The Reserve Bank of India’s (RBI) liberalised remittance scheme (LRS) has witnessed a substantial uptick, with outward remittances jumping by 50.64% to reach $9.1 billion during the first quarter of the fiscal 2023-24. This surge was led by robust growth across various segments, propelled by changes in the timeline of tax collected at source (TCS) under the LRS scheme and a return to normalcy in international travel patterns.
Outward remittances exhibited a 17% increase from the final quarter of FY23.
Most segments rise
Investments in equity and debt schemes surged to $503.73 million in Q1FY24, a remarkable rise from $223.74 million in the corresponding period of the previous year.
The purchase of immovable property registered an impressive 122% leap, amounting to $89.94 million. Overseas deposits experienced an almost 62% surge, reaching $430.59 million.
Remittances for the maintenance of close relatives also witnessed a robust surge of 78.22%, reaching $1,831 million compared to $1,027.38 million during the same period the previous year.
The gift segment followed a similar trajectory, climbing to $1,374.46 million from $770.66 million in Q1FY23.
Another significant sector, international travel, rebounded with a robust growth of 39%, totalling $4,078.01 million during the quarter under review, up from $2,918.68 million during the corresponding period the previous year.
This uptick is largely attributed to individuals capitalising on the extension of the timeline for the implementation of tax collected at source on LRS regulations to October 1, 2023.
In contrast, spending among Indians on overseas education experienced a marginal dip of nearly 6%, reaching $694.41 million compared to $738.42 million during the same period last year.
The reason
During the FY23 Union Budget, the government proposed raising the TCS on liberalised foreign remittances to 20% from the existing 5%, applicable to amounts exceeding Rs 7 lakh for all purposes except education and medical treatment. Initially slated to commence from July 1, 2023, the Ministry of Finance later postponed its implementation to October 1, 2023.
Introduced in 2004, the LRS scheme grants resident individuals the freedom to remit up to $250,000 per financial year for permissible current or capital account transactions, or a blend of both, devoid of charges.
The scheme’s initial phase initiated with a $25,000 limit, which was gradually revised upwards.
