Let Panama papers noise not drown out legal overseas transactions: ASSOCHAM

In the backdrop of screaming headlines on the 'Panama Papers' and some prominent Indian entities and individuals figuring among them, as much as USD 1.32 billion (about Rs. 9,000 crore) was remitted out of India in a perfectly legal way under the RBI's Liberalised Remittance Scheme (LRS), apex industry body ASSOCHAM stated today.

Of USD 1.32 billion remitted by individual residents in the fiscal 2014-15, the maximum remittance took place under the gift head (USD403 million), followed by 'Studies abroad' (USD 277.1 million) and 'Maintenance of close relatives' (USD 174 million). Investment in equity/debt amounted to USD 195.5 million, according to the RBI data accessed by the ASSOCHAM Economic Research Bureau.

"Instead of seeing all the remittances abroad with a needle of suspicion in the context of the so-called Panama Papers, we must realize a fair amount of liberal foreign exchange regime is in operation and which is how it should be," ASSOCHAM Secretary General D S Rawat said.

He said, "Let us not pre-judge the outcome of the investigations being done by a multi-agency government team. It would certainly find out what is permissible and what is not."

As per the Master Circular of the RBI, investment under the LRS is permitted in several activities including acquisition of shares or debt instruments, immovable property outside India, up to USD 2,50,000 per year, without prior approval of the central bank. Moreover, remittances under the scheme can be consolidated in respect of family members subject to individual family members complying with its terms and conditions.

Besides, resident individuals can set up Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) outside India for bonafide business activities within the overall limit of USD 2,50,000.

Under the RBI scheme authorized dealers may freely allow remittances by resident individuals up to USD 2,50,000 per financial year (April-March) for any permitted current or capital account transactions or a combination of both.

Since some reports suggested how money was remitted abroad for acquisition of expensive paintings etc, it must be noted that the LRS eminently allows such a proposition. According to the RBI Master Circular, "Remittances under the Scheme can be used for purchasing objects of art."

A resident individual can invest in units of mutual funds, venture capital funds, unrated debt securities, promissory notes etc. under this scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme.