Outward remittances under RBI's LRS rose 26% in Q2FY24, shows data

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Outward remittances under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) during the April-September quarters of 2023-24 have surpassed the remittances in the corresponding year-ago period, thanks to robust growth in international travel and changes in taxation rules.

According to data released by the RBI in its monthly bulletin for September, outward remittances under the scheme increased by 26.09 per cent to $9.23 billion in the second quarter (Q2) of 2023-24 (FY24) from $7.32 billion in Q2 of 2022-23 (FY23).

In September 2023, Indians remitted $3.50 billion overseas, compared to $2.67 billion in September 2022.

According to the monthly data, international travel, which accounted for nearly 57 per cent of the entire outward remittance by Indians under the scheme, rose by 34.38 per cent year-on-year (Y-o-Y) to $5.22 billion, compared to $3.89 billion in the same period of FY23.

The remittances for the purchase of immovable property expanded by nearly 56.53 per cent to $60.31 million in the period under review from $38.53 million in the year-ago period. At the same time, investments in the equity and debt market saw a 90 per cent Y-o-Y increase to $360.59 million from $189.78 million.

“The surge in outward remittances is likely due to the change in the LRS tax scheme, which is expected to come into force from October 1. This has resulted in a sharp increase in equity and debt investment along with the purchase of immovable property,” said Radhika Piplani, chief economist at DAM Capital Advisors.

During the FY23 Union Budget, the government had proposed to raise tax collected at source on liberalised foreign remittances to 20 per cent from the existing 5 per cent, for amounts exceeding ~7 lakh for all purposes except education and medical treatment. The revision was initially scheduled to be effective from July 1, but the Ministry of Finance later deferred it to October 1, 2023.

According to the RBI data, in the quarter under review, the outward remittance by Indians under the maintenance of close relatives rose by 23.30 per cent to $1.22 billion from $989.89 million, whereas for gifts, it increased to $886.55 million from $681.37 million.

On the other hand, remittances for other activities dropped by 24.72 per cent Y-o-Y to $88.09 million from $117.01 million in the April-September quarters of 2021-22. Similarly, the amount for medical treatment slipped down to $13.48 million. Remittances for studies abroad slid to $1.15 billion.

According to the LRS scheme introduced in 2004, all resident individuals, including minors, are allowed to remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both. Initially, the scheme was introduced with a limit of $25,000. The LRS limit has been revised in stages consistent with the prevailing macro and microeconomic conditions.