Background – credit card payments under FEMA
India has come a long way in liberalizing foreign exchange
transactions for its residents. The legal framework for the
administration of foreign exchange transactions in India is
provided by the Foreign Exchange Management Act, 1999 (FEMA).
Earlier, transferring money overseas was a cumbersome procedure
involving numerous approvals from the Reserve Bank of India
(RBI).
However, as India solidified its position in the global markets,
open cross-border capital flow became crucial for holistic economic
growth. Thus, the RBI introduced LRS for individuals to remit/spend
in foreign exchange easily.
LRS allows Indian residents to freely remit up to USD 250,000
per financial year for current or capital account transactions or a
combination of both, as prescribed. Any remittance exceeding this
limit requires prior permission from the RBI.
