Breaking Barriers:
RBI's landmark circular grants residents the power to pay IFSC Foreign University Fees under LRS
Breaking Barriers:
RBI's landmark circular grants residents the power to pay IFSC Foreign University Fees under LRS
Contents 1. Introduction: 5 2. What is Liberalised Remittance Scheme (LRS) 5 3. Permissible remittances to IFSCs – prior to RBI Circular, dated 22.06.2023 5 4. What has changed with the RBI’s circular Dated 22.06.2023? 6 5. Conclusion 6
Introduction:
Are you seeking global education? RBI's new circular opens doors to IFSC Foreign Universities with a Bang. On June 22, 2023, the RBI issued a circular on "Remittances to International Financial Services Centres (IFSCs) in India under the Liberalised Remittance Scheme (LRS)" permitting the resident individuals to remit funds to IFSCs for the purpose 'study abroad' under Liberalized Remittance Scheme (LRS). The funds can be remitted for payment of fees to foreign universities or foreign institutions located in IFSC.
The RBI’s Circular comes up in line with the a Notification (S.O. 2374(E), dated 23.05.2022) issued by Ministry of Finance recognizing 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 Liberalised Remittance Scheme (LRS)
Liberalised Remittance Scheme (LRS)1 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 FEMA regulations, resident individuals may 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 to pay expenses related to travelling (private or for business), medical treatment, studying, gifts and donations, maintenance of close relatives and so on.
The Rules and Regulations governing the Liberalised Remittance Scheme is A.P. (DIR Series) Circular No. 64 dated February 4, 2004, read with Master Direction - Liberalised Remittance Scheme (LRS).
Permissible remittances to IFSCs – prior to RBI Circular, dated 22.06.2023
Earlier, remittances to IFSCs under LRS could be made only for making investments in securities. The Ministry of Finance vide. 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 foreign institutions in the International Financial Services Centre, as a financial service.
1 LRS scheme was announced by the RBI in February 2004 vide. A.P. (DIR Series) Circular No. 64 dated February 4, 2004, read with GoI Notification G.S.R. No. 207(E) dated March 23, 2004.
Breaking Barriers: RBI's landmark circular grants residents the power to pay IFSC Foreign University Fees under LRS 5.What has changed with the RBI’s circular Dated 22.06.2023?
As per the Circular dated 22.06.2023, the RBI has allowed the authorised persons to facilitate remittances by resident individuals for payment of fees to foreign universities or foreign institutions in IFSCs for pursuing specified courses. This remittance will be treated as remittance under the purpose 'studies abroad' as mentioned in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
In order to align the study abroad provisions as specified under LRS for IFSCs, the RBI has now issued a circular specifying that the Authorised Persons are now allowed 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 the payment of fees to foreign universities or institutions located in International Financial Services Centres (IFSCs) for pursuing courses mentioned in the gazette notification.
Illustration:
Mr. A, a resident Indian, wants to remit USD 1,50,000 to a Foreign University established in the Gift City (IFSC) for the purpose of Engineering Studies. Advise him if he can make a remittance under the LRS?
Liberalised Remittance Scheme (LRS) allows resident individuals to remit up to USD 2,50,000 per financial year (April to March) for any permitted capital account transaction, current account transaction, or a combination of both.
In light with the provision of the Circular Dated 22.06.2023, Mr. A is permitted to make 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) has set the stage for a groundbreaking transformation in the field of education. By allowing authorized individuals to facilitate remittances for payment of fees to foreign universities and institutions in International Financial Services Centres (IFSCs), the RBI has unleashed a wave of opportunities for students aspiring to pursue specified courses.
By bridging the gap between financial services and educational aspirations, the RBI has demonstrated its 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.
Breaking Barriers: RBI's landmark circular grants residents the power to pay IFSC Foreign University Fees under LRS 6.
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