RBI and Fema Guidelines For Outward Remittance

What is Outward Remittance?

An Outward Remittance is a process of transferring money in the form of foreign exchange, by a resident in a particular country, say India, to a beneficiary who is located outside the concerned country (except for Nepal and Bhutan) for any purpose that is approved under the Foreign Exchange Management Act (FEMA).

Difference Between Inward and Outward Remittance

While outward remittance under LRS scheme symbolises sending money from your Indian account to a foreign account, inward remittances mean that foreign currency is remitted to your Indian (INR) account. Besides this fundamental difference, there is not much of a difference between the two.

Now that we know what outward remittance is, Then we will get go through the LRS schema and new rule from RBI after that we will walk through the brief details of the RBI guidelines for various types of Outward Remittance.

What is Liberalised Remittance Scheme (LRS)?

According to the Liberalized Remittance Scheme (LRS) of Reserve Bank of India (RBI), it is mandatory to quote PAN number for remittance transactions from India to Abroad.

The LRS scheme is made for the residents of India to ease the process of transferring money abroad. The money is transferred for several reasons such as overseas education, overseas medical treatments, tour cost and immigration, as well as to allow Indian residents to invest in foreign stocks and property.

The Scheme was introduced in 2004. Earlier, PAN card was not a primary requirement for remittance transactions up to $25,000.

Official Statement From RBI

The statement issued on 6th April 2018 by Jose J. Kattoor, Chief General Manager at RBI via press release titled “Statement on Developmental and Regulatory Policies”, is “Pursuant to the announcement made in the first bi-monthly Monetary Policy Statement 2018-19 on April 5, 2018, a system for daily reporting of individual transactions under the Liberalized Remittance Scheme (LRS) by Authorized Dealer (AD) banks has been put in place.

This system enables the AD banks to view the remittances already sent by an individual during the financial year, thus improving monitoring and ensuring compliance with the LRS limits.

Since the said reporting system uses the Permanent Account Number (PAN) of the remitter as a Unique Identifier to aggregate the remitter-wise data, it has been decided that furnishing of PAN, which hitherto was not to be insisted upon while putting through permissible current account transactions of up to USD 25,000, shall now be mandatory for making all remittances under LRS.

Further, in the context of remittances allowed under LRS for maintenance of close relatives, it has been decided to align the definition of ‘relative’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.”

PAN Being Made Mandatory For LRS

There have been multiple instances of individuals/businesses involving themselves in unethical practices breaching foreign exchange limits specified by RBI.

PAN has been mandated to ensure that LRS limits prescribed by RBI have strictly adhered.

The current annual LRS limit for every individual in India is $2, 50,000 per FY.

Banks have been given a strict ultimatum to report all LRS transactions to RBI, irrespective of Amount unlike earlier, and it is expected that there would be regular checks to ensure compliance to LRS rules from the current financial year.

Below are the list RBI and Fema Guidelines For various Purposes:

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1. RBI Guidelines for Overseas Education

Eligibility

You are allowed to send USD 250,000 per academic year as per LRS.

Quantum of Exchange

The resident should be Indian and there should be a confirmed admission proof in any overseas institution, college or university. The students who have Indian passports and have been out of India for education are also eligible for this remittance.

Also, those students who have foreign passports, but are dependent on their parents who are residents of India are also eligible for this type of remittance.

Documentation required

For outward remittance for overseas education, you would need a request cum FEMA declaration form. This is important to release the exchange.

You would also need a photocopy of your passport that has a valid visa apart form Admission Letter / Study Continuity Letter from the Institute.

outward remittance from india

2. Outward Remittance For Medical Treatment Abroad

Eligibility

The eligibility for outward remittance for medical treatment is USD 250,000 per FY year as per LRS.

Quantum of Exchange

The resident must be an Indian who is suffering from an ailment or disease that needs treatment from any abroad medical centre.

It could also be for an Indian resident who fell sick at an abroad location.

Documentation Required

For outward remittance for overseas medical treatment, you would need a request cum FEMA declaration form. This is important to release the exchange.

