Remittances to International Financial Services Centres (IFSCs) under the Liberalised Remittance Scheme (LRS)
The Authorised Dealer(AD) Banks prior to July 10, 2024 allowed resident individuals to remit funds to IFSCs under Liberalised Remittance Scheme(LRS) for the following purposes only:
1. Making investments in IFSCs in securities except those issued by entities/ Companies resident in India (outside IFSC); and
2. Payment of fees for education to foreign universities or foreign institutions in IFSCs for pursuing courses mentioned in the gazette notification no. SO 2374(E) dated May 23, 2022, issued by the Central Government.
On July 10, 2024, the Reserve Bank of India vide A.P. (DIR Series) Circular No. 15 allowed the AD Banks to facilitate remittances for all permissible purposes under LRS to IFSCs for:
1. Availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019 within IFSCs; and
2. All current or capital account transactions, in any other foreign jurisdiction (other than IFSCs) through an FCA held in IFSCs.
For these permissible purposes, resident individuals can open FCA in IFSC.
Impact of liberalisation pursuant to RBI circular dated July 10, 2024:
1. Resident individuals shall be allowed availing financial services or financial products through remittance from FCA. This shall not only provide boost to the financial services offered in IFSC including banking and insurance but also provide individuals safeguard against inflation or depreciation against US dollar.
2. RBI vide the mentioned circular have now allowed authorised persons facilitate remittances for wider range of purposes beyond investment in IFSC and payment of education fees to foreign universities.
Resident Individuals shall now be permitted to remit funds for capital account transactions including Overseas Direct Investment, Overseas Portfolio Investment, loans to Non Resident Indian relatives and acquisition of immovable property as well as current account transactions including expenses towards private visits, gift/ donations, remittance for maintenance of relative abroad, medical treatment, education expenses through FCA held in IFSC as long as it is under the limits precribed under LRS.
The Reserve Bank of India is yet to provide updated master directions on Liberalised Remittance Scheme reflecting the above changes.
A.P. (DIR Series) Circular No. 15- https://taxguru.in/rbi/rbi-circular-updated-guidelines-remittances-ifscs-lrs-2024.html
The article is written by Ms. Riddhi Gada – Manager – and Ms. Vrushali Bhave Athavale – Senior Manager!
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