Weekly Current Affairs (15th to 21st May 2023) Part - 2 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Gaps in AePS Exploited by Cybercriminals

Context: The Aadhaar-enabled Payment System (AePS) in India has recently faced exploitation by cybercriminals, leading to unauthorized access to users' bank accounts.

• Scammers have been using leaked biometric details to bypass the need for One Time Passwords (OTPs) and drain funds from unsuspecting victims.
• A series of recent scams have exposed the vulnerabilities of the AePS and how cybercriminals are exploiting the loopholes in the system to defraud unsuspecting customers.

What is AePS?

About:

• Th AePS is a bank-led model that allows online interoperable financial transactions at Point of Sale (PoS) or micro-ATMs through the Business Correspondent (BC) of any bank using the Aadhaar authentication.
• It was taken up by the National Payments Corporation of India (NPCI) - a joint initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).
• The AePS is meant to provide easy and secure access to banking services for the poor and marginalized sections of society, especially in rural and remote areas.
• It eliminates the need for OTPs, bank account details, and other financial information.
• Transactions can be carried out with only the bank name, Aadhaar number, and captured fingerprint during Aadhaar enrollment.

Benefits:

• Deepening Social Security: The AePS helps in deepening social security by facilitating cash transfers from various government schemes such as PM-KISAN, MGNREGA, etc., directly into the beneficiaries’ bank accounts.
• Enabling Interoperability: The AePS enables interoperability among different banks and financial institutions, allowing customers to access their bank accounts through any BC or micro-ATM of any bank.

Drawbacks:

• Neither Unique Identification Authority of India (UIDAI) nor NPCI mentions clearly whether AePS is enabled by default.

How is AePS Exploited?

• Leaked Biometric Details: Cybercriminals obtain leaked biometric information, which includes fingerprints captured during Aadhaar enrollment. They use this stolen data to operate biometric POS devices and ATMs without the need for two-factor authentication or OTPs. By bypassing these security measures, they can transfer money from users' bank accounts.
• Silicone Thumbs: Scammers have been known to use silicone thumbs to deceive biometric devices. They place the artificial thumb on the fingerprint sensor, tricking the system into authenticating their fraudulent transactions. This method allows them to perform unauthorized financial activities on behalf of the account holder.
• Lack of Transaction Notifications: In some cases, victims of AePS scams do not receive any notification from their banks regarding unauthorized transactions. They remain unaware of the fraudulent activity until they notice discrepancies in their bank account balance. This lack of immediate alerts enables scammers to continue draining funds undetected.
• Exploiting Weak Security Measures: Gaps in the AePS system's security protocols, such as inadequate identity verification or authentication processes, provide opportunities for cybercriminals to carry out their fraudulent activities. They take advantage of these weaknesses to exploit the system and access users' bank accounts.
• Systemic Issues: The AePS also faces issues such as biometric mismatches, poor connectivity, weaker systems of certain banking partners, etc., that affect its performance and reliability. Sometimes, the transactions fail due to these reasons but the money gets debited from the customers’ accounts without their knowledge.

How to Prevent AePS Frauds?

Amendments to Aadhar Regulations 2016:

• UIDAI proposes an amendment to the Aadhaar (Sharing of Information) Regulations, 2016.
• The amendment requires entities in possession of an Aadhaar number to not share details unless Aadhaar numbers have been redacted or blacked out.

Aadhaar Lock:

• Users are advised to lock their Aadhaar information using the UIDAI website or mobile app.
• Locking Aadhaar prevents the unauthorized use of biometric information for financial transactions.
• Aadhaar can be unlocked when biometric authentication is required, such as for property registration or passport renewals.
• After the necessary authentication, Aadhaar can be locked again for security purposes.

Other Preventive Measures:

• It is advisable to avoid scanning QR codes or clicking on links sent by unknown or suspicious sources.
• Exercise caution and refrain from trusting individuals who offer assistance in withdrawing money from locations other than authorized bank branches or ATMs.
• Prior to providing a fingerprint on a PoS machine, it is recommended to verify the displayed amount and request a receipt for every transaction.
• Regularly check the balance and transaction alerts of the bank account linked to the mobile number.
• In the event of any suspicious or fraudulent activity, promptly report it to both the bank and the police.
• According to the RBI, customers are entitled to zero liability for unauthorized transactions if promptly reported within three working days.