You would also need a photocopy of your passport that has a valid visa apart from the Estimate from an Overseas Hospital / Doctor for the Cost of Treatment.

3. Remittance By Tour Operators/Travel Agents to Overseas Agents

Eligibility

Must be an Indian tour operator wanting to send the travellers abroad. The tour operator may need outward remittance also when he wants to send money to overseas agents.

Quantum of Exchange

You need to pay an amount equal to the invoice but the Amount Requested for any Individual Traveller not to Exceed USD 250,000 per FY year as per LRS.

Documentation Required

For outward remittance for overseas Holiday Expense, you would need a request cum FEMA declaration form. This is important to release the exchange. You would also need a photocopy of Traveller’s passport.

You also need a list of the passengers travelling and a letter from the India based Tour agent.

4. Outward Remittance for Private Visits

Eligibility

The resident must be an Indian. Foreign-born wife of Indians and children who is endorsed on parent’s passport are also eligible for a full entitlement. Foreign nationals who are permanently resident in India are also eligible but under FEMA regulations the applicant is not availing of facilities for remittance of his salary, savings etc.

Quantum of Exchange

On a financial year basis, the resident must have a total of US$10000 out of which USD 3000 in terms of currency notes spend per visit and rest in traveller’s cheque for all the countries except Iraq, Libya, and Iran etc.

For travellers proceeding to Iraq or Libya, their exchange in the form of currency notes per resident should not exceed USD 5000.

Entire exchange can be released in form of currency of travelers going to Islamic Republic of India, Russian Federation and another republic of the Commonwealth of independent states.

Under this scheme, Individual traveling to Nepal and Bhutan are not eligible to withdraw foreign exchange.

Documentation Required

For outward remittance for private visits, you would need to submit request cum FEMA declaration form. If the amount is up to USD 5000 equivalent, you will have to submit an A-2 form. Originals passport should be verified by the counter staff.

The details of the ticket showing travel within 60 days of taking foreign exchange and details of the ticket number should be noted on the request form by the counter staff.

You would also need a photocopy of pay order along with debit advice and undertaking form from the counter staff that all the documents are verified.

In terms of FEMA regulations, if the applicant is a foreign national permanently resident in India then they have to submit an application. In that, they have to mention that they are the permanent resident of India and not availing of facilities for remittance of their salary or savings etc.

5. RBI Guidelines For Business Travel

Eligibility

Your visit must be in connection with participating/attending an international conference/seminars which based on scientific, technical, and educational nature are treated as business visits.

Executives should be sponsored by firms/companies/organization in India.

The passengers who are for specialized training/study tour they must be sponsored by institutions or undertaken by professionals.

Quantum of Exchange

Irrespective of the period of stay the entitlement is up to USD 25,000 needed for per business trip. If the release of exchange beyond USD 25,000 then requires prior approval of RBI.

If a passenger wants to club both conference and business visit together then also the entitlement is up to USD 25,000.

With the condition that the visit is sponsored by the company/organization/firm where the passengers are employed on regular basis then exchange may also release to foreign nationals.

Documentation Required

For outward remittance for business visit scheme sponsored by the company, you would need request cum FEMA declaration form signed by an authorized official of the company.

In case of travel related to training/study tours, a letter must be needed from the overseas institution. In that letter, they certify that the expenses are being borne by the organization along with the details of training/study tour.

In case of travel for a conference/seminars, the brochure along with the application shall also be submitted.

If the amount exceeds USD, you will have to submit an A-2 form.

6. RBI Guidelines for Fee Participation in the Global Conference and Specialized Training

Eligibility:

The resident must be an Indian national. They could also endorse with parent’s passport as they are also eligible for it. Your visit must be in connection with participating/attending an International conference or seminar which is based on Scientific, technical and educational nature are treated in this.

These travel should be sponsored by organization/firms/companies in India or Abroad. Those who are for specialized training must be sponsored by the institution or undertaken by professional.

