23rd May 2023 (7 Topics)
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LRS scheme: Rise in overseas remittances by Indians in FY23
Context
- The data showed that travel accounts for about 50% of the total outward remittances allowed under the LRS for resident individuals in FY2023.
- Travel accounted for 35% of all Indians' worldwide spending during the years 2021–2022.
Key highlights:
- Indians took out $ 27.14 billion (around Rs 2.24 lakh crore) during the year ended March 2023 under the Liberalised Remittances Scheme of the Reserve Bank of India, a rise of 38.39 per cent when compared to $ 19.61 billion in the previous year.
- From July 1 this year, there will be a 20% tax on remittances under LRS, except for credit card spends below Rs 7 lakh outside India, medical expenses and education purposes.
- Indians spent around $ 13.66 billion (over Rs 1.13 lakh crore) on overseas travel in the current financial year, a 98% jump from the same period of last year.
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Liberalised Remittance Scheme:
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Foreign Exchange Management Act (FEMA):
- The total amount spent on foreign travels during the first 10 months of fiscal 2022-23 almost doubled when compared to the same period of previous fiscal.
- Last week, the Centre amended rules under the FEMA; bringing international credit card spends outside India under the LRS.
Concerns:
- Experts raised concerns that taxpayers can claim refunds on the TCS levy at the time of filing their returns, but this could result in their funds being locked until the refund is initiated by the tax department.
Present Status:
- Currently, there is a 5 % tax on funds in excess of Rs 7 lakh sent out of India under the LRS of the RBI.
- Besides travel, Indians spend money overseas on gifts, donations, maintenance of close relatives, education, medical treatment, purchase of immovable property, investment in equity or debt and deposits.
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