Fema

www.safeecollege.comwww.safeecollege.com 11

Foreign Exchange Management Foreign Exchange Management - -

an overview of Current account an overview of Current account TransactionsTransactions


What is new in FEMA regime ? What is new in FEMA regime ?

Preamble itself is changed Preamble itself is changed All current account transactions are freeAll current account transactions are free Capital account transactions are deregulatedCapital account transactions are deregulated Definition of NRI changed from purpose to Definition of NRI changed from purpose to

residence residence From Criminal law to Civil LawFrom Criminal law to Civil Law Less punishment – No ImprisonmentLess punishment – No Imprisonment Compounding powers to RBICompounding powers to RBI Less stringent & more business friendlyLess stringent & more business friendly

All colored text is relevant for examination


Foreign Exchange Market in Foreign Exchange Market in IndiaIndia

Regulator: Reserve Bank of IndiaRegulation: Foreign Exchange Management Act, 1999

Authorised Dealers, Money changers

Buyers and sellers: exporters, importers, individuals,Corporates, FIIs, Non-Residents, NRIs etc.

Tier-I

Tier - II

Tier-III


Forex Activities in India – Forex Activities in India – FacilitatorsFacilitators

Ministry of FinanceMinistry of Finance Ministry of Commerce , DGFTMinistry of Commerce , DGFT Directorate of EnforcementDirectorate of Enforcement Customs Customs Export Promotion Councils – FIEO Export Promotion Councils – FIEO Export Inspection Units Export Inspection Units Authorised Persons Authorised Persons FEDAI FEDAI EXIM Bank EXIM Bank ECGC ECGC RBIRBI


Current Account Capital Account

Trade Invisibles

Exports Imports

TourTravelRemittanceGiftProfit/Div/int

FDI Portfolio

Foreign IndianSource Source

(FII) (GDR/ADR)

Loan

(Govt/Pvt(ECB)

Foreign currency A/CRI & NRI

FOREIGN EXCHANGE TRANSACTIONS


Forex – the Concept ( contd. ) – Forex – the Concept ( contd. ) –

Current & Capital AccountCurrent & Capital Account Current account transaction – Current account transaction – All transactions All transactions

undertaken by a resident undertaken by a resident that do not alter his assets or that do not alter his assets or liabilities outside Indialiabilities outside India are current account transactions. are current account transactions.

affects cash position of an entity – Trade-related affects cash position of an entity – Trade-related remittances & miscellaneous remittances fully remittances & miscellaneous remittances fully convertible - fully delegated to ADs convertible - fully delegated to ADs

Capital account transaction – Capital account transaction – affects asset & affects asset & liability position of an entityliability position of an entity - borrowing, lending - borrowing, lending & investment – FDI , FII, ECBs , NRI deposits , & investment – FDI , FII, ECBs , NRI deposits , Overseas Investments – expanding convertibility Overseas Investments – expanding convertibility


GeneralGeneral

In terms of the Rules -In terms of the Rules -Foreign Exchange Foreign Exchange Management (Current Account Transactions) Management (Current Account Transactions) Rules, 2000 (Annex I)-Rules, 2000 (Annex I)- drawal of exchange for drawal of exchange for certain certain categories of transactionscategories of transactions as listed in as listed in

Schedule I - Schedule I - expressly prohibitedexpressly prohibited Schedule II - permitted by the ADs if Schedule II - permitted by the ADs if approval approval

from the Ministry/Dept of GoIfrom the Ministry/Dept of GoI is secured is secured Schedule III- Schedule III- prior approval of the RBIprior approval of the RBI required required

for remittance exceeding limitsfor remittance exceeding limits. .


Schedule ISchedule I Remittance out of lottery winningsRemittance out of lottery winnings Remittance of Remittance of income from racing/riding or any income from racing/riding or any

other hobby etcother hobby etc Remittance for Remittance for purchase of lottery tickets, purchase of lottery tickets,

banned/ prescribed magazinesbanned/ prescribed magazines, football pools, , football pools, sweepstakes etc sweepstakes etc

Payment of commission on exports made towards Payment of commission on exports made towards investment in JV / WOS abroad of Indian investment in JV / WOS abroad of Indian companies. companies.

