Current Affairs · Banking and Finance Regulations
Under the Foreign Exchange Management Act (FEMA) and the Liberalised Remittance Scheme (LRS) guidelines, examine the regulatory constraints if a resident individual wishes to remit funds abroad as a gift to his sister residing in Canada and simultaneously wants to use his international credit card for an online gambling platform based overseas.
- 1Remittances for gifts are only allowed to parents and children; therefore, a gift to a sibling is completely disallowed under the current Master Directions.
- 2The individual can freely use his international credit card for gambling since credit card transactions are processed outside the scope of LRS restrictions.
- 3The gift to the sister is a permissible transaction under LRS, but any remittance or credit card usage for gambling, lottery, or items prohibited under Schedule I of FEMA Current Account Rules is strictly prohibited.✓
- 4Both transactions are fully permitted under the LRS framework as long as the cumulative total does not exceed 250,000 USD per financial year.
Correct answer
The gift to the sister is a permissible transaction under LRS, but any remittance or credit card usage for gambling, lottery, or items prohibited under Schedule I of FEMA Current Account Rules is strictly prohibited.
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