What are the Challenges of AePS?

Lack of Awareness and Literacy:

• Many customers are not aware of the benefits and features of the AePS or how to use it safely and securely. They also lack financial literacy and digital skills, which makes them vulnerable to fraud and errors.

Inadequate Infrastructure and Connectivity:

• The AePS depends on the availability and quality of infrastructure and connectivity, such as biometric devices, PoS machines, internet, power supply, etc. However, these are often lacking or unreliable in rural and remote areas, where the AePS is most needed.

Regulatory and Policy Issues:

• The AePS also faces some regulatory and policy issues, such as the legal validity of Aadhaar authentication, the privacy and security of biometric data, the MDR charges for transactions, the grievance redressal mechanism for customers, etc.

Way forward

Strengthening the Security and Authentication of AePS Transactions:

• Implement encryption and digital signatures to protect transaction data.
• Incorporate biometric liveness detection to prevent cloning or spoofing of biometric data.
• Certify devices used for AePS transactions and monitor transactions for suspicious activity.

Raising Awareness:

• Educate users about the risks associated with sharing Aadhaar number and biometrics.
• Utilize the Aadhaar lock/unlock feature to control access to biometrics.
• Ensure service providers follow guidelines and standards issued by authorities and comply with data protection laws.

Enhancing Coordination and Cooperation among Stakeholders:

• Facilitate information sharing among UIDAI, NPCI, RBI, banks, fintech companies, law enforcement agencies, and civil society organizations.
• Develop joint strategies and action plans to address cybercrime challenges.
• Provide technical assistance and capacity building to stakeholders.
• Establish a platform for reporting and resolving grievances related to AePS.

India’s Fisheries Sector

Context: Government’s Sagar Parikrama is an evolutionary journey envisaged in the sea across the coastal belt aiming to resolve the issues of the fishermen and other stakeholders and facilitate their economic upliftment through various government schemes and programs, including PMMSY (Pradhan Mantri Matsya Sampada Yojana) and KCC (Kisan Credit Card).

What is the Sagar Parikrama Initiative?

About:

• Sagar Parikrama’ program envisages to cover the maritime States/UTs in a phased manner. The journey began on March 5th, 2022, from Mandvi, Gujarat.
• The journey focuses on bridging the gaps in the expectations of fisher communities, developing fishing villages, and upgrading infrastructure such as fishing harbors and fish landing centers.

Phases of Sagar Parikrama:

• Phase I: The journey covered three locations in Gujarat - Mandavi, Okha-Dwarka, and Porbandar.
• Phase II: Seven locations were covered in Mangrol, Veraval, Diu, Jafrabad, Surat, Daman, and Valsad.
• Phase III: Coastal areas of northern Maharashtra, including Satpati, Vasai, Versova, New Ferry Wharf (Bhaucha Dhakka), and Sasson Dock in Mumbai, were part of this phase.
• Phase IV: Udupi and Dakshina Kannada districts in Karnataka were covered during this phase.
• Upcoming Phase V: Phase V of Sagar Parikrama will cover six locations: Raigad, Ratnagiri, and Sindhudurg Districts in Maharashtra, and Vasco, Maorugoa, and Canacona in Goa.
• Maharashtra, with its extensive coastline of 720 km, has immense untapped potential in the fisheries sector.
• The state ranks 7th in fish production in the country, with marine fisheries contributing 82% and inland fisheries 18%.
• Goa, with a coastline of 104 km, also plays a vital role in the marine fishery sector, providing livelihoods to many.

What is the Status of the Fisheries Sector in India?

