(I) Liberalized Remittance Scheme

As per Liberalized Remittance Scheme, Resident Individuals are allowed to remit USD 2,50,000 per Financial year for the purpose of permitted Capital or Current transaction or both.

The Scheme is not available to Corporates, Partnership Firms, HUF, Trusts, etc. The Scheme is available to all resident individuals including minors.

As per the permissible capital account transaction under LRS, Resident Individual can do the following:

  • Acquisition and holding shares of both listed and unlisted overseas companies or debt instruments
  • Acquisition of qualification shares of an overseas company for holding the post of Director
  • Acquisition of shares of a foreign company towards professional services rendered or in lieu of Director’s remuneration
  • Investment in units of Mutual Funds, Venture Capital Funds
  • Unrated debt securities, promissory note

Remittances under the Scheme can be consolidated in respect of family members subject to individual family members complying with its terms and conditions. Clubbing is permitted only if they are co- owners of securities acquired.

LRS is therefore suitable for Portfolio Investments

Basic Criteria to determine whether an investment is a portfolio Investment:

  • Not having Managerial rights
  • No other financial Commitment apart from equity
  • Not a Subscription to MOA

(II) Overseas Direct Investment

As per Regulation 20A of FEMA 120 / RB 2004 of RBI dated July 7, 2004 as amended from time to time, Resident Individuals are permitted to make Overseas Direct Investment (“ODI”)

  • Resident Individual either individually or jointly with other Individuals or Indian Party can make Overseas Direct Investment
  • Investments made shall be in form of Equity Shares and Compulsorily Convertible Preference Shares
  • The limit of overseas direct investment by the resident individual shall be within the overall limit prescribed by the Reserve Bank of India under the provisions of Liberalised Remittance Scheme i.e USD 2,50,000
  • Investment is to be made through ODI for the following cases:
  1. Setting a Wholly Owned Subsidiary /Joint Venture (Subscription to MoA)
  2. Setting a Wholly Owned Subsidiary /Joint Venture (Subscription to MoA)
  3. When you have Managerial rights of investing Entity
  • Repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc., within 60 days of its falling due.
  • Prohibited Sectors are:
  1. Financial Sector
  2. Banking Sector
  3. Real Estate Sector

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