Context:
Finance Ministry has announced that it will waive the 20% tax on overseas credit card spending for individuals up to ₹7 lakh per financial year, following criticism and concerns raised by taxpayers and businesses.
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Few highlighted points are given below
Under the Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident individuals up to USD 250,000 per Financial Year (April-March) for any permitted current or capital account transaction or a combination of both. The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc.
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Under the Scheme, individuals can consolidate remittances for family members, provided that each family member adheres to its terms and conditions. However, other family members are not allowed to combine capital account transactions, such as opening a bank account, making investments, or purchasing property, unless they are co-owners or co-partners of the overseas bank account, investment, or property. Further, a resident cannot gift to another resident, in foreign currency, for the credit of the latter’s foreign currency account held overseas under LRS.
The limit of USD 250,000 per Financial Year (FY) under the Scheme also includes/ subsumes remittances for Current Account transactions available to
resident individuals under Para 1 of Schedule III to Foreign Exchange Management (Current Account Transactions)
Amendment Rules, 2015 dated May 26, 2015. Release of foreign exchange exceeding USD 250,000 requires prior permission from the Reserve Bank of India.
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Aim:
Simplify the process of remitting money outside India and encourage foreign investments by Indian individuals
Permissible Transactions Education, travel, medical treatment, gifting, investment in shares or property, etc.
Non-Permissible Transactions Trading in foreign exchange or buying lottery tickets
Ineligible Entities Corporations, partnership firms, Hindu Undivided Family (HUF), Trusts, etc.
Benefits:
Diversify investments and assets, finance foreign education or travel
Issues Outward remittances may pressure Forex reserves.
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