A Canadian Tuition Remittance That Breaks the Annual Ceiling
Mr. Farhan Qureshi wants to remit CAD 61,500 to Canada for his son Ayaan's four-year undergraduate programme. The university offer letter spells the name "Ayaan Farhan Qureshi" while the passport shows "Ayaan Qureshi". Mr. Qureshi's PAN is not linked to Aadhaar and his bank has flagged it as inoperative. He wants CAD 20,000 sent to the university against its invoice and CAD 41,500 to a Canadian bank account in his son's name, although the study permit is still pending. He has already remitted USD 215,000 this financial year: USD 150,000 from this bank for the son's tuition and USD 65,000 from another bank for his own purposes. CAD 61,500 is roughly USD 45,000. He asks the bank to record the purpose as "maintenance of close relatives" and to split the payment into three transfers of CAD 13,000 so that "no one asks for papers again".
1. Compute the LRS position and set out the lawful options for funding the CAD 61,500.
Read the worked answer
Headroom = USD 250,000 minus USD 215,000 already used = USD 35,000. At roughly 0.73 USD per CAD, CAD 61,500 is about USD 45,000, so he is about USD 10,000 over the ceiling and the full amount cannot be processed.
Options:
- remit USD 35,000 now under his own LRS and fund the balance through his wife's LRS, using her own PAN, her own bank account and her own funds (he may gift her rupees; resident-to-resident gifts are not restricted by FEMA), with her declaration;
- use the university's instalment plan and remit the balance after 1 April, when the annual limit resets;
- apply to RBI for approval to exceed LRS, which is not a realistic route for tuition.
The bank must obtain his declaration of remittances made through other dealers before processing, and must not accept a figure above the ceiling.
2. Which documentation and KYC defects must be resolved before the remittance proceeds?
Read the worked answer
Four defects stand in the way:
- Name mismatch. The passport is the KYC document. The bank should not proceed on an offer letter with a different name without a linking declaration or affidavit, and ideally a corrected letter from the university.
- Inoperative PAN. PAN is mandatory for LRS remittances. Until the PAN-Aadhaar linkage is completed, the PAN is inoperative and the transfer cannot be processed.
- Beneficiary structure. Payment to the university against its invoice is straightforward. Payment of living expenses to the son's account abroad is permissible for education, but needs the admission document, his passport and the bank's own diligence, and a pending study permit is a legitimate query.
- Forms. An A2 form and the customer declaration are required, with the purpose code correctly stating education.
The bank should also retain the invoice, offer letter and passport copies for its record.
3. Can the bank accept the "maintenance of close relatives" purpose and the three-way split?
Read the worked answer
Neither is acceptable. Splitting into three transfers of CAD 13,000 does not reduce documentation: each transfer needs the same KYC, purpose and declaration, and three quick transfers to the same destination are aggregated for LRS and TCS purposes and can be read as structuring.
Recording "maintenance of close relatives" when the money pays tuition is a false purpose declaration. It is a FEMA contravention and a tax risk, and the bank must not certify a purpose code it knows to be wrong. Purpose codes drive the bank's regulatory reporting and its own returns, and a mismatch between code and beneficiary is exactly what a subsequent scrutiny picks up. The branch should insist on the education purpose code, correct the head-wise split (fee to the university against invoice, living expenses to the student's account), and document the reasons.