The GIFT that keeps giving: How LRS expansion opens global doors for Indians

Last week, the Reserve Bank of India (RBI) expanded the scope of the Liberalised Remittance Scheme (LRS). The policy, which allows Indians to transfer up to $250,000 outside of India, now permits Indian residents to open foreign currency accounts in International Financial Services Centres (IFSCs) such as the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar, Gujarat. 

Previously, remittances under LRS to IFSCs were restricted to investments in securities (excluding those issued by Indian entities outside IFSCs) and payment of fees for education to foreign institutions within these centres. Indian residents seeking to invest abroad had to navigate the cumbersome process of opening foreign bank accounts before accessing global equity markets. Similarly, parents financing their children’s education abroad were compelled to open foreign accounts.

The new rule permits Indian residents to hold foreign currencies like US dollars or UK pounds in accounts at IFSCs. This expansion significantly increases the flexibility of the LRS, allowing for a broader range of international transactions. Resident Indians can now use foreign currency accounts for sending gifts abroad, purchasing property, buying insurance, making fixed deposits, paying education loans, and funding overseas travel.