Payment related to callback services of Payment related to callback services of telephonestelephones


Schedule I (contd…)Schedule I (contd…)

Remittance of dividend by any company where Remittance of dividend by any company where dividend balancing is applicabledividend balancing is applicable

Remittance of interest income on funds held in Remittance of interest income on funds held in Non – Resident Special Rupee ( Account ) Non – Resident Special Rupee ( Account ) Scheme. Scheme.

Payment of Payment of commission on exports under Rupee commission on exports under Rupee state credit Route, except commission upto 10% state credit Route, except commission upto 10% of invoice value of exports of tea and tobaccoof invoice value of exports of tea and tobacco..


Schedule IISchedule II Remittances which need prior Remittances which need prior approval from the approval from the

dealing ministry / department of GoIdealing ministry / department of GoI and and permitted up to the amounts as mentioned in the permitted up to the amounts as mentioned in the approval letter – approval letter –

Cultural toursCultural tours , Advertisement in foreign print , Advertisement in foreign print media , Freight of vessel charted by a PSU , media , Freight of vessel charted by a PSU , Payment for import by a Govt, dept. or PSU on Payment for import by a Govt, dept. or PSU on c.i.f. basisc.i.f. basis, Multi modal transport operators , Multi modal transport operators making remittance to their agents abroad , hiring making remittance to their agents abroad , hiring of transponders by TV channels , ISPs , of transponders by TV channels , ISPs , Remittances under technical collaboration Remittances under technical collaboration agreements etc.agreements etc.


Schedule IIISchedule III

Transactions needing Transactions needing RBI approvalRBI approval for for amounts exceeding delegated powers of amounts exceeding delegated powers of ADs ADs

– – travel , gift , donation , employment , travel , gift , donation , employment , emigration , maintenance , medical emigration , maintenance , medical expenses exceeding the estimates , higher expenses exceeding the estimates , higher studies exceeding the estimates, studies exceeding the estimates, commission to agents for sale of flats etc. commission to agents for sale of flats etc. in India , consultancy fees ,pre in India , consultancy fees ,pre incorporation expenses. incorporation expenses.


Limits upto which ADs can release Limits upto which ADs can release foreign Exchange foreign Exchange

Sl Sl nono

TransactionTransaction Limit in US $Limit in US $

11 Private visitPrivate visit USD 10,000 per financial yearUSD 10,000 per financial year

22 Business travel, Business travel, Conference, Conference, TrainingTraining

USD 25,000 per tripUSD 25,000 per trip

33 Medical Medical treatmenttreatment

USD 100,000 or its equivalent on self declaration USD 100,000 or its equivalent on self declaration basis basis

44 Higher studiesHigher studies USD 1,00,000 per academic year USD 1,00,000 per academic year


Limits upto which ADs can release Limits upto which ADs can release foreign Exchange foreign Exchange

Sl.Sl.no.no.

TransactionTransaction LimitLimit

55

EmploymentEmployment Upto USD 1,00,000Upto USD 1,00,000

66

EmigrationEmigration Upto USD 1,00,000 Upto USD 1,00,000

77

Gift/donationGift/donation USD 5,000 per remitter/donor per annum. USD 5,000 per remitter/donor per annum.

88 Maintenance of close Maintenance of close relatives abroad relatives abroad ––

USD 1,00,000 per recipient USD 1,00,000 per recipient

99 Cultural Cultural as sanctioned by GoIas sanctioned by GoI

1010 LRSLRS USD 2,00,000 per financial yearUSD 2,00,000 per financial year


Liberalised Remittance Scheme of Liberalised Remittance Scheme of USD 200000USD 200000

Facility extended to all resident individuals Facility extended to all resident individuals freely remit freely remit upto USD 200,000upto USD 200,000 per financial year per financial year

for any permissible current or capital account for any permissible current or capital account transaction or a combination of bothtransaction or a combination of both. .

Not available for purposes specifically prohibited Not available for purposes specifically prohibited (Schedule I) or GOI (Schedule II) of FEMA(Current (Schedule I) or GOI (Schedule II) of FEMA(Current Account Transactions) Rules, 2000. Account Transactions) Rules, 2000.

free to acquire and hold immovable property, free to acquire and hold immovable property, shares or any other asset outside India without shares or any other asset outside India without prior approval of RBIprior approval of RBI using the scheme.using the scheme.


