FEMA, Current Account Transaction.

Originally posted by : sssvkSridharan R.
	Dear Colleages, As per Rule 3 of the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2001, a person can not draw foreign exchange for any of the transaction specified in the Schedule I, one of which is             “Payment of commission on exports made towards equity investment in joint ventures/wholly owned subsidiaries abroad of Indian companies.”   Can any one explain the above transaction with example, please…..   Regards, Sridharan. Salem.

Thats pretty simple. Indian companies are allowed to made equity investments in foreign subsidiary /JV by sale of goods and no commission can be paid on the same.

For ex. A ltd. an Indian Company wishes to take equity in B Ltd.(UK). Now instead of sending money as equity A Ltd. (manufacturer of machines)sends the machines and books the following entry:-

Share Capital of B Ltd.          Dr.         .................

    To Sales                               Cr.         ..................

(Being exports sales vide invoice no.XXXX made in lieu of equity participation in B Ltd.)

FEMA doesn't allow any commission top be paid against such export sales.

Hope the matter is clear.

Anuj

0-981016211

Thank you. thank you very much ,Sir

Thanks for the explanation CA Anuj Sir. If i have any doubts can i pls contact u sir as i am a CA FINAL student appearing for may 2016 exams.

Regards

Kishan K