Foreign Exchange Transaction Without Prior Approval - Current Account

Foreign Exchange Transactions can only be done with prior approval of the RBI. However, there are few foreign exchange transactions which can be done without obtaining prior approval. Such transactions are discussed in this article.

Liberalised Remittance Scheme

Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

In case of remitter being a minor, the LRS declaration form must be countersigned by the minor’s natural guardian. The Scheme is not available to corporates, partnership firms, HUF, Trusts etc.

Current Account Transactions

Current Account Transaction is a transaction other than a capital account transaction and includes:

• Payment due in connection with foreign trade, other current business, services and short term banking and credit facilities in the ordinary course of business
• Payments due as interest on loans and as net income from investments
• Remittances for living expenses of parents, spouse and children residing abroad
• Expenses in connection with foreign travel, education and medical care of parents, spouse and children.

The definition of current account transaction is inclusive and any expenditure which is not covered under capital account transaction will be current account transaction even if the transaction is not specified above.

Remittances Limit For Individuals Without Prior Approval

Individuals can avail of foreign exchange facility for the following purposes within the LRS limit of USD 2,50,000 on financial year basis:

1. Private visits to any country (except Nepal and Bhutan)
2. Gift or donation
3. Going abroad for employment
4. Emigration
5. Maintenance of close relatives abroad
6. Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up
7. Expenses in connection with medical treatment abroad
8. Studies abroad
9. Any other current account transaction which is not covered under the definition of current account in FEMA 1999

Remittances Limit for Persons Other Than Individuals Without Prior Approval

The following facilities are available to persons other than individuals:

1. Donations up-to one per cent of their foreign exchange earnings during the previous three financial years or USD 5,000,000, whichever is less, for-

• creation of Chairs in reputed educational institutes
• contribution to funds (not being an investment fund) promoted by educational institutes; and
• contribution to a technical institution or body or association in the field of activity of the donor Company.

2. Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India up to USD 25,000 or five percent of the inward remittance whichever is less.
3. Remittances up to USD 10,000,000 per project for any consultancy services in respect of infrastructure projects and USD 1,000,000 per project, for other consultancy services procured from outside India.
4. Remittances up to five per cent of investment brought into India or USD 100,000 whichever is less, by an entity in India by way of reimbursement of pre-incorporation expenses.
5. Remittances up to USD 250,000 per financial year for purposes stipulated under Para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015. However, all residual current account transactions undertaken by such entities are otherwise permissible without any specified limit and are to be disposed off at the level of AD, as hitherto. It is for the AD to satisfy themselves about the genuineness of the transaction.