FEMA and US tax

Liberalized Remittance Scheme

RBI introduced the scheme vide AP DIR Series in 2004 as a step for liberalization to promote residents to remit funds internationally.

However, the Government of India has liberalized remittances of assets and income.



Almost any resident individual can take advantage of the scheme. LRS is, however, not for corporates, HUF, partnership firms, and Trusts

Current Limit

RIs can remit free up to $2,50,000/- every year for capital and current account transactions. The limit is set for every RI. Every family member can enjoy this facility. So, a 4-member family remits up to $10,00,000 in a year. If the foreign exchange is above USD 2,50,000/-, it needs remittance and prior approval of RBI. But, in some transactions, remittance can go beyond this amount, and Authorized Dealer Bank allows it, and there is no need for prior approval.

Permissible Transactions

Resident Individual will easily be able to access the foreign exchange facility for various purposes. You have to check out them before making any transaction

Current Account transactions

Restrictions and prohibitions under LRS

LRS limit and exceptions

The facility is available to RI when it is intended for medical treatment, studies, and emigration.

Compliances and processes

Other general rules

Borrowing and lending activities by NRI

An NRI is allowed to get a loan from Indian banks, and he or she is subjected to different terms. Banks will also be able to give loans to NRIs on different securities and shares. NRIs can also obtain an overdraft or loan against NRO in India. But, this loan cannot be used for relending and carrying on plantation and agricultural activities. Resident Individuals have the right to lend money at the limit of around $2,50,000 every financial year. The loan must not charge interest and involve at least a 1-year maturity period. 

Borrowing money from RI

The RI should borrow up to an amount of USD 2,50,000/- under some conditions

Borrowing by RI

A person residing in India can borrow an amount based on non-repatriation due to some reasons.

The US tax laws

These laws vary with citizenship and residency. The USA has imposed a tax on both citizens and residents on their income regardless of where they reside. A US person means he 

Jobs Act and Tax Cuts

US Congress sanctioned tax reforms on 22nd December, 2017. The legislative reform is known as the Tax Cuts and Jobs Act. The main areas that have an impact are federal tax slab rates, Estate tax lifetime, and standard deduction. 

Taxability in the USA

US citizens have to file the Federal tax return regardless of their location. They are also responsible for local and state taxes. The Tax Cuts has amended the federal tax slab rates.