India’s attempt to tighten outward investment rules to discourage Indian residents from unnecessarily taking money out of the country has hurt fund flows into the International Financial Services Centre (IFSC), Gift City, two people aware of the matter said.
Until recently, it was difficult for Indian residents to invest in Gift City, or Gujarat International Finance Tec-City, a greenfield smart city being developed in Gujarat’s Gandhinagar as a potential hub for international financial services to compete with global financial hubs like Singapore, Dubai and London.
To encourage wealthy Indians to use Gift City instead of overseas jurisdictions for their investments, the Reserve Bank of India (RBI) allowed Indian entities to invest in Gift City through the Liberalized Remittance Scheme (LRS) this April. The scheme permits Indians to remit up to $250,000 each year to foreign countries for current or capital account transactions, or both.
However, before RBI’s guidelines came, the Union Budget for FY24 had put in some restrictions on the LRS scheme.
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