Liberalised Remittance Scheme of Liberalised Remittance Scheme of USD 200000 USD 200000

Free to open, hold and maintain foreign currency Free to open, hold and maintain foreign currency accounts with a bank outside India for accounts with a bank outside India for remittances under the scheme without the prior remittances under the scheme without the prior approval of RBIapproval of RBI. .

Remittance cannot be made directly or indirectly Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.to Bhutan, Nepal, Mauritius or Pakistan.

Not available for making remittances directly or Not available for making remittances directly or indirectly to indirectly to countries identified by the Financial countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Action Task Force (FATF) as ‘non-co-operative Countries or TerritoriesCountries or Territories, from time to time., from time to time.


Release of Foreign Currency-restrictionsRelease of Foreign Currency-restrictions

No releaseNo release of foreign exchange for any of foreign exchange for any kind of travel to kind of travel to Nepal and BhutanNepal and Bhutan or for or for any transaction with persons resident in any transaction with persons resident in Nepal and Bhutan.Nepal and Bhutan.

Travellers allowed to Travellers allowed to purchase/carry purchase/carry foreign currency notes/coins only up to foreign currency notes/coins only up to USD USD 20002000. .

Balance amount in the form of traveller’s Balance amount in the form of traveller’s cheque or banker’s draft.cheque or banker’s draft.


Release of foreign Currency-Release of foreign Currency-RestrictionsRestrictions

Exceptions to this areExceptions to this are

• (a) travellers proceeding to Iraq and (a) travellers proceeding to Iraq and Libya - not exceeding USD 5000 or its Libya - not exceeding USD 5000 or its equivalent;equivalent;

• (b) travellers proceeding to the Islamic (b) travellers proceeding to the Islamic

Republic of Iran, Russian Federation and Republic of Iran, Russian Federation and other Republics of Commonwealth of other Republics of Commonwealth of Independent States - entire foreign Independent States - entire foreign exchange released in the form of foreign exchange released in the form of foreign currency notes or coins.currency notes or coins.


Resident Going Abroad-Resident Going Abroad-Indian CurrencyIndian Currency

Residents are free to take outside India (other Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of GOI than to Nepal and Bhutan) currency notes of GOI and RBI notes up to not exceeding Rs. 5,000/ - and RBI notes up to not exceeding Rs. 5,000/ - per personper person..

They may take or send outside India (other than They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not to Nepal and Bhutan) commemorative coins not exceeding two coins each.exceeding two coins each.


Utilisation of forexUtilisation of forex

The foreign exchange acquired has to be used The foreign exchange acquired has to be used within 180 days of purchasewithin 180 days of purchase..

If not possible, to be surrendered to an AD within If not possible, to be surrendered to an AD within 180 days180 days..

Can retain upto USD 2000 in currency Can retain upto USD 2000 in currency notes/travellers chequenotes/travellers cheque..

Foreign Exchange purchased for a specific Foreign Exchange purchased for a specific purpose is not utilized for that purpose, it could purpose is not utilized for that purpose, it could be utilized for any other eligible purpose be utilized for any other eligible purpose permitted under the relevant regulation. permitted under the relevant regulation.


Residents coming to India from Residents coming to India from abroad-abroad-

regarding Indian Currencyregarding Indian Currency - - can bring in with himcan bring in with him(a)(a) up to Rs. 5,000 from any country other than Nepal or up to Rs. 5,000 from any country other than Nepal or

Bhutan, and Bhutan, and (b)(b) any amount in denomination not exceeding Rs.100 from any amount in denomination not exceeding Rs.100 from

Nepal or Bhutan.Nepal or Bhutan. Foreign Exchange-Foreign Exchange- can bring without any limit. can bring without any limit. 1.1. If the aggregate value of the foreign exchange in the If the aggregate value of the foreign exchange in the

form of currency notes, bank notes or TCs brought in form of currency notes, bank notes or TCs brought in exceeds USD 10,000/- or its equivalent and/or exceeds USD 10,000/- or its equivalent and/or

2.2. the value of foreign currency exceeds USD 5,000/- or its the value of foreign currency exceeds USD 5,000/- or its equivalent, equivalent,

3.3. To be declared to the Customs Authorities at the Airport To be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in in the Currency Declaration Form (CDF), on arrival in India.India.

www.safeecollege.comwww.safeecollege.com

Thank youThank you

Fema

Education

Transcript of Fema