Outward remittances under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) for the second quarter of the fiscal year 2023-24 have exceeded the figures from the corresponding period last year on the back of robust growth in international travel and recent changes in taxation rules.
According to data released in the RBI’s monthly bulletin for September, outward remittances under the LRS witnessed a significant 26.09 per cent increase, reaching $9.23 billion in the second quarter (Q2) of 2023-24, compared to $7.32 billion in the same period of the previous fiscal year.
The surge in outward remittances is linked to changes in the LRS tax scheme, to be implemented from October 1, which has led to a noticeable increase in equity and debt investments, along with a rise in immovable property purchases.
September jump
In September 2023 alone, Indians remitted $3.50 billion overseas, reflecting a notable increase from $2.67 billion in September 2022.
The data further reveals that nearly 57 per cent of the overall outward remittances under the LRS were attributed to international travel, experiencing a substantial 34.38 per cent year-on-year growth to $5.22 billion in the reviewed period.
The data also highlights a 23.30 per cent increase in outward remittances under the maintenance of close relatives, reaching $1.22 billion, and an increase in gift-related remittances to $886.55 million. Conversely, remittances for other activities saw a decline of 24.72 per cent to $88.09 million, while amounts for medical treatment decreased to $13.48 million, and remittances for studies abroad slid to $1.15 billion.
Remittances for the purchase of immovable property expanded by nearly 56.53 per cent to $60.31 million, while investments in the equity and debt market saw a remarkable 90 per cent year-on-year increase, reaching $360.59 million.
The rule change
The government’s proposal in the FY23 Union Budget to increase tax collected at source on liberalised foreign remittances from 5 to 20 per cent, for amounts exceeding Rs 7 lakh, was initially slated to be effective from July 1. However, the Ministry of Finance later deferred the implementation to October 1, 2023.
The LRS scheme allows resident individuals, including minors, to remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both. The scheme has undergone revisions over the years in line with economic conditions, initially starting with a limit of $25,000.
