, i.e., $250,000 per financial year

3. Can an NRI receive loan from his/her resident relative?

Yes, an NRI/PIO can receive loan from a resident relative by way of crossed cheque or electronic transfer, subject to the following conditions:

i. The loan is interest-free with minimum one-year maturity;

ii. The loan amount should be within the overall LRS limit of $250,000 per financial year, available to the resident individual;

iii. The loan shall be utilized by the NRI for personal requirements or for own business purposes in India;

iv. The loan shall not be utilized for certain prohibited activities viz. chit fund business, or Nidhi Company, or agricultural or plantation activities or in real estate business or construction of farmhouses, or trading in Transferable Development Rights;

v. The loan amount should be credited to the NRO Account of the NRI/PIO;

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 NRO/ NRE / 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.

With inputs from CA Nilpa Keval Gosrani and CA Rabiya Roopawalla.

Vikas Vasal is national leader, tax, at Grant Thornton India LLP.

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