About:

• As the third-largest fish producer and the second-largest aquaculture producer globally, India recognizes the significance of the fisheries and aquaculture industry.
• The Indian Blue Revolution has led to a major improvement in the fishing and aquaculture industries. The industries are regarded as sunrise sectors and are anticipated to have a big impact on the Indian economy.
• In the recent past, Indian fisheries has witnessed a paradigm shift from marine dominated fisheries to inland fisheries, with the latter emerging as a major contributor of fish production from 36% in the mid-1980 to 70% in the recent past.
• The fish production reached an all-time high of 16.25 MMT during FY 2021-22 with marine exports touching Rs. 57,586 Crores.

Top Producing States:

• Andhra Pradesh is the largest producer of fish in India followed by West Bengal.

Current Challenges:

• Illegal, Unreported, and Unregulated (IUU) fishing: IUU fishing exacerbates overfishing and undermines the sustainability of the sector.
• IUU fishing involves activities such as fishing without proper licenses, using banned gear, and disregarding catch limits. Weak monitoring and surveillance systems make it difficult to combat this problem effectively.
• Inadequate Infrastructure and Technology: Outdated fishing vessels, gear, and processing facilities hinder the efficiency and productivity of the sector. Insufficient cold storage and transportation infrastructure result in post-harvest losses.
• Limited access to modern fishing technology, such as fish finders and GPS navigation systems, restricts the ability to locate fish stocks accurately.
• Climate Change and Environmental Degradation: Rising sea temperatures, ocean acidification, and changing currents have a profound impact on marine ecosystems and fish populations.
• Climate change leads to shifts in fish distribution, reduced productivity, and increased vulnerability to diseases. Pollution, habitat destruction, and coastal development further degrade marine ecosystems.
• Socio-Economic Issues: The fisheries sector in India is characterized by a large number of small-scale and artisanal fishers who face multiple socio-economic challenges.
• Low incomes, lack of access to credit and insurance, and inadequate social security measures contribute to the vulnerability of fishing communities.
• Gender disparities and the marginalization of women in fisheries also pose challenges.
• Market Access and Value Chain Inefficiencies: Despite India's significant fish production, there are challenges in accessing domestic and international markets.
• Poor post-harvest handling, limited value addition, and inadequate market linkages result in reduced profitability for fishers.

Initiatives related to Fisheries Sector:

• Pradhan Mantri Matsya Sampada Yojana
• Palk Bay Scheme
• Fisheries and Aquaculture Infrastructure Development Fund (FIDF)

Way Forward

• Embrace Aquaponics: India can promote the adoption of aquaponics, a sustainable farming technique that combines fish farming with hydroponics.
  • This system allows for the simultaneous cultivation of fish and plants, utilizing fish waste as a nutrient source for plant growth.
  • Aquaponics reduces water usage, maximizes land productivity, and provides an additional source of income for fish farmers.
• Enhance Cold Chain Infrastructure: There is a need to improve the cold chain infrastructure to minimize post-harvest losses and maintain the quality of fish products.
  • Also, there is a need to establish well-equipped fish collection centers near coastal areas and integrate them with modern storage facilities, transportation systems, and processing units.
  • This will enable the efficient preservation and distribution of fish, reducing spoilage and increasing market value.
• Support Value Addition and Diversification: Encourage fish farmers to engage in value addition activities to increase their income. Provide training and financial assistance for fish processing, packaging, and branding.
  • Promote the development of innovative fish-based products such as ready-to-eat snacks, fish oil supplements, fish leather, and collagen products. This will expand market opportunities and enhance the value chain.

Global Report on Internal Displacement 2023

Context: Recently, the Internal Displacement Monitoring Centre has released a report titled- The Global Report on Internal Displacement 2023 (GRID-2023), which cites that the number of people displaced by disasters rose by 40% in 2022 rather than 2021.

• The IDMC is the world's leading source of data and analysis on internal displacement. It provides high-quality data, analysis and expertise on Internal Displacement with the aim of informing policy and operational decisions that can reduce the risk of future displacement.

What are the Key Findings of the GRID-2023?

