 "Know your forex limits before going abroad")
Whether you plan to go abroad for studies, holiday, business travel or any other purpose like making investment in shares and property, you need foreign exchange in the local currency. Your budget can go haywire if you are unaware of the relevant limits under foreign exchange regulations. The Reserve Bank of India (RBI), the nodal body for managing foreign exchange, has prescribed limits up to which a resident individual can remit or spend foreign exchange freely i.e. without any approval requirement.
Holiday: Holidaying abroad may require spending in foreign currency for hotel accommodation, tour arrangements, shopping, etc. Under this category, an individual is allowed to draw foreign exchange up to $10,000 in a year for one or more private visits abroad.
Business trip: If you are going abroad for business travel, attending conference or specialised training, you can apply to your bank for release of foreign exchange up to $25,000.
Employment: RBI has allowed drawing foreign exchange up to $100,000 for taking up employment abroad.
Education: You can draw up to $100,000 equivalent per academic year for studying abroad. Studying abroad covers all expenses relating to education including admission fee, tuition fee and purchase of study material. However, if you require funds in excess of $100,000, you need to produce an estimate from the institute you intend to study to the concerned bank.
Medical treatment: An individual willing to travel abroad for getting medical treatment is allowed to withdraw foreign exchange up to $100,000 based on self-declaration of essential details without providing any estimate from a doctor or hospital. However, if the individual wishes to take money over the prescribed limit, s/he will have to provide an estimate from a hospital or doctor. In addition, a maintenance expense of up to $25,000 is allowed.
Emigration facilities: RBI has allowed drawal of foreign exchange for emigration facilities up to $100,000 based on self-declaration or an amount prescribed by the country of emigration.
Liberalised Remittance Scheme (LRS): In addition to these limits there is a scheme known as Liberalised Remittance Scheme in force since 2004 which allows resident individuals to draw foreign exchange up to a specified limit. The remittance limits under LRS keep changing and under the present limit an individual can draw up to $250,000 per year for the transaction permissible under the scheme. Under this scheme, an individual can freely acquire and hold shares, debentures, units of mutual funds, venture capital funds, unrated debt securities, promissory notes or any other instrument of like nature. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme. He can also set up a company, enter into joint venture or buy immovable properties abroad provided the law of the host country allows such transactions. Apart from the above, this scheme allows an individual to make remittance as gift or loan to his relative abroad who is a non-resident Indian i.e. an Indian
Citizen who resides outside India. Further, where an individual has availed of a loan at a time when he was non-resident, he can take the benefit of this scheme to make remittance for repayment of loans.
Bank Accounts: The RBI has allowed resident individuals to open, hold and maintain foreign currency accounts with their banks. The amount standing in these accounts can be utilised for making remittances abroad for permissible transactions.
Exchange Earners' Foreign Currency Account (EEFC): The balance in this account represents earnings in foreign exchange and can be utilised towards current and capital account transactions like private visits, business visits, purchase of property, and payment of custom duty. There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount withdrawn in rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.
Resident Foreign Currency Account: An individual can open, hold and maintain with a bank in India a Foreign Currency Account, known as a Resident Foreign Currency (RFC) Account, out of foreign exchange received as pension, gift, proceeds from sale of property outside India, maturity proceeds of insurance policy, etc. The funds in this account are free from all restrictions towards utilisation including investments.
Resident Foreign Currency (Domestic) Account: Resident individuals have another option by opening and operating an account with a bank known as Resident Foreign Currency (Domestic) Account. The credits in this account are allowed to be out of foreign exchange acquired in the form of currency notes, bank notes and travellers' cheques while on a visit to any place outside India by way of payment for services, gift from close relatives or unspent amount of foreign exchange acquired for travel abroad. The balance held in this account can be utilised for permissible current and capital account transactions like private visits, business visits, and purchase of property.
