COURTKUTCHEHRY SPECIAL FOR INDIAN INVESTING IN FOREIGN COUNTRIES
Automatic Approval Route: How Indians Can Invest Abroad Without RBI Permission
Liberalised Remittance Scheme Empowers Individuals
General Permission Protects Assets Earned Overseas
By Vishwas Kumar
New Delhi: April 07, 2026:
For Indians aspiring to expand globally by opening companies or LLCs abroad, the automatic approval route under FEMA and RBI’s Master Directions offers a convenient pathway. Unlike investments requiring prior approval, certain categories of overseas investments can be made freely, subject to limits and compliance conditions. Understanding these rules is essential for entrepreneurs and individuals to plan international ventures without regulatory hurdles.
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Categories of Automatic Approval
Investment by persons resident in India does not need prior approval in the following cases:
- Liberalised Remittance Scheme (LRS) – Resident individuals can remit up to USD 250,000 per financial year for permitted transactions.
- General Permission – Investments made using funds held in foreign currency accounts or assets acquired while being non-resident.
- Automatic Approval Route for Indian Entities – Financial commitment up to 400% of net worth, subject to a cap of USD 1 billion per financial year.
These routes simplify overseas investment, but each has its own conditions.
1. Liberalised Remittance Scheme (LRS)
The LRS is the most widely used route for individuals. Under this scheme:
- Resident individuals, including minors, can remit up to USD 250,000 per financial year.
- Funds can be used for both current account transactions (travel, education, medical treatment, maintenance of relatives abroad) and capital account transactions (purchase of shares, immovable property, ODI/OPI).
- Even minors can use the scheme, with forms signed by guardians.
- Consolidated remittances for family members are allowed, but gifting under LRS to another resident in India is prohibited.
- Individuals can open and hold foreign currency accounts abroad without RBI approval.
Restrictions:
- Not available to corporates, partnerships, HUFs, or trusts.
- Not available for capital account transactions with countries identified as non-cooperative by FATF (e.g., Iran, Myanmar, North Korea).
- Banks cannot extend credit facilities for LRS transactions.
Operational Points:
- PAN is mandatory.
- All remittances must be routed through one bank branch.
- Banks will ensure compliance with KYC, AML, and TDS requirements.
- Source of funds must be verified; cash deposits are not accepted.
- Form A2 must be filled for each remittance.
For entrepreneurs, LRS offers flexibility. For example, an individual can invest in a foreign LLC or acquire property abroad within the USD 250,000 limit. Families can pool limits to make larger investments.
2. General Permission
General Permission applies to assets acquired while being non-resident. If an individual earned money abroad or acquired property while living outside India, they can continue to hold, transfer, or invest those assets after becoming resident in India.
This provision ensures that returning Indians are not penalized for assets legitimately acquired abroad. Section 6(4) of FEMA explicitly allows such holdings without RBI approval.
3. Automatic Approval Route for Indian Entities
Indian companies and LLPs can invest abroad under the automatic route, provided:
- Financial commitment does not exceed 400% of net worth.
- Total commitment is capped at USD 1 billion per financial year.
This route allows corporates to set up subsidiaries, joint ventures, or acquire stakes abroad without prior RBI approval, provided they remain within limits. For larger investments, specific approval is required.
Why These Rules Matter
- Individuals can use LRS for personal investments, education, or property abroad.
- Returning residents can freely manage assets acquired overseas under General Permission.
- Indian corporates can expand globally under the automatic route, subject to limits.
Together, these provisions create a balanced framework: encouraging global participation while safeguarding India’s foreign exchange reserves.
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FAQs
Q1: How much can an individual remit abroad under LRS?
Up to USD 250,000 per financial year for permitted transactions.
Q2: Can minors use LRS?
Yes. Forms must be signed by both the minor and their guardian.
Q3: Can corporates use LRS?
No. LRS is only for individuals. Corporates must use ODI/OPI routes.
Q4: What is General Permission under FEMA?
It allows residents to hold or invest assets acquired while being non-resident, without RBI approval.
Q5: What is the limit for Indian entities under automatic approval?
Up to 400% of net worth, capped at USD 1 billion per financial year.
Q6: Can LRS be used for investments in high-risk FATF countries?
No, capital account transactions with non-cooperative countries are prohibited. Current account transactions (like remittances to relatives) are allowed.
Q7: Is PAN mandatory for LRS remittances?
Yes. PAN is required for all remittances under LRS.
Q8: Can funds under LRS be used to buy property abroad?
Yes. Acquisition of immovable property abroad is permitted under LRS.
CONCLUSION:
By mastering these rules, Indian individuals and entities can confidently plan overseas ventures, knowing when approval is required and when automatic routes suffice. This clarity empowers entrepreneurs to expand globally while staying compliant with India’s foreign exchange laws.