Rise in donations abroad raises fresh questions
RBI says total donations did not cross $1.6 mn in '07-08. What has gone unnoticed is 10-fold jump in amount remitted as gifts. Richest Indians I Old Horses of India Inc
By Sugata Ghosh & Gayatri Nayak, ET Bureau |
MUMBAI: The recent reports on donations to the Clinton Foundation throw up interesting interpretations, compared to RBI���s published figures and remittance rules.
Total donations by resident individuals did not cross $1.6 million in 2007-08, according to the latest data released by the central bank. Therefore, an additional amount may have either gone through unofficial channels or out of funds parked earlier.
The liberalised remittance scheme allows a resident individual to remit a maximum $200,000 a year. Under the circumstances, an Indian donating between $1 million and $5 million could not have done so without breaking the rules or taking permission from the central bank.
While the rules permit a five-member family to donate a combined $1 million, the amount cannot be clubbed under a single name. Each donor���s name has to be spelt out separately. Besides, each of these donors must have a permanent account number (PAN), identifiable source of income and should have filed tax returns.
The remittance window can be used by residents to open deposits with overseas banks, buy properties, invest in stock and bonds traded abroad, donate and gift. It can also be used to support expenses on education and travel. Last year, the cap on payment through this route was raised to $200,000 from $25,000.
According to RBI data, investments in securities through this window saw a huge jump to $144.7 million in 2007-08 from $20.7 million in the previous year. Property purchases also went up to $39.5 million from $8.5 million, trends which have been widely reported.
What, however, has gone unnoticed is the 10-fold rise in the amount remitted as gifts. It has zoomed from $7.4 million in 2006-07 to $70.3 million in 2007-08 to $66 million in the first six months of 2008-09.
Gifts, as distinct from donations, are given to relatives and friends. According to banking circles, one reason why gifts have surged is the rapid remittance of proceeds from property sales in the local market. Many families have sold their properties and gifted the proceeds to members of the next generation who have settled abroad. This may, however, not fully explain the entire remittance under gifts.
Moreover, money remitted as donations cannot be classified as gifts. It���s technically possible that an individual, who had been placing deposits with offshore banks since 2004-05 when the scheme was introduced, subsequently donates the money (say $5 million) to a charity. In the books of the charity organisation, it���s a donation. But in RBI���s records, it is deposits, or investments.
It���s also possible to gift the money to a friend, who later donates it. While there are no tax or monetary benefits in routing the money through a friend, it can be a way to mask the fund���s origin and the real purpose for which it was remitted, till controlled leaks hit the headlines.
Total donations by resident individuals did not cross $1.6 million in 2007-08, according to the latest data released by the central bank. Therefore, an additional amount may have either gone through unofficial channels or out of funds parked earlier.
The liberalised remittance scheme allows a resident individual to remit a maximum $200,000 a year. Under the circumstances, an Indian donating between $1 million and $5 million could not have done so without breaking the rules or taking permission from the central bank.
While the rules permit a five-member family to donate a combined $1 million, the amount cannot be clubbed under a single name. Each donor���s name has to be spelt out separately. Besides, each of these donors must have a permanent account number (PAN), identifiable source of income and should have filed tax returns.
The remittance window can be used by residents to open deposits with overseas banks, buy properties, invest in stock and bonds traded abroad, donate and gift. It can also be used to support expenses on education and travel. Last year, the cap on payment through this route was raised to $200,000 from $25,000.
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According to RBI data, investments in securities through this window saw a huge jump to $144.7 million in 2007-08 from $20.7 million in the previous year. Property purchases also went up to $39.5 million from $8.5 million, trends which have been widely reported.
What, however, has gone unnoticed is the 10-fold rise in the amount remitted as gifts. It has zoomed from $7.4 million in 2006-07 to $70.3 million in 2007-08 to $66 million in the first six months of 2008-09.
Gifts, as distinct from donations, are given to relatives and friends. According to banking circles, one reason why gifts have surged is the rapid remittance of proceeds from property sales in the local market. Many families have sold their properties and gifted the proceeds to members of the next generation who have settled abroad. This may, however, not fully explain the entire remittance under gifts.
Moreover, money remitted as donations cannot be classified as gifts. It���s technically possible that an individual, who had been placing deposits with offshore banks since 2004-05 when the scheme was introduced, subsequently donates the money (say $5 million) to a charity. In the books of the charity organisation, it���s a donation. But in RBI���s records, it is deposits, or investments.
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It���s also possible to gift the money to a friend, who later donates it. While there are no tax or monetary benefits in routing the money through a friend, it can be a way to mask the fund���s origin and the real purpose for which it was remitted, till controlled leaks hit the headlines.
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