19-Jun-2018

RBI changes rules, makes PAN must for sending money abroad from India

MUMBAI June 7: The Reserve Bank of India (RBI) yesterday tightened the norms for sending money abroad under the Liberalised Remittance Scheme (LRS), making PAN mandatory for anyone using this scheme.
 
Under the LRS, resident Indians used to send money abroad for their children's studies besides investing in foreign stocks and property. 
 
The Remittance Scheme was opened up to Indian residents in 2004, wherein, parents mainly used this way to send money for payment of fees and living expenses of their kids studying abroad. Earlier, PAN was not insisted upon on current account transactions of up to $25,000. 
 
Infact, LRS allows Indians to buy stocks of foreign companies on foreign stock exchanges or to buy properties abroad. However, people used LRS scheme to invest or send money anywhere in the world. 
 
But now the central bank has made PAN mandatory for every transaction under the LRS after it noticed that many Indian citizens and trders were remitted funds abroad to bet on stocks and properties, breaching the specified limits under the scheme.
 
The RBI's developmental and regulatory policy statement today briefed about 'harmonisation of data and definitions for the Liberalised Remittance Scheme. 
 
The statement said, "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," it said.
 
"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," the statement added.