Capital account transactions are those that involve the transfer of money across borders for investment purposes. Current account transactions are those that involve the transfer of money across borders for non-investment purposes, such as trade in goods and services, tourism, and personal remittances.
The Liberalized Remittance Scheme (LRS) is a set of guidelines issued by the Reserve Bank of India (RBI) that allows Indian residents to remit money abroad without any restrictions. The LRS was introduced in 2004 to promote trade and investment and to make it easier for Indians to send money to their families and friends abroad.
Under the LRS, Indian residents can remit up to USD 250,000 per financial year for any permissible current or capital account transactions. Permissible current account transactions include:
- Payments for education: This includes tuition fees, hostel fees, books, and other expenses for studies abroad.
- Payments for medical treatment: This includes medical expenses for treatment abroad.
- Payments for travel: This includes expenses for travel abroad, such as airfare, accommodation, and visa fees.
- Payments for maintenance of close relatives: This includes expenses for the maintenance of close relatives who are living abroad.
Permissible capital account transactions include:
- Investment in shares and securities: This includes investment in shares, bonds, and other securities of foreign companies.
- Investment in immovable property: This includes investment in immovable property located outside India.
- Remittance for setting up a business abroad: This includes remittance for setting up a business or a branch of a business abroad.
The LRS is a very flexible scheme that allows Indian residents to remit money abroad for a wide range of purposes. It has made it much easier for Indians to send money to their families and friends abroad, and it has also helped to promote trade and investment.
Here are some MCQs on capital account transactions and current account transactions under the Liberalized Remittance Scheme (LRS):
- What are capital account transactions?
- Capital account transactions are those that involve the transfer of money across borders for investment purposes.
- What are current account transactions?
- Current account transactions are those that involve the transfer of money across borders for non-investment purposes, such as trade in goods and services, tourism, and personal remittances.
- What is the Liberalized Remittance Scheme (LRS)?
- The Liberalized Remittance Scheme (LRS) is a set of guidelines issued by the Reserve Bank of India (RBI) that allows Indian residents to remit money abroad without any restrictions.
- What are the permissible current account transactions under the LRS?
- The permissible current account transactions under the LRS include payments for education, medical treatment, travel, and maintenance of close relatives.
- What are the permissible capital account transactions under the LRS?
- The permissible capital account transactions under the LRS include investment in shares and securities, investment in immovable property, and remittance for setting up a business abroad.