Are you an Indian resident eager to expand your horizons and seize opportunities in foreign stocks and property abroad? Look no further! The Reserve Bank of India’s Liberalized Remittance Scheme (LRS) allows you to transfer funds abroad for various purposes including investments abroad.
However, to ensure a seamless foreign remittance experience and maximize the efficiency of overseas investments, it is imperative that you familiarize yourself with key aspects such as LRS limits, taxation rules, necessary documentation, and other regulatory requirements while sending money abroad to invest in stocks and real estate.
What Is Liberalised Remittance Scheme (LRS)?
Under the Liberalised Remittance Scheme (LRS), all resident individuals can remit up to USD 2,50,000 or equivalent per financial year for any permissible current or capital account transaction, or a combination thereof, without requiring any approval from the RBI.
While there are no restrictions on the number of transactions that can be conducted, it is crucial to ensure that the cumulative amount of all foreign exchange transactions should not exceed USD 2, 50,000 or equivalent in a financial year.
What are the Permissible Investment Options Under LRS for Indians?
Investments in stocks, real estate, and various other types of overseas investment options are categorized as capital account transactions. As per the Liberalized Remittance Scheme (LRS), only specific capital account transactions are allowed. These include:
1. Buying property outside India
2. Investing in foreign shares, securities, mutual funds, and similar assets
3. Establishing wholly-owned subsidiaries (WOS) and Joint Ventures (JV) abroad for legitimate business purposes, subject to specified terms and conditions
What is Not Permitted as an Overseas Investment Under LRS?
The Liberalised Remittance Scheme (LRS) does not allow Indians to invest abroad for the following purposes:
1. Sending funds for prohibited activities, such as margin trading, lottery, and similar activities
2. Remittance for purchase of foreign currency convertible bonds issued by Indian companies in the overseas secondary market
3. Remittance for trading in foreign exchange abroad
4. Capital account remittances, directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “Non-co-operative countries and territories”, from time to time
5. Remittance directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the RBI to the banks
Are There Any Tax Obligations for Investment Abroad?
A 5% TCS is levied on all remittances for investment abroad above Rs 7 lakh under the RBI’s Liberalized Remittance Scheme (LRS). It is worth noting that starting October 1st, 2023, the Tax Collected at Source will increase to up to 20%. However, individuals can claim a refund for the TCS deducted when filing their income tax return (ITR).
In the case of profits earned from foreign investments made under the Liberalised Remittance Scheme (LRS), the taxation in India depends on the duration for which the investment was held. If the investment was held for 24 months or more, it is subject to a long-term capital gains tax of 20%. Otherwise, gains from these investments are treated as regular income and taxed according to the applicable income tax slabs
Why BookMyForex is the Best Platform to Remit Money Abroad
Whether you’re an investor eyeing international stock markets to diversify your portfolio or an individual with dreams of buying property overseas, look no further – BookMyForex has got you covered.
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