Does LRS limit apply to NRO account?
—Name withheld on request I assume that your daughter has become a NRI (non-resident Indian) by now. Your understanding is correct that making a gift to your daughter in her US bank account would be subject to LRS limit of $250,000 per financial year and would attract TCS. However, even making a gift of a rupee to her NRO account is treated as a transaction made under LRS and is subject to the annual LRS cap of $250,000 per financial year.
Therefore, you won’t be able to transfer ₹15 crore to her NRO account outright and it will be subject to the same LRS limit of $ 250,000 per financial year. Secondly, the Finance Act 2023 made an amendment whereby now gifts made to NRO accounts are also subject to TCS with effect from 1 July 2023. Barring the initial threshold limit of ₹7 lakh, TCS at 20% (plus applicable surcharge and cess) would be levied on the rupee gifts made to the NRO account.
It may also be noted that though TCS was introduced on rupee gifts made to NRO accounts with effect from 1 July 2023, the initial threshold of ₹7 lakh is applicable for the entire financial year 2023-24. Further, the CBDT (Central Board of Direct Taxes) has clarified that the exemption threshold of ₹7 lakh is a combined threshold across all categories of LRS except for overseas tour and programmes. Harshal Bhuta is partner at P.R. Bhuta & Co. Chartered Accountants.Milestone Alert!
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