Quantum of Exchange:

For these type of foreign trips, resident individuals can avail foreign exchange up to USD 25,000 in financial year irrespective of no of the visit to the countries. This limit is as per the Liberalised Remittance Scheme w.e.f May 26, 2015.

If the foreign exchange is release increases USD 25,000 then that must get prior approval from RBI. If clubbing multiple conferences the limit remains unchanged.

However, if the employee is deputed by company/organization and all expenses are borne by them, then such cases shall be treated as residual current account transaction and may be permitted by AD Bank without any limit, subject to verification of bonfires of the transaction.

Documentation Required:

  • Request cum FEMA declaration form for release of exchange under business visit scheme on Company letterhead.
  • Form A2 – Application cum declaration
  • Copy of letter from the organization in India giving relevant details.
  • Copy of documentary evidence giving full details

7. RBI Guidelines for Participation in International Events/ Competitions (towards training, sponsorship, and prize money)

Eligibility

Must be an Indian national with valid passport and visa. Must have a valid overseas Invitation letter with the detail of training. A person should have a sponsorship letter or Prize Money documentary evidence.

Quantum of Exchange

The international event must in India or Abroad. Remittance of prize money / Sponsorship of Sports activity abroad in excess of USD 1, 00,000 by a person other than National/International sports bodies would need Ministry of Human Resource Development (Department of Youth Affair and Sports)

Provided that this Rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) account of the remitter.

Documentation Required

  • AD II dealer shall submit an application form with details and also be confirming customer KYC compliance for affecting the remittance.
  • Covering letter from the AD II providing the complete applicant/remitter and beneficiary details and also certifying the KYC norms complied with.
  • FEMA declaration duly signed by the AD II.
  • Completed A2 form if applicable (for USD 5,000 and above)
  • Payments need to be collected via cheque or Draft subject to realization.
  • Approval for Ministry if the amount exceeds USD 1, 00,000.

8. RBI Guidelines for Disbursement of Crew Wages

Eligibility:

The Master of ship/ Authorised dealer must be Indian and Authorised by RBI for these remittance transactions.

Quantum of Exchange:

This is under remittance to the restricted authorized dealer where authorized dealer/ Master of Ship release /remit foreign exchange towards disbursement of crew wages which is under non-trade current account transaction.

The amount is as per the invoice of the crew within the prescribed limit of personal/Business visit forex quota.

Documentation Required

  • AD II dealer shall submit an application form with details and also be confirming customer KYC compliance for affecting the remittance.
  • Covering letter from the AD II providing the complete applicant/remitter and beneficiary details and also certifying the KYC norms complied with.
  • FEMA declaration duly signed by the AD II.
  • Completed A2 form if applicable (for USD 5,000 and above)
  • Payments need to be collected via cheque or Draft subject to realization.

However, there are some exceptions to this procedure. The RBI prohibits certain transactions under the scheme. Do you know what they are?

9. Outward remittance for educational tie up arrangements with universities abroad

Eligibility

You are allowed to release foreign exchange up to USD 2, 50,000. However, based on the estimate received from the institution board AD category l bank and AD category ll may allow remittances exceeding USD 2,50,000.

Quantum of Exchange

Irrespective of the period of stay the entitlement is up to USD 2, 50,000 needed for per trip. If the release of exchange beyond USD 2, 50,000 then requires prior approval of RBI.

With the condition that the tie-up is arranged by the college/universities where the passengers are employed on regular basis then exchange may also release to foreign nationals.

Documentation Required

For outward remittance for educational tie up arrangements with universities abroad, you would need an A2 form that is an application cum declaration form.

A letter must be needed from the organization in India giving relevant details. One documentary evidence needed and that should be giving full details of tie-up arrangements.

Copy of the letter from the organization of India giving relevant details and the copy of documentary evidence giving full details about tie-up arrangements should be kept on record for further verification.

10. Outward remittance for employment and processing fees for overseas job application

Eligibility

You are allowed to send USD 100,000 per academic year.

