Rapid Fire
Decline in Outward Remittances Under LRS
- 22 Aug 2024
- 2 min read
The recent data from the Reserve Bank of India (RBI) highlights a significant drop in outward remittances under the Liberalised Remittance Scheme (LRS), reflecting the impact of global economic uncertainties and domestic policy changes.
- Outward remittances decreased by 43.93% to USD 2.181 billion in June 2024 from USD 3.890 billion in June 2023.
- The introduction of Tax Collection at Source (TCS) at 20% on overseas tour packages has disincentivized remittances, except for education and medical treatment.
- Travel accounted for over 50% of total outflows, with amounts falling from USD 1.482 billion in June 2023 to USD 1.275 billion in June 2024.
- Global and domestic economic fluctuations and inflation have led individuals to reduce non-essential transfers, causing a decline in outward remittances.
- Outward remittance means the transfer of money from India to another country or region. LRS is governed by the Foreign Exchange Management Act, 1999 and regulated by RBI.
- LRS allows resident individuals, including minors, to remit up to USD 250,000 per financial year for permissible current or capital account transactions such as travel, medical treatment, education, gifts, donations, maintenance of relatives, and investment in shares, debt instruments, and immovable properties overseas.
- TCS is an tax collected by sellers on specific transactions, including foreign remittances under the LRS. When individuals send money abroad, travel, TCS is collected by the authorised dealer, typically a bank, and deposited with the government. This ensures tax compliance on overseas financial activities.
- TCS is not applicable on international credit card spending.
