Sending money abroad now easy: Open foreign currency accounts in GIFT City | Personal Finance

Example:  Priya is saving for her daughter’s dream vacation to Europe.  With the new rules, Priya can open an FCA in GIFT City and deposit US Dollars directly into the account. This eliminates the need to constantly convert rupees to dollars, potentially saving her on exchange rate fluctuations.

Previously, LRS remittances to IFSCs were limited. Now, you can use your FCA for a broader range of permissible overseas transactions (excluding other IFSCs).  Imagine using your FCA to:

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  Gifts: Previously, there were limitations on sending money as gifts abroad. Now, with an FCA, you can easily send gifts to friends or family residing overseas.
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  Travel: Managing foreign currency for travel can be cumbersome. With an FCA, you can hold foreign currency like US Dollars or Euros, making it easier to pay for your next adventure abroad.
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  Overseas Property: If you’ve ever dreamt of buying property abroad, an FCA allows you to hold and manage the funds conveniently.
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  Foreign Insurance: You might be able to purchase insurance products denominated in foreign currency within the IFSC, potentially hedging against currency fluctuations. This could be useful for assets or liabilities abroad.
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  Fixed Deposits: Consider parking your foreign currency savings in a fixed deposit (FD) within the IFSC. This could potentially offer attractive interest rates on your foreign currency holdings.
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  Education: If your child is pursuing education abroad, you can use your FCA to directly pay their loan installments in foreign currency, simplifying the process.
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  Foreign wealth management: Some IFSCs may offer investment products focused on foreign markets. You could use your FCA to invest in these products, potentially diversifying your portfolio beyond Indian assets.

What were the limitations before?

LRS remittances to IFSCs were restricted to specific investments in securities (excluding Indian companies) and education fees at select foreign universities. Residents couldn’t hold FCAs or use them for a wider range of overseas transactions.

These transactions are still subject to the overall LRS limit set by the RBI, which is currently $250,000 per year per person.

What are the benefits?

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  Greater Flexibility: This move offers Indian residents more freedom and flexibility for managing their foreign currency holdings and making international transactions.
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  Potential Investment Opportunities: The ability to use FCAs for financial services within IFSCs opens doors for exploring new investment avenues.
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  Alignment with Global Standards: This brings IFSCs like GIFT City closer to other international financial hubs in terms of the services offered to resident investors.

First Published: Jul 11 2024 | 10:37 AM IST