Remittances to IFSCs under LRS
- February 2021: RBI permitted remittances under the LRS to IFSCs for making investments in IFSCs in securities except those issued by entities or companies resident in India (outside IFSC).[3] It was decided that a Foreign Currency Account (“FCA”) in the IFSCs could be created by resident individuals for this purpose, subject to compliance with the prescribed conditions.
- June 2023: Following a Ministry of Finance notification classifying certain courses offered by foreign universities or institutions in the IFSC as financial services, the RBI allowed remittances to be made by resident individuals, to IFSCs under LRS, for paying fees related to these courses.[4] The notified courses include those offered in financial management, fintech, science, technology, engineering, and mathematics.
Prior to the issuance of the July 2024 Circular, remittances under the LRS to IFSCs through the FCA were thus restricted to investments in securities (except those issued by entities or companies resident in India (outside IFSC)); and payment of fees to foreign universities or foreign institutions in IFSCs for specified courses.
Changes Introduced by RBI
The Circular introduces the following additional purposes for remittances under the LRS:
- Obtaining financial services or financial products as per the International Financial Services Centres Authority Act, 2019 (“Act”) within IFSCs; and
- Conducting current or capital account transactions in any foreign jurisdiction (except IFSCs) using an FCA held in IFSC
Implications
This circular represents a significant shift, enhancing flexibility for resident Indians to engage with global financial markets. It broadens the range of permissible remittance purposes, making a variety of high-tech financial services and products available within IFSCs. This aligns GIFT IFSC with global financial centres, offering expanded opportunities for overseas investments and expenditures. Expected benefits include increased foreign investment, job growth in the financial sector, and greater financial innovation. Resident Indians can now open FCAs at Gift City under the LRS even for sending gifts to friends abroad, buying property abroad, buying insurance, making fixed deposits, and so on.