External remittances under the Reserve Bank of India’s (RBI) Liberalized Remittance Scheme (LRS) for the second quarter of the fiscal year 2023-24 surpassed the figures of the corresponding period last year due to robust growth in international travel and recent changes. in tax rules.
According to data published in RBI’s monthly bulletin for September, outward remittances under the LRS witnessed a significant increase of 26.09 percent, reaching $9.23 billion in the second quarter (Q2) of 2023-24, compared to $7.32 billion USD in the same period of the previous fiscal year.
The increase in remittances is linked to changes in the LRS tax scheme, to be implemented from October 1, which has led to a notable increase in equity and debt investments, along with an increase in real estate purchases.
September leap
In September 2023 alone, Indians sent $3.50 billion abroad, reflecting a notable increase from $2.67 billion in September 2022.
The data further reveals that nearly 57 percent of the total outward remittances under the LRS were attributed to international travel, experiencing a substantial growth of 34.38 percent year-on-year to $5.22 billion in the period under review.
The data also highlights a 23.30 percent increase in external remittances under the care of close relatives, reaching $1.22 billion, and an increase in gift-related remittances to $886.55 million. On the contrary, remittances for other activities saw a decrease of 24.72 percent to $88.09 million, while sums for treatment decreased to $13.48 million, and remittances for studies abroad slipped to $1.15 billion.
Remittances for the purchase of real estate expanded by nearly 56.53 percent to $60.31 million, while investments in the equity and debt market saw a remarkable 90 percent 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 liberalized foreign remittances from 5 to 20 percent, for amounts exceeding Rs 7 lakh, was initially scheduled to be effective from July 1. However, the Finance Ministry later delayed. the implementation until October 1, 2023.
The LRS scheme allows resident individuals, including minors, to remit up to $250,000 per financial year for any eligible 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.