Outward remittances under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS) witnessed a significant 60.45% month-on-month decline, plummeting to $2.17 billion from the previous month’s figure of $3.50 billion.
The year-on-year comparison revealed a notable uptick, with remittances in October registering a 13.14% increase compared to the year-ago period, reaching $1.92 billion.
Despite traditionally being a festive month, Indians contributed $9.05 billion in overseas remittances during the August-October quarter of the financial year 2024, reflecting an increase from $7.26 billion in the second quarter of FY24.
Notably, international travel, constituting over 60% of the total outward remittance by Indians, observed a substantial 40.62% year-on-year surge, amounting to $1.37 billion in October, compared to $0.97 billion in the same period of FY23.
However, remittances for the acquisition of immovable property experienced a decline of nearly 27.8%, dropping to $11.02 million from $15.28 million in the corresponding period of the previous year. Investments in equity and debt markets also saw a significant year-on-year fall of 24.73%, reaching $83.86 million from $111.41 million. Similarly, remittances for deposits declined to $26.28 million from $64.28 million in the year-ago period.
During October, outward remittances for maintaining close relatives witnessed a decline of 26.55%, amounting to $206.16 million, down from $280.67 million. Gifts also experienced a dip, falling to $184.79 million from $208.11 million. On the other hand, remittances for medical treatment increased to $8.53 million, and those for studies abroad inched up to $269.11 million during the period under consideration.
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%, 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.