Documentation: RBI has not prescribed any documents except self-declaration satisfying the banker that the foreign exchange will be utilised only for the transaction for which request to the banker for the release of foreign exchange is made and Form A2. However, practically, banks may ask for some additional documents as per its internal policies. Therefore, it will be better to carry all important documents with you while applying for release of foreign exchange.
Holiday: Holidaying abroad may require spending in foreign currency for hotel accommodation, tour arrangements, shopping, etc. Under this category, an individual is allowed to draw foreign exchange up to $10,000 in a year for one or more private visits abroad.
Business trip: If you are going abroad for business travel, attending conference or specialised training, you can apply to your bank for release of foreign exchange up to $25,000.
Employment: RBI has allowed drawing foreign exchange up to $100,000 for taking up employment abroad.
Education: You can draw up to $100,000 equivalent per academic year for studying abroad. Studying abroad covers all expenses relating to education including admission fee, tuition fee and purchase of study material. However, if you require funds in excess of $100,000, you need to produce an estimate from the institute you intend to study to the concerned bank.
Medical treatment: An individual willing to travel abroad for getting medical treatment is allowed to withdraw foreign exchange up to $100,000 based on self-declaration of essential details without providing any estimate from a doctor or hospital. However, if the individual wishes to take money over the prescribed limit, s/he will have to provide an estimate from a hospital or doctor. In addition, a maintenance expense of up to $25,000 is allowed.
Emigration facilities: RBI has allowed drawal of foreign exchange for emigration facilities up to $100,000 based on self-declaration or an amount prescribed by the country of emigration.
Liberalised Remittance Scheme (LRS): In addition to these limits there is a scheme known as Liberalised Remittance Scheme in force since 2004 which allows resident individuals to draw foreign exchange up to a specified limit. The remittance limits under LRS keep changing and under the present limit an individual can draw up to $250,000 per year for the transaction permissible under the scheme. Under this scheme, an individual can freely acquire and hold shares, debentures, units of mutual funds, venture capital funds, unrated debt securities, promissory notes or any other instrument of like nature. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme. He can also set up a company, enter into joint venture or buy immovable properties abroad provided the law of the host country allows such transactions. Apart from the above, this scheme allows an individual to make remittance as gift or loan to his relative abroad who is a non-resident Indian i.e. an Indian
Citizen who resides outside India. Further, where an individual has availed of a loan at a time when he was non-resident, he can take the benefit of this scheme to make remittance for repayment of loans.
Bank Accounts: The RBI has allowed resident individuals to open, hold and maintain foreign currency accounts with their banks. The amount standing in these accounts can be utilised for making remittances abroad for permissible transactions.
Exchange Earners' Foreign Currency Account (EEFC): The balance in this account represents earnings in foreign exchange and can be utilised towards current and capital account transactions like private visits, business visits, purchase of property, and payment of custom duty. There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount withdrawn in rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.
Resident Foreign Currency Account: An individual can open, hold and maintain with a bank in India a Foreign Currency Account, known as a Resident Foreign Currency (RFC) Account, out of foreign exchange received as pension, gift, proceeds from sale of property outside India, maturity proceeds of insurance policy, etc. The funds in this account are free from all restrictions towards utilisation including investments.
Resident Foreign Currency (Domestic) Account: Resident individuals have another option by opening and operating an account with a bank known as Resident Foreign Currency (Domestic) Account. The credits in this account are allowed to be out of foreign exchange acquired in the form of currency notes, bank notes and travellers' cheques while on a visit to any place outside India by way of payment for services, gift from close relatives or unspent amount of foreign exchange acquired for travel abroad. The balance held in this account can be utilised for permissible current and capital account transactions like private visits, business visits, and purchase of property.
Documentation: RBI has not prescribed any documents except self-declaration satisfying the banker that the foreign exchange will be utilised only for the transaction for which request to the banker for the release of foreign exchange is made and Form A2. However, practically, banks may ask for some additional documents as per its internal policies. Therefore, it will be better to carry all important documents with you while applying for release of foreign exchange.
The writer is managing partner, Nangia & Co.