REVEALING TRUTH ABOUT SUSPICIOUS LIBERALISED REMITTANCE SCHEME

Introduction:

Foreign Exchange Management Act (FEMA) is the regulation which take care of all Foreign Exchange dealing of Residents in India. The Act is applicable in the following situations: i) Any Transactions between person Resident in India and person Resident outside India; ii) Transactions in Foreign Currencies by Resident outside India; iii) Transactions in Indian Rupees by Non-resident person in India; iv) Acquiring any property outside India by Resident; and v) Acquiring any property in India by person Resident outside India. The person Resident in India can do foreign exchange Transactions under Current Account and Capital Account. All the current account Transactions are generally allowed unless prohibited while all capital account Transactions are prohibited unless specifically permissible. Government is committed to extend more freedom to residents to use foreign currency and thus Liberalised Remittance Scheme. Let us talk on, Is RBI Suspicious – Liberalised Remittance Scheme?

Key Features And Contemporary Issues:

• Liberalised Remittance Scheme was introduced in 2004 by Government of India Notification G.S.R. No. 207(E) dated March 23, 2004 with the objective to facilitate Resident individual to remit funds abroad for permitted Capital or current account Transactions or combination of both.
• Presently, Resident individual can remit up to USD 250,000 per FY (April to March) including minors BUT not available for other than individual.
• Resident Individual under FEMA is not the same as under Income tax Act. As worldwide income of Resident individual is taxable in Income in India, so income earned on fund remitted outside India under Liberalised Remittance Scheme and foreign assets need disclosure in tax returns in India.
• Exponential increase of outward remittance under LRS, worries the government for probably misuse of the funds as there is hardly any fool proof mechanism of tracking the Remittance under LRS when it was launched in 2004, its end use and income earned on this funds overseas.
• Probably misuse may be:
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• Check and balances put in place by government:
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• Some of the deterrent:
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Concluding Remarks:

FEMA is a policy law and national interest is predominant as against nitty-gritties of language in tax legislations. Therefore, there is very little options are available with the persons who defaulted in provisions of Foreign Exchange Management Act. To avoid any unwanted harassment, one needs quite a cautious approach in maintaining proper records for all one’s foreign exchange exposure.

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