Outward remittances under the Reserve Bank of India’s (RBI’s) Liberalised Remittance Scheme (LRS) declined by nearly 16 per cent in May 2024 from the year-ago period due to the base effect resulting from the Union Government’s proposal to raise tax collection at source (TCS) on remittances.
During the Union Budget of FY 2022-23, the government had proposed to raise TCS to 20 per cent from 5 per cent on amounts exceeding Rs 7 lakh for all purposes except for education and medical treatment. The revision was scheduled to be effective from July 1, 2023.
The proposal during the budget led to a 41 per cent YoY increase in remittances under the scheme in May 2023 from the year-ago period to $2.88 billion in May 2023. However, the Ministry of Finance later deferred it to October 1, 2023.
According to the latest RBI bulletin, remittances under the scheme stood at $2.42 billion in May 2024, 16.18 per cent below the year-ago period.
During the reported month, remittances under the largest component—international travel—slipped marginally to $1.40 billion compared to $1.49 billion in the year-ago period.
Other key segments like maintenance of close relatives dropped by 34.63 per cent to $320.8 million from $490.7 million in May 2023. The ‘gifts’ segment dropped by 30.4 per cent to $271.9 million.
Similarly, remittances for overseas education dropped 14.7 per cent YoY to $210.9 million while the ‘deposit’ segment saw nearly a 47 per cent drop to $52.98 million from the year-ago period.
On the other hand, remittances by Indians under the LRS scheme for medical treatment and purchase of immovable property rose by 47.59 per cent and 2.21 per cent respectively to $7.66 million and $21.69 million each.
The LRS scheme was introduced in 2004, allowing all resident individuals to remit up to $250,000 per financial year for any permissible current or capital account transaction, or a combination of both, free of charge.
In the initial phase, the scheme was introduced with a limit of $25,000, and this was revised gradually.
First Published: Jul 18 2024 | 8:05 PM IST
