Union Budget in 2022 focused on capacity building and dispute resolution in the International Financial Services Centre (IFSC) jurisdiction, which resulted into a bespoke framework for establishing the presence of foreign universities in IFSC, GIFT City (free from domestic Indian regulations) and an announcement of a world class arbitration centre. While such initiatives have rekindled the interest in the IFSC jurisdiction, there are certain key expectations from the upcoming Union Budget in Year 2023 that could be pivotal to expedite the process to elevate IFSC, GIFT City into the leagues of other globally established centres.
Parity under RBI’s liberalised remittance scheme (“LRS”): Currently, RBI’s LRS scheme permits resident individual Indians to remit up to $2,50,000 in a financial year for various defined current and capital account transactions, such as offshore investments. While IFSC is considered offshore from an exchange control perspective, resident individuals are permitted only limited capital account transactions where: (a) investment is made only in securities issued in IFSC; (b) if the funds are not invested, they are ineligible to draw any interest; and © in case such funds remain idle beyond 15 days, they are required to be repatriated back to India (which incidentally will also result into depletion of the $2,50,000 annual limit).
Interestingly, no such restrictions are placed on resident Indians for carrying out capital account or current account transactions in any other foreign jurisdiction. Incidentally, current account transactions are not permitted at all, which will pose a separate hurdle when the foreign universities set up in IFSC and are unable to charge tuition fees to resident Indian
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