• Total Number Of Displacements: The number of people living in internal displacement reached a record high of 71.1 million people across 110 countries and territories. 62.5 million as a result of conflict and violence, and 8.7 million as a result of disasters. Disasters displaced 8.7 million people internally in 88 countries and territories as of December 2022. This led to record levels of flood displacement in countries including Pakistan, Nigeria and Brazil. By 2021, 30.7 million new displacements were due to disasters. In 2022 some 150 countries/territories reported such displacement.
• Country wise Picture: Pakistan had the highest number of disaster displacements in the world in 2022, at 8.16 million. In Pakistan, floods displaced millions, accounting for a quarter of the global disaster displacements. The Philippines was at second rank and reported 5.44 million displacements and China at third rank with 3.63 million. India recorded the fourth largest disaster displacement, with 2.5 million displacements and Nigeria at fifth rank with 2.4 million.
• Factors for Displacement: Disaster: The increase in disasters, particularly weather-related, is largely the result of the effects of La Niña which continued for a third consecutive year. The “triple-dip” La Niña caused widespread disasters across the world. Russia-Ukraine Induced Displacement: In 2022, the number of people displaced by the Russia-Ukraine war increased. The conflict caused a displacement of 16.9 million — “the highest figure ever recorded for any country.” The number of displacements associated with conflict and violence nearly doubled to 28.3 million.
• Implications: Entrenched conflict, disasters and displacement aggravated Global Food Security in 2022, which was already a concern as a result of the slow and uneven recovery from the Covid-19 pandemic. Low-income countries, many of which are dealing with internal displacement, were most affected, in part given their reliance on food and fertilizer imports and international humanitarian aid. 75% of the countries assessed as facing crisis levels of food security have IDPs.

What is the Scenario of India?

• India recorded thousand numbers of internal displacement and 631,000 internally displaced people due to conflict and violence and 2.5 million due to disaster in 2022.
• India and Bangladesh started to experience flooding even before the official start of the monsoon season, which normally runs between mid-July and September.
• India’s north-eastern state of Assam was affected by early floods in May 2022 and the same areas were once again flooded in June. Nearly five million people were affected across the state.
• Some parts of India reported their lowest July 2022 rainfall in 122 years.
• By the end of the monsoon, 2.1 million displacements had been recorded across India, a significant decrease from the five million that occurred during the 2021 season.

What is Internal Displacement?

• About: Internal displacement describes the situation of people who have been forced to leave their homes but have not left their country.
• Factors of Displacement: Millions of people are uprooted from their homes or places of habitual residence each year in the context of conflict, violence, development projects, disasters and climate change and remain displaced within their countries’ borders.
• Components: Internal displacement is based on two components:
  • The person’s movement is coerced or involuntary (to distinguish them from economic and other voluntary migrants);
  • The person stays within internationally recognised state borders (to distinguish them from refugees).
• Difference from Refugee: According to the 1951 Refugee Convention, a “refugee” is a person who has been persecuted and forced to leave his native country.
  • A precondition of being considered a refugee is that a person crosses an international border.
  • Unlike refugees, internally displaced people are not the subject of any international convention.
  • At the international level, no single agency or organisation has been designated as the global lead on protection and assistance of internally displaced persons.
• However, there are United Nations Guiding Principles on Internal Displacement.

What are the Recommendations?

• Conflict resolution, peacebuilding, disaster risk reduction, climate resilience, food security and poverty reduction must all be strengthened.
• There is an increasing need for durable solutions to meet the scale of the challenges facing displaced people. This spans the expansion of cash assistance and livelihood programmes that improve IDPs’ (Internally Displaced People) economic security, through investments in risk reduction measures that strengthen their communities’ resilience.
• Beyond immediate humanitarian assistance, investments are needed in anticipatory action and risk reduction measures that strengthen displaced communites' resilience.
• Developing IDP's livelihoods and skills would help to facilitate durable solutions by increasing their food security and their communities’ and countries’ self-reliance at the same time.

Hysterectomy

Context: Concerned about the high risk faced by poor and less-educated women, especially in rural areas, who undergo unjustified hysterectomies, the Ministry of Health and Family Welfare, Government of India has initiated measures to address this issue.

