The Reserve Bank of India (RBI) has recently issued a circular that
paves the way for global education opportunities. On June 22, 2023, the RBI
released a circular titled "Remittances to International Financial
Services Centres (IFSCs) in India under the Liberalised Remittance Scheme
(LRS)." This circular permits resident individuals to remit funds to IFSCs
for the purpose of studying abroad, under the Liberalised Remittance Scheme
(LRS). These funds can be used for paying fees to foreign universities or institutions
located within IFSCs.
This circular from the RBI aligns with a notification (S.O. 2374(E),
dated 23.05.2022) issued by the Ministry of Finance. The notification
recognizes that foreign universities or institutions offering courses in
Financial Management, FinTech, Science, Technology, Engineering, and
Mathematics within International Financial Services Centres (IFSCs) are
considered financial services.
What
is the Liberalised Remittance Scheme (LRS)?
The Liberalised Remittance Scheme (LRS) is a scheme that allows resident
individuals to remit a certain amount of money during a financial year to
another country for investment and expenditure. As per the regulations under
the Foreign Exchange Management Act (FEMA), resident individuals can remit up to
USD 250,000 per financial year for any permissible current or capital account
transaction, or a combination of both. This money can be used for various
purposes, such as travel expenses (private or business), medical treatment,
studying abroad, gifts and donations, maintenance of close relatives, and more.
The rules and regulations governing the Liberalised Remittance Scheme
can be found in A.P. (DIR Series) Circular No. 64 dated February 4, 2004, read
with the Master Direction - Liberalised Remittance Scheme (LRS).
Permissible
Remittances to IFSCs - Prior to RBI Circular dated 22.06.2023
Before the RBI circular issued on June 22, 2023, remittances to IFSCs
under the Liberalised Remittance Scheme (LRS) were limited to making
investments in securities. However, the Ministry of Finance, through
Notification no. S.O. 2374(E), dated 23.05.2022, notified that courses offered
in Financial Management, FinTech, Science, Technology, Engineering, and
Mathematics by foreign universities or institutions in the International
Financial Services Centre are considered financial services.
What
has changed with the RBI's circular dated 22.06.2023?
The circular dated June 22, 2023, from the RBI allows authorized
individuals to facilitate remittances by resident individuals for the payment
of fees to foreign universities or institutions in IFSCs for pursuing specified
courses. This remittance falls under the purpose of "studies abroad"
as mentioned in Schedule III of the Foreign Exchange Management (Current
Account Transactions) Rules, 2000.
To align the study abroad provisions under the Liberalised Remittance
Scheme (LRS) for IFSCs, the RBI has issued a circular specifying that
authorized individuals are now permitted to assist resident individuals in
making remittances for the purpose of "studies abroad" as outlined in
Schedule III of the Foreign Exchange Management (Current Account Transactions)
Rules, 2000.
This enables residents to make fee payments to foreign universities or
institutions located in International Financial Services Centres (IFSCs) for
pursuing courses mentioned in the gazette notification.
Illustration:
Let's consider an example to understand how the new circular applies.
Mr. A, a resident Indian, wishes to remit USD 150,000 to a foreign university
established in the Gift City (IFSC) for the purpose of Engineering Studies. Can
he make a remittance under the Liberalised Remittance Scheme (LRS)?
The Liberalised Remittance Scheme (LRS) allows resident individuals to
remit up to USD 250,000 per financial year (April to March) for any permitted
capital account transaction, current account transaction, or a combination of
both.
Based on the provisions of the circular dated June 22, 2023, Mr. A is
permitted to make a remittance to the foreign university established in the
IFSC for the purpose of studying.
Conclusion
The recent circular issued by the Reserve Bank of India (RBI) marks a
groundbreaking transformation in the field of education. By allowing authorized
individuals to facilitate remittances for the payment of fees to foreign
universities and institutions in International Financial Services Centres
(IFSCs), the RBI has opened up a wave of opportunities for students aspiring to
pursue specified courses.
This move bridges the gap between financial services and educational aspirations, demonstrating the RBI's commitment to fostering a global learning ecosystem. Students can now explore diverse fields such as Financial Management, FinTech, Science, Technology, Engineering, and Mathematics provided by foreign institutions in IFSCs and realize their academic dreams on an international stage.
