Why in news
- Outward remittances under the RBI's Liberalised Remittance Scheme (LRS) rose 20% year-on-year to $2.5 billion in June.
What is the Liberalised Remittance Scheme (LRS)?
- Introduced by the RBI in 2004, LRS permits resident individuals to freely remit up to USD 250,000 per financial year.
- Remittances are allowed for permissible current and capital account transactions, including education, medical treatment, travel, and overseas financial investments.
Drivers of Outward Growth
- Equity and Debt: Remittances for overseas equity and debt investments doubled to $456.7 million.
- Consumption demand: Outward travel and gift remittances remained major components of total outflows.
Why it Matters
- Reflects growing international capital diversification by domestic retail investors.
- Monitored closely by the RBI to assess capital account pressures and forex outflow dynamics.
Key terms
Capital Account Transaction
An international transaction that alters the assets or liabilities (including contingent liabilities) outside India of persons resident in India.
Tax Collected at Source (TCS)
Tax collected by Authorized Dealers on specific foreign remittances under LRS above prescribed thresholds.
Prelims facts
- LRS applies only to resident individuals, including minors, and is not available to corporate entities or trusts.
Source: Business Standard