The Reserve Bank of India (RBI) has tightened the rules for remitting money abroad under the Liberalised Remittance Scheme (LRS) and has made PAN mandatory for anyone using this scheme. Earlier PAN was not insisted upon for putting current account transactions of up to $25,000.
It may be noted that the scheme is mostly availed by Indians who send money abroad for the purpose of their children’s education or for purposes of investment in foreign stock market and properties. The LRS scheme was made available to Indians in 2004 and is mostly used by parents who have sent their children abroad for studies, primarily to pay fees and send allowance for expenses. Besides, the LRS scheme also grants Indians the provision to buy stocks of foreign companies on particular stock exchanges and also for buying property abroad. It may be noted that under the scheme, people can send money or invest almost everywhere in the world.
The fresh guideline was imposed by the RBI on Wednesday after it discovered that several Indians – businessmen, Bollywood celebrities and diamond traders – remitted funds abroad to bet on stocks and properties, thus breaching the specified limit under the scheme. It may be noted that the annual LRS limited for each individual was raised in 2015 from $1,25,00 to $2,50,000.
Along with the announcement of a 25 basis point hike in repo rate, the RBI also suggested that a mechanism for daily reporting of individual transactions by authorised dealer (AD) banks has been incorporated.
It went on to suggested that this would enable AD banks to keep a tab on the remittances that have already been sent by an individual during the course of a financial year.
As per the RBI statement: Pursuant to the announcement made in the first bi-monthly Monetary Policy Statement 2018-19 on April 5, 2018, a system for daily reporting of individual transactions under the Liberalised Remittance Scheme (LRS) by Authorised Dealer (AD) banks has been put in place. This system enables the AD banks to view the remittances already sent by an individual during the financial year, thus improving monitoring and ensuring compliance with the LRS limits. Since the said reporting system uses the Permanent Account Number (PAN) of the remitter as a Unique Identifier to aggregate the remitter-wise data, it has been decided that furnishing of PAN, which hitherto was not to be insisted upon while putting through permissible current account transactions of upto USD 25,000, shall now be mandatory for making all remittances under LRS. Further, in the context of remittances allowed under LRS for maintenance of close relatives, it has been decided to align the definition of ‘relative’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.