Cash Notes, a Neighbour's Ticket and Leftover Dollars in the Almirah
Mrs. Kamala Kulkarni, 61, a retired school principal in Pune, is planning a twelve-day trip to Singapore and Malaysia in March, followed by a five-day pilgrimage to Nepal in April. She visits a full-fledged money changer and asks for USD 6,000 entirely in currency notes, saying she does not trust cards. She also wants the same money changer to sell her USD 2,000 for her neighbour, Mr. Sethi, who is travelling to Bangkok and does not want to visit the branch himself; she will pay in rupees and hand him the cash. For the Nepal leg she asks whether she must buy foreign currency. Finally, she mentions that on return from Singapore she expects to have about USD 1,400 left, which she wants to keep in her steel almirah at home for next year's trip, along with USD 900 in notes already lying there from a 2024 holiday. She has not used any LRS facility this financial year.
1. How much of the USD 6,000 can the money changer issue as currency notes, and how should the balance be handled?
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Currency notes for a single trip are capped at USD 3,000 (USD 5,000 only for travel to a few specified destinations such as Iraq, Libya, Iran, Russia and the CIS). So of the USD 6,000, at most USD 3,000 can be issued as notes; the balance must be given as a travel card, banker's cheque or telegraphic transfer, all within the overall LRS ceiling of USD 250,000 per financial year.
The money changer must complete KYC against her passport and PAN, see the valid ticket, obtain her self-declaration of purpose and issue a receipt recording the sale. Her comfort with cards is not a ground to breach the notes cap: the cap exists to limit cash movement and the associated risk. She should also be told that every purchase is aggregated against her PAN for the year, so keeping receipts matters.
2. Can the money changer sell USD 2,000 to Mrs. Kulkarni for her neighbour Mr. Sethi?
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No. Foreign exchange for travel is sold to the traveller, against the traveller's own passport, ticket and KYC, and the sale must be recorded against his documents and his PAN. The LRS quota is personal and cannot be lent, rented or used on someone else's behalf.
A dealer may sometimes accept payment from a relative, but the transaction, declaration and records remain in the traveller's name. If the money changer books USD 2,000 against Mrs. Kulkarni's passport for Mr. Sethi's Bangkok trip, both are parties to a FEMA contravention, and the dealer breaches its KYC and record-keeping obligations. The correct response is to ask Mr. Sethi to come in personally with his passport, ticket and PAN. The fact that he finds a branch visit inconvenient is irrelevant.
3. What is the position on the Nepal leg and on the leftover foreign currency she intends to keep at home?
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Nepal needs no foreign exchange. Indian rupee notes are legal tender there, and a resident travelling to Nepal or Bhutan may carry Indian currency up to the prescribed limit (currently Rs 25,000). So no LRS purchase arises for that leg.
On the leftover cash: a resident individual may hold foreign currency notes only up to USD 2,000 in aggregate, and unspent travel exchange beyond that must be surrendered to an authorised dealer within 180 days of return. Her USD 1,400 plus the USD 900 already at home totals USD 2,300, so she may retain USD 2,000 and must surrender the excess USD 300; alternatively she can spend it, load it on a card or use it on the next trip within the limits. Holding USD 2,300 indefinitely is a contravention. She should also expect the notes buying rate on surrender, which is lower than the rate she paid, so the round trip always costs her a spread.