What is Hysterectomy?

About:

• A hysterectomy is a surgical procedure that involves the removal of the uterus (womb), the organ in a woman's body where a baby develops during pregnancy.

Types:

• When only the uterus is removed, it is called a partial hysterectomy.
• When the uterus and cervix are removed, it is called a total hysterectomy.
• When the uterus, cervix, part of the vagina, and a wide area of ligaments and tissues around these organs are removed, it is called a radical hysterectomy.

Indications for Hysterectomy in India:

• Hysterectomy is performed in India for gynecological conditions like fibroids (non-cancerous growths that develop in or around the womb), endometriosis (disease in which tissue similar to the lining of the uterus grows outside the uterus), abnormal bleeding, and pelvic inflammatory disease, when other treatments fail.
• It is also utilized as part of cancer treatment to remove cancerous tissues and in cases of severe, unresponsive pelvic pain.

What are the Issues Associated with Hysterectomy in India?

Increase Hysterectomies in Younger Women:

• The recent Supreme Court judgment in Dr. Narendra Gupta vs Union Of India, 2023 highlighted that in developed countries, hysterectomies are typically performed on premenopausal women aged 45 and above.
• However, community-based studies in India have shown an increasing number of hysterectomies among younger women, ranging from 28 to 36 years old.

NFHS Data:

• According to the most recent National Family Health Survey (NFHS) -5 empirical data, 3% of women aged 15-49 have had a hysterectomy.
• The prevalence of hysterectomy is the highest in Andhra Pradesh (9%), followed by Telangana (8%), and lowest in Sikkim (0.8%) and Meghalaya (0.7%) among women aged 15–49.
• The prevalence of hysterectomy was highest in Southern region, i.e., 4.2%, which was also greater than the national prevalence, followed by Eastern part of India (3.8%).
• On the other hand, the lowest prevalence was observed in the Northeast region, i.e., only 1.2%

Unnecessary Hysterectomies:

• A public interest litigation (PIL) filed in 2013 highlighted the issue of "unnecessary hysterectomies”.
• The PIL revealed that in the states of Bihar, Chhattisgarh, and Rajasthan, women were subjected to hysterectomies that were deemed unnecessary, endangering their health.
• Private hospitals were found to be involved in performing these unnecessary hysterectomies. More than two-thirds (70%) of women who have undergone a hysterectomy had the operation in a private health facility.
• Misuse of the procedure was also observed, with healthcare institutions exploiting it to claim higher insurance fees under various government healthcare schemes.

What are the Efforts to Address the Issue?

Supreme Court Direction:

• In response to the PIL, the Supreme Court directed states and union territories to adopt the health guidelines formulated by the Centre to monitor and prevent unnecessary hysterectomies. The implementation of these guidelines was mandated within a three-month timeframe.
• There has been a serious violation of the fundamental rights of the women who underwent unnecessary hysterectomies.
• The SC in Dr. Narendra Gupta vs Union Of India 2023 acknowledged that the right to health is an intrinsic part of the right to life under Article 21 of the Constitution. Life, to be enjoyed in all its diverse elements, must be based on robust conditions of health.
• SC also urged an action plan to tackle the problem including suggestions to create national, state and district-level hysterectomy monitoring committees and the inauguration of a grievance portal.

Health Ministry Guidelines:

• In 2022, the Health Ministry issued guidelines aimed at preventing unnecessary hysterectomies. States were instructed to comply with these guidelines to ensure appropriate use of the procedure.
• Recently, the ministry has directed the states to share data on the hysterectomies performed by medical institutions
• Compulsory audits for all hysterectomies were also advised, similar to the existing audits conducted for maternal mortality.

25th Anniversary of Pokhran-II

Context: India recently celebrated the 25th anniversary of Pokhran-II on 11th May 2023 marking the successful nuclear bomb test explosions which became a significant milestone in its journey to become a nuclear power.

• May 11 is also celebrated as the National Technology Day to honour Indian scientists, engineers and technologists, who worked for the country's scientific and technological advancement and ensured the successful conduct of Pokhran tests.