Quantum Exchange

The resident should be Indian and there should be a confirmed application from the respective overseas company. The employee who has Indian passports and has been out of India for purposes of employment are eligible for this remittance.

Also, those employees who have foreign passports, but are dependent on their parents who are residents of India are also eligible for this type of remittance. Executives should be sponsored by firms/companies/organization in India.

Documentation Required

For outward remittance for an overseas job application, you would need a request cum FEMA declaration form. This is important to release the exchange.

You would also need a photocopy of your passport that has a valid visa. If the amount exceeds USD 5000, you will have to submit an A-2 form.

11. RBI guidelines towards fees examinations held in India and abroad and additional score sheets for GRE, TOEFL, etc.

Eligibility

The resident must be an Indian national endorse with parent’s passport also eligible for it. Your visit must be in connection with participating/attending an exam in India which is based on Scientific, technical and educational nature are treated in this.

These travel should be sponsored by organization or universities or institutions in India or Abroad. Those who are for specialized training must be sponsored by the institution or undertaken by professional.

Quantum of Exchange

For these type of foreign trips, resident individuals can avail foreign exchange up to USD 25,000 in financial year irrespective of no of the visit to the countries. This limit is as per the Liberalised Remittance Scheme w.e.f May 26, 2015.

If the foreign exchange is release increases USD 25,000 then that must get prior approval from RBI. If clubbing multiple conferences the limit remains unchanged.

However, if the employee is deputed by company/organization and all expenses are borne by them, then such cases shall be treated as residual current account transaction and may be permitted by AD Bank without any limit, subject to verification of bonfires of the transaction.

Documentation Required

  • Request cum FEMA declaration form for release of exchange under business visit scheme on Company letterhead.
  • Form A2 – Application cum declaration
  • Copy of letter from the organization in India giving relevant details.
  • Copy of documentary evidence giving full details

12. RBI Guidelines for Immigration and Consultancy Fees

Many times, you would need to send money abroad for various purposes. It could be for travel, medical expenses or private visits. However, what must concern you is how you can actually send that money.

There are some basic rules that are applicable for such transfers. In this blog, we will look at the various guidelines that the RBI has laid down for such outward remittances.

Eligibility

The person who is leaving his own country to settle in another that person must have USD 100,000 or amount prescribed by country of emigration.

They can draw foreign exchange from AD category I bank and category II bank. But one thing you keep in your mind that this amount is only for two persons or less than two people. In the country of emigration, this amount will use only to meet the incidental expenses.

Quantum of Exchange

The resident must be an Indian who is proceeding to permanent emigration to abroad. To become eligible or for earning points or credits for immigration no amount of foreign exchange should be remitted outside of India.

Further, for undertaking any capital amount transaction for example the overseas investment in government bonds, lands, and commercial enterprise the remittance is not applicable.

Documentation Required

In outward remittance for emigration, you would need FEMA Declaration cum request form. This form is needed for release of exchange. As per the type of remittance, the relevant portion of the form should be filled.

Depending on the reason of emigration that is for employment, medical treatment, or education in abroad and for permanent emigration the person who all are traveling they need a photocopy of their passport along with valid visa.

If the amount is exceeding more than USD 5000 equivalent then you will have to submit an A-2 form. Originals passport should be verified by the counter staff.

In case of foreign education the application fees or processing fees in case of immigration, the valid visa is not required.

Prohibited Transaction Under the Scheme

  • Remittance for the purchase of lottery tickets/sweepstakes, proscribed magazines, etc. or any item restricted under schedule 2 of foreign exchange management rule 2000.
  • Remittance for trading in foreign exchange, purchase of FCCB issued by the Indian company in the overseas secondary market.
  • Capital account remittances, to countries identified as “non-cooperative countries and territories” by financial action task force (FATF).
  • Remittances to entities identified as a significant risk of committing acts of terrorism as advised by the Reserve bank.

We will keep come back with more interesting insights and topics in our next blog. Keep reading! Meanwhile, if you are planning to send money to your relatives in any part of the world, you can simply contact us!