remittance to IFSC under LRS

RBI has vide its circular dated 16th February, 2021 allowed resident individuals to invest in securities issued in the International Financial Services Centre (IFSC) through the Liberalised Remittance Scheme route. There are some conditions to be fulfilled, which are :

  1. The remittance shall be made only for making investments in IFSCs in securities, other than those issued by entities/companies resident (outside IFSC) in India.
  2. Resident Individuals may also open a non interest bearing Foreign Currency Account (FCA) in IFSCs, for making the above permissible investments under LRS. Any funds lying idle in the account for a period upto 15 days from the date of its receipt into the account shall be immediately repatriated to domestic INR account of the investor in India.
  3. Resident Individuals shall not settle any domestic transactions with other residents through these FCAs held in IFSC.

Further there are some compliances to be done by the authorised dealers in such transactions which are :

AD Category – I banks, while allowing such remittances, shall ensure compliance with all other terms and conditions, including reporting requirements prescribed under the Scheme. It may be noted that any person resident in India (outside IFSC) entering into any transaction with a person/entity in IFSC shall only be governed by regulations/directions and rules issued/notified by the Reserve Bank of India and the Government of India respectively under Foreign Exchange Management Act (FEMA), 1999. Further, compounding of any contravention of FEMA provision by such person resident in India shall be dealt by the Reserve Bank of India in accordance with the extant instructions/provisions on compounding of contraventions under FEMA.

Copy of the circular can be found here

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