What is Pokhran-II and India’s Journey as a Nuclear Power?

Origin:

• In 1945, renowned physicist Homi J. Bhaba lobbied for the establishment of the Tata Institute of Fundamental Research (TIFR) in Bombay, dedicated to nuclear physics research.
• TIFR became India’s first research institution dedicated to the study of nuclear physics.
• Post-independence, Bhaba convinced the then PM Jawaharlal Nehru about the importance of nuclear energy and in 1954, the Department of Atomic Energy (DAE) was founded, with Bhabha as the director.
• The DAE operated autonomously, away from significant public scrutiny.

Reasons for India's Pursuit of Nuclear Weapons:

• India's pursuit of nuclear weapons was motivated by concerns over its sovereignty and security threats from China and Pakistan.
• The 1962 Sino-Indian War and China's nuclear test in 1964 heightened the need for India to safeguard its national security.
• The war with Pakistan in 1965, with Chinese support, further emphasized the need for self-sufficiency in defense capabilities.

Pokhran- I

About:

• By the 1970s, India was capable of conducting a nuclear bomb test.
• Pokhran-I was India's first nuclear bomb test conducted on May 18, 1974, at the Pokhran Test Range in Rajasthan.
• It was code-named Smiling Buddha and officially described as a "peaceful nuclear explosion" with “few military implications”.
• India became the 6th country in the world to possess nuclear weapons capability after the US, Soviet Union, Britain, France and China.

Implications of Test:

• The tests faced near-universal condemnation and significant sanctions especially from US and Canada.
• It hindered India's progress in nuclear technology and slowed down its nuclear journey.
• Domestic political instability, such as the Emergency of 1975 and opposition to nuclear weapons also hindered progress.

After Pokhran-I:

• The 1980s saw a resurgence of interest in nuclear weapons development due to Pakistan's progress.
• India increased funding for its missile program and expanded its plutonium stockpiles.

Pokhran-II

About:

• Pokhran-II refers to a sequence of five nuclear bomb test explosions conducted by India on between 11-13th May 1998 at Rajasthan's Pokhran desert.
• Code name - Operation Shakti, this event marked India's 2nd successful attempt.

Significance:

• Pokhran-II cemented India's status as a nuclear power.
• It demonstrated India's ability to possess and deploy nuclear weapons, thus enhancing its deterrence capabilities.
• The Indian government led by Prime Minister Atal Bihari Vajpayee officially declared itself as a state possessing nuclear weapons following Pokhran-II.

Implication:

• While the tests in 1998 also invited sanctions from some countries (like the US), the condemnation was far from universal like in 1974.
• In context of India’s fast-growing economy and market potential, India was able to stand its ground and thus cement its status as a dominant nation state.

India's Nuclear Doctrine:

• India adopted a policy of credible minimum deterrence, stating that it would maintain a sufficient nuclear arsenal for deterrence purposes but would not engage in an arms race.
• In 2003, India officially came out with its nuclear doctrine that clearly elaborated on the 'no first use' policy.

India's Current Nuclear Capability:

• India currently possesses approximately 160 nuclear warheads, according to the Federation of American Scientists (FAS).
• India has achieved an operational nuclear triad capability, allowing for the launch of nuclear weapons from land, air, and sea.
• The triad delivery systems include Agni, Prithvi, and K series ballistic missiles, fighter aircraft, and nuclear submarines.

What is India's Status on Various International Treaties about Nuclear Weapons?

Non-Proliferation Treaty (NPT) 1968:

• India is not a signatory; it declined to accede to the NPT, citing concerns about the treaty's perceived discriminatory nature and lack of reciprocal obligations from nuclear weapons states.

Comprehensive Nuclear-Test-Ban Treaty (CTBT):

• India has not signed the CTBT as it is a strong advocate for a time-bound disarmament commitment from nuclear weapon states (NWS) and may use the lack of a commitment as a reason to refrain from signing the CTBT.

