The following article was first published in the Mint newspaper on 30th May, 2023. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.
I have a son (17) and daughter (21). My daughter plans to go abroad for two years. I have two queries: i) How much money can I send her in a year, and can it be every month or does it have to be once a year? ii) I have created a private trust for the benefit of my children. Can I send the money through a private trust?
—Name withheld on request
The Liberalised Remittance Scheme (LRS) is available to all resident individuals in India to remit up to $250,000 per fiscal year. There is no restriction on the frequency of remittances under LRS. That said, the aggregate amount in one financial year must not exceed $250,000. Furthermore, from 1 July, tax collection at source (TCS) on the LRS will increase from 5% to 20% for remittances. Therefore, you can send money to your daughter every month as long as it is within this annual limit. Note: at the time of remitting the amounts, the authorised dealer bank will require you to undertake certain compliances such as payment of 20% TCS and submission of form A2, under which the nature of transaction must be declared by you.
Regarding your second query: You have created a private trust and seek to remit funds from the trust’s account. But, LRS is not available to trusts. Hence, you will have to remit the funds from your bank account, and not from the account of the trust.
My son is an NRI living in Germany. He does not plan to come back, and started his own business there. I want to gift him a portion of my savings. Can I transfer a lump-sum amount from my savings account to his overseas bank account as a gift?
—Name withheld on request
LRS allows a resident individual to make a rupee gift to an NRI close relative (a ‘relative’ is as defined as under the Companies Act, 2013) of the resident individual by way of crossed cheque or electronic transfer. Your son is regarded as your relative under the Companies Act, 2013, and hence, you can transfer by way of a gift a lump-sum amount from your savings account in India to his overseas account.
However, do note that such gift amount should be within the threshold of $250,000 per financial year as permitted for a resident individual under the LRS. Considering that with effect from 1 July , the TCS on all remittances under LRS will be increased from 5% to 20%, it will be worthwhile to factor in the actual amount to be gifted on the basis of the additional cash outflow towards TCS.