Easy Office
LCI Learning

Foreign Exchange Management Act

SANOJ KUMAR , Last updated: 18 January 2016  
  Share


FOREIGN EXCHANGE MANAGEMENT ACT

Current and Capital Account Transactions and release of Foreign Exchange

As Amended by the Finance Act, 2015

Transaction under FEMA

According to FEMA, 1999 all the foreign exchange Transaction either “Capital Account Transactions” or Current Account Transactions”.

Meaning of Capital Account Transaction

A Current Account Transaction has been defined as a Transaction other than Capital Account Transactions, means all transaction which do not alter assets or liability outside India of resident or assets or liability in India of Non Resident treated as Current Account Transactions and without prejudice to the generality of the foregoing such transaction includes,

1. Payments due in connection with foreign trade, other current business, services, and short term banking and credit facilities in the ordinary course of business.

2. Payments due as interest on loans and as net income from investments,

3. Remittances for living expenses of parents, children, and spouse residing abroad,

4. Expenses in connection with foreign travel, education and medical care of Parents, Spouse and children’s.

Provided that Central Government may impose such reasonable restrictions as may be prescribed in case of public interest and in consultation with Reserve Bank of India.

Route for Drawal of Foreign Exchange

According to RBI foreign Exchange can be drawn from any authorized dealer by the General Permission Route or Prior Approval Route.

Release of foreign exchange under General Permission by Authorised Dealers

S.No.

Particulars

Limitations

1.

Private visit to any country (except Nepal and Bhutan)

USD 10,000 or its equivalents in one year for one or more private visit.

2

Gift/donations per remitter/donor

Gift/Donations are comes under liberalized Remittance Schemes of USD 1,25,000 for resident individuals. Remittance should not exceed USD 1,25,000 during a particular FY

3

Donations by Corporate

1% of the foreign exchange earnings during the previous three FY or USD 5 million, whichever is less, for a specified purpose

4

Going abroad for employment

USD 1,00,000 one time only

5

Remittance facility for emigrations

USD 1,00,000 or the amount prescribed by country of emigration not exceeding USD 1,00,000 one time only.

6

Remittance for maintenance of close relatives abroad

Net salary (after deduction of tax, PF and other deduction) of a person who is resident but not permanent resident in india and citizen of foreign state other than Pakistan.

Or

USD 1,00,000 per year per recipient in all other cases

7

Business Travel Abroad

USD 25000 per trip respective of stay

8

Attending conference or specialized training

USD 25000

9

Meeting expenses of Medical treatment

USD 1,00,000

10

Maintenance expenses of a patient going for medical treatment of medical checkup abroad

USD 25000

11

Studies abroad

USD 1,00,000 per academic Year or estimation from the Institution abroad whichever is higher.

12

Meeting expenses of accompanying as attendance to a patient going abroad for medical treatment or medical checkup

USD 25000

13

Commission to agent abroad for selling of residential flats or commercial plot in India

USD 25000 or 5 % of inward remittance per transactions whichever is higher

14

Consultancy services from outside India

USD 1 million per project to USD 10 million per project (in case of infrastructure project)

In all other case USD 1 million will be continuing.

15

Reimbursement of pre-incorporation expenses

5% of the investment brought into India or USD 100,000 whichever is higher,

16

Remittance for use and/or Purchase of Trade mark

Freely allow without approval of RBI

17

Remittance for securing Insurance for Health from a company abroad

Freely allow

18

Remittance of royalty and payment of lump sum fee under the technical collaboration agreement

Freely allow without any prior approval of RBI

19

Release of exchange for medical treatment outside India when a person has fallen sick after proceeding abroad

Extent of USD 1,00,000 without any hassles and any loss of time on the basis of self declarations

20

Small Value Remittance

Up to USD 25000 (form A2)

Prohibition on Drawal of Foreign Exchange

1. Remittance out of lottery winning

2. Remittance of income from racing/riding etc, or any other hobby

3. Remittance for purchase of lottery ticket, banned/prescribed magazines, football pools, sweepstakes etc.,

4. Payments of commission on exports made towards equity investment in Joint ventures/wholly owned subsidiaries abroad of Indian companies.

5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable.

6. Payments of commission on exports under Rupees State Credit Routes except commission up to 10% of invoice value of export of tea and tobacco,

7. Payment related to “ Call back Services” of telephones

8. Remittance of interest income on funds held in non-resident Special Rupees Scheme a/c. (NRSR Account)

9. A travel to Nepal and/or Bhutan

10. A transaction with a person resident in Nepal or Bhutan.

Release of Foreign Exchange for Haj/Umrah Pilgrimage

Authorised dealers and full fledged money Changer may release the full amount of BTQ entitlement in cash or up to the cash limit specified by the Haj Committee of India, to the Haj/Umrah pilgrams.

Prior Approval of Government of India for Drawl of foreign exchange 

1. Cultural tours.

2. Advertisement in foreign print media for the purpose other than promotion of tourism, foreign investments and international bidding (exceeding USD 10000) by a SG and its PSU.

3. Remittance of freight of vessels chartered.

4. Payment of import by a government department or a PSU on c.i.f. basis only for imports through ocean transport.

5. Multi-model transport operators making remittance to their agents abroad

6. Remittance of hiring charges of transponders

a. TV channels

b. Internet Service Providers

7. Remittance of Container detention charges exceeding the rate prescribed by Director General of Shipping.

8. Remittance of Prize money/sponsorship of sport activity abroad by a person other than international/ national/street level sports bodies, if the amount involved exceeds USD 1,00,000.

9. Remittance for membership of P&I Club ministry.

Capital Account Transactions

 It’s classified into two classes:

(i). Capital Account Transactions of person resident in India.

  • Investment in foreign securities
  • Foreign Currency loans raised in India and abroad
  • Transfer of Immovable properties outside India
  • Guarantees issued by a person resident in India in favour of a person resident outside India.
  • Export, Import and holding of currency/currency notes.
  • Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India
  • Maintenance of foreign currency account in India and outside India by a person Resident in India.
  • Taking out a insurance policy form an insurance company outside India.
  • Loan and overdraft to a person resident outside India
  • Remittance outside India of capital assets of a person resident in India.
  • Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad

(ii). Capital Account Transactions of person resident outside India.

(a). Investment in India by way of

  • Issue of securities by a body corporate or an entity in India and investment therein by a person resident outside India; and
  • Investment by way of contributions by a person resident outside India to the capital of a firm or proprietorship concern or an association of person in India.

(b). acquisition and transfer of immovable property in India in favour of, on behalf of a person resident in India.

(c). Guarantee by a person resident outside India in favour of, or on behalf of a person resident in India,

(d). Import / Export of Currency/Currency Notes/ into/from India by a person resident outside India

(e). Deposit between a person resident in India and person resident outside India.

(f). Foreign Currency Accounts in India of a person resident outside India

(g). Remittance outside India of a capital assets in India of a person resident outside India.

Prepared by: Sanoj Kumar
(CS Management Trainee)


Published by

SANOJ KUMAR
()
Category Others   Report

  9128 Views

Comments


Related Articles


Loading