The Treaty on the Prohibition of Nuclear Weapons (TPNW):

• It entered into force on 22 January 2021 and India is not a member of this treaty.

Nuclear Suppliers Group(NSG):

• India is not a member of the NSG.

Wassenaar Arrangement:

• India joined the arrangement on December 2017 as its 42nd participating state.

International Credit Card Spending Outside India under LRS

Context: Recently, the Finance Ministry of India, in consultation with the Reserve Bank of India (RBI), has made significant amendments to the Foreign Exchange Management Act (FEMA), bringing international credit card spending outside India under the Liberalised Remittance Scheme (LRS).

• This comes in the backdrop of a surge in spending in overseas travel. Indians spent 12.51 billion USD on overseas travel between April-February of fiscal 2022-23, a rise of 104% compared to the same period of the last year.
• The inclusion enables the levy of the higher rate of Tax Collected at Source (TCS) as announced in the Budget for 2022-23 effective from 1stJuly 2023.

What are the Key Details and Implications?

Inclusion of International Credit Card Spend in LRS:

• The amendment is expected to facilitate the monitoring of high-value overseas transactions but does not apply to payments for purchasing foreign goods/services from India.

Omission of Rule 7 and Expansion of LRS:

• Previously, the usage of international credit cards for expenses during trips abroad was not covered under LRS.
• Rule 7 of the Foreign Exchange Management (Current Account Transaction) Rules, 2000, which excluded such spendings from LRS, has been omitted.
• This amendment allows international credit card transactions to be included in determining the overall LRS limit of 250,000 USD per person per financial year.

Tax Implications:

• A TCS levy of 5% will be applicable on such transactions until 1stJuly 2023 (except for medical and education-linked sectors).
• After 1 stJuly 2023, the TCS rate will increase to 20% for credit card spends outside India.
• The new provisions will not apply on payments for 'education' and 'medical' purposes and do not impact changes in the use of international credit cards by residents while in India.
• The mechanism for levying TCS on overseas credit card spends is yet to be made functional, which poses compliance challenges for banks and financial institutions.

Impact on Compliance and Refunds:

• Banks and financial institutions may experience an increased compliance burden due to these changes.
• Taxpayers can claim refunds on the TCS levy while filing tax returns, which could result in locked funds until refunds are initiated by the tax department.

What is Liberalised Remittance Scheme?

About:

• This is the scheme of the Reserve Bank of India, introduced in the year 2004.
• Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

Not Eligible:

• The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc.
• Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme.

Remitted Money can be used for:

• Expenses related to travelling (private or for business), medical treatment, study, gifts and donations, maintenance of close relatives and so on.
• Investment in shares, debt instruments, and buy immovable properties in the overseas market.
• Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.

Prohibited Transactions:

• Any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
• Trading in foreign exchange abroad.
• Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non- cooperative countries and territories”, from time to time.
• Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

Requirements:

• It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS made through Authorized Persons.

What is Tax Collected at Source?

• TCS is the tax payable by a seller, which he collects from the buyer at the time of sale of certain goods or services.
• TCS is governed by Section 206C of the Income-tax Act, which specifies the goods or services on which TCS is applicable and the rates of TCS.
• Some of the goods or services on which TCS is applicable are liquor, timber, tendu leaves, scrap, minerals, motor vehicles, parking lot, toll plaza, mining and quarrying, foreign remittance under LRS, etc.
• The seller must have a Tax Collection Account Number (TAN) to collect and deposit TCS with the tax authorities.
• The seller must issue a TCS certificate to the buyer within a specified time limit, showing the amount of tax collected and deposited.
• The buyer can claim credit for the amount of TCS deducted from his income while filing his income tax return.

What is Foreign Exchange Management Act, 1999?

• The legal framework for the administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999.
• Under the FEMA, which came into force with effect from 1st June 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions.

Current Account Transactions:

• All transactions undertaken by a resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions.
• Example: payment in connection with foreign trade, expenses in connection with foreign travel, education etc.

Capital Account Transactions:

• It includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased).
• Example: investment in foreign securities, acquisition of immovable property outside India etc.