Rupee-dollar value: 5 things to know before investing or sending money abroad

The RBI’s Liberalized Remittance Scheme (LRS) will be your one stop shop for all your foreign exchange issues, whether you are planning to invest overseas, travel abroad or even send your children to school. abroad. As the name suggests, LRS relates to remittances (investments abroad) that a resident person is allowed to make. On the other hand, in addition to remittances, one can also use the foreign exchange facility (for medical expenses or while traveling), which is also covered by the LRS.

Here are 5 things to know about rupee-dollar before investing or sending money abroad under the RBI’s liberalized remittance scheme.

1. Buy dollars in India

To invest or spend abroad, Indian rupees must first be converted into US dollars for any international transaction. These transactions are subject to the regulations of the Liberalized Remittance Scheme (LRS). Simply put, if you live in India, you must buy dollars from an authorized dealer (the bank) using Indian Rupees (INR). The money can then be used to buy property or other assets like stocks by sending it abroad or spending it there.

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2. Maximum dollars you can send abroad

Any resident person, even a minor (countersigned by a guardian), is currently allowed to contribute up to US$2.5 lakh (US$2,50,000) in a fiscal year under LRS guidelines. This equates to around Rs 2,00,000 or Rs 2 crore at the current exchange rate of Rs 80 to $1. The number of transactions authorized each year is not limited. The restriction applies to each financial year, so even if someone returns the amount paid during the same year, they will not be able to send any more money. The regulations make it clear that one can only send foreign exchange (FX) for permitted capital account transactions, current account transactions, or a combination of both.

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3. Dollars allowed to be transported abroad

If you are going on a trip abroad with the family, the “ease of exchange” will determine whether you will be allowed to carry dollars. The person is required to maintain their currency usage at a maximum of 250,000 USD. If you are on a private tour to any country except Nepal and Bhutan, you can use your credit card for expenses and cash withdrawals from ATMs if the card allows international transactions.

If you are traveling for business or attending a conference or specialized training abroad.

If you need foreign currency to meet medical expenses, or for a check-up abroad, or to accompany as a companion a patient traveling abroad for medical treatment / check-up.

If you have to meet expenses related to medical treatment abroad

If you need foreign currency to cover the cost of education/study abroad

If you wish to offer or make a donation abroad

If you are going to work abroad

If it is for emigration purposes

All such transactions will be considered current account transactions and provided that the transactions do not fall under the prohibited list, the authorized dealer (the bank) may also make the remittance without the consent of the RBI.

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4. Buy US stocks, open a foreign bank account

LRS regulations will classify any investments you make in stocks, real estate or other offshore assets as capital account transactions. According to the LRS regulations, only transactions specific to the capital account are permitted. Some of them are:

If you want to open a bank account abroad, i.e. a foreign currency account

If you want to buy real estate abroad

To make investments abroad, including investing in stocks, mutual funds, debt securities, among others.

Establishment of wholly owned subsidiaries and joint ventures outside India for business operations.

5. Income, dividends earned abroad

LRS laws allow an investor to retain and reinvest income earned in the foreign country if they have invested in stocks and mutual funds there (as long as it is not a direct offshore investment ). The investor is not required to report accrued interest or dividends from savings and foreign investments.

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