The Reserve Bank of India (RBI) has permitted resident individuals to open Foreign Currency Accounts at International Financial Services Centres (IFSCs) in GIFT City, Gujarat, under the Liberalised Remittance Scheme (LRS).
Details:
- Authorised Persons: These are entities authorised by the RBI, such as banks and designated FX dealers, to facilitate remittances for financial services or products within IFSCs as per the International Financial Services Centres Authority Act, 2019. Transactions are routed through the banking system.
- New Facility: Resident Indians can now open fixed deposits in dollars within bank accounts at GIFT IFSC.
What is the Liberalised Remittance Scheme? The Liberalised Remittance Scheme (LRS) is an RBI initiative that allows Indian residents, including minors, to remit up to USD 250,000 per financial year (April to March) abroad. For minors, the LRS declaration form must be countersigned by the minor’s natural guardian. There are no restrictions on the frequency of remittances, provided the cumulative amount does not exceed USD 250,000 in a financial year. Remittances can be made in any freely convertible foreign currency.
Eligibility:
- Residents of India: Defined under the Foreign Exchange Management Act (FEMA), residents must have an Indian bank account, a valid Permanent Account Number (PAN), and a passport.
- Exclusions: Non-resident Indians (NRIs) cannot use LRS to remit funds from India. They are allowed to transfer funds from NRO, NRE, and FCNR accounts abroad.
- Entities: LRS is not available to corporations, partnership firms, Hindu Undivided Families (HUF), trusts, etc.
Permissible Transactions:
- Current Account Transactions:
- Private visits to any country except Nepal and Bhutan
- Gifts or donations
- Employment abroad
- Emigration and studies abroad
- Maintenance of close relatives abroad
- Business travel, attending conferences or specialized training, meeting medical expenses abroad
- Expenses related to medical treatment abroad
- Other current account transactions not defined under FEMA 1999
- Capital Account Transactions:
- Opening foreign currency accounts abroad with banks outside India
- Purchasing foreign property
- Investments in overseas shares, securities, and mutual funds
- Setting up wholly owned subsidiaries or joint ventures abroad (subject to terms and conditions)
- Extending INR loans to NRIs who are relatives as per the Companies Act
Prohibited Transactions:
- Under Schedule-I and Schedule II: Remittances for purposes like purchasing lottery tickets, sweepstakes, proscribed magazines, or any restricted items under the Foreign Exchange Management (Current Account Transactions) Rules, 2000.
- Specific Restrictions:
- Buying Foreign Currency Convertible Bonds issued by Indian companies in the overseas secondary market
- Trading in foreign exchange abroad
- Remittances to individuals or entities identified by the RBI as posing a significant risk of terrorism
- Capital account remittances to countries identified by the Financial Action Task Force (FATF) as “non-cooperative countries and territories”