Lectures Delivered by Dr. Tabrez ahmad in Foreign Exchange Management Law

1. Dr. Tabrez Ahmad
Professor of Law
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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2. Agenda
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Objective
FERA/FEMA
Organizational setup
Definitions
FEMA – highlights
Manner of receipt in foreign exchange
Liberalized Remittance Scheme
Contravention and compounding
Hedging of Price Risk in Commodities
Forex facilities
Guidelines for Travel
NRI & PIO
Types of Accounts-NRE, NRO
Re-patriation
Surrender
Current Account Transactions
Release of Exchange for Travel
Business and Commercial Remittance Abroad
Business and Commercial Remittance Abroad
Export & Import of Goods and Services
Foreign Direct Investment
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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3. Objective
 The main objective behind the Foreign Exchange Management Act
(1999) is to consolidate and amend the law relating to foreign exchange
with the objective of facilitating external trade and payments. It was
also formulated to promote the orderly development and maintenance
of foreign exchange market in India.
 FEMA is applicable to all parts of India. The act is also applicable to all
branches, offices and agencies outside India owned or controlled by a
person who is a resident of India.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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4. FERA/FEMA
 The Foreign Exchange Management Act (1999) or in short FEMA has
been introduced as a replacement for earlier Foreign Exchange
Regulation Act (FERA)
 FEMA was introduced because the FERA didn’t fit in with postliberalisation policies
 A significant change that the FEMA brought with it, was that it made
all offenses regarding foreign exchange civil offenses, as opposed to
criminal offenses as dictated by FERA.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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5. FOREIGN EXCHANGE
FEMA prohibits:
 Dealing in or transfer of Foreign Exchange or Foreign Security to any
person other than Authorised Person
 Make any payment otherwise through an authorized person to or for
the credit of any person resident outside India in any manner
 receive otherwise through an authorized person, any payment by order
or on behalf of any person resident outside India in any manner.
 enter into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to
acquire, any asset outside India by any person
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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6. Exemptions
 possession of foreign currency or foreign coins by any person up to
such limit as the Reserve Bank may specify
 foreign currency account held or operated by such person or class of
persons and the limit up to which the Reserve Bank may specify
 foreign exchange acquired or received before the 8th day of July, 1947
 foreign exchange held by a person resident in India up to such limit as
the Reserve Bank may specify, if such foreign exchange was acquired by
way of gift or inheritance from a person referred above
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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7. Exemptions Contd.
 foreign exchange acquired from
employment, business, trade, vocation, services, honorarium, gifts, inh
eritance or any other legitimate means up to such limit as the Reserve
Bank may specify
 such other receipts in foreign exchange as the Reserve Bank may
specify
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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8. Organizational setup
 The FEMA head-office, also known as Enforcement Directorate is
situated in New Delhi and is headed by a Director.
 The Directorate is further divided into 5 zonal offices in
Delhi, Mumbai, Kolkata, Chennai and Jalandhar and each office is
headed by a Deputy Director.
 Each zone is further divided into 7 sub-zonal offices headed by the
Assistant Directors and 5 field units headed by Chief Enforcement
Officers.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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9. Definitions
 "Adjudicating Authority" means an officer authorized under sub-
section (1) of section 16
 "Appellate Tribunal" means the Appellate Tribunal for Foreign
Exchange established under section 18
 "authorized person" means an authorized dealer, money changer, offshore banking unit or any other person for the time being authorized
under sub-section (1) of section 10 to deal in foreign exchange or
foreign securities
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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10. Definitions
 "Bench" means a Bench of the Appellate Tribunal
 “Capital account transaction" means a transaction which alters the
assets or liabilities, including contingent liabilities, outside India of
persons resident in India or assets or liabilities in India of persons
resident outside India, and includes transactions referred to in subsection (3) of section 6
 "Chairperson" means the Chairperson of the Appellate Tribunal
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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11. Definitions
 "chartered accountant" shall have the meaning assigned to it in
clause (b) of sub-section (1) of section 2 of the Chartered Accountants
Act, 1949 (38 of 1949)
 "currency" includes all currency notes, postal notes, postal
orders, money orders, cheques, drafts, travellers cheques, letters of
credit, bills of exchange and promissory notes, credit cards or such
other similar instruments, as may be notified by the Reserve Bank
 "currency notes" means and includes cash in the form of coins and
bank notes
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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12. Definitions
 Current account transaction means a transaction other than a capital
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account transaction and without prejudice to the generality of the
foregoing such transaction includes:(i) payments due in connection with foreign trade, other current
business, services, and short-term banking and credit facilities in the
ordinary course of business,
(ii) payments due as interest on loans and as net income from
investments,
(iii) remittances for living expenses of parents, spouse and children
residing abroad, and
(iv) expenses in connection with foreign travel, education and medical
care of parents, spouse and children
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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13. Definitions
 "Director of Enforcement" means the Director of Enforcement
appointed under sub-section (1) of section 36
 "export", with its grammatical variations and cognate
expressions, means—
(i) the taking out of India to a place outside India any goods,
(ii) provision of services from India to any person outside India
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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14. Definitions
 "foreign currency" means any currency other than Indian currency
 "foreign exchange" means foreign currency and includes,—
(i) deposits, credits and balances payable in any foreign currency,
(ii) drafts, travellers cheques, letters of credit or bills of
exchange, expressed or drawn in Indian currency but payable in any
foreign currency,
(iii) drafts, travellers cheques, letters of credit or bills of exchange drawn
by banks, institutions or persons outside India, but payable in Indian
currency;
Dr. Tabrez Ahmad,
http://corpoolexindia.blogspot.in
14

15. Definitions
 "foreign security" means any security, in the form of
shares, stocks, bonds, debentures or any other instrument
denominated or expressed in foreign currency and includes securities
expressed in foreign currency, but where redemption or any form of
return such as interest or dividends is payable in Indian currency
 import", with its grammatical variations and cognate
expressions, means bringing into India any goods or services;
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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16. Definitions
 "Indian currency" means currency which is expressed or drawn in
Indian rupees but does not include special bank notes and special one
rupee notes issued under section 28A of the Reserve Bank of India
Act, 1934 (2 of 1934)
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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17. Definitions
 "service" means service of any description which is made available to
potential users and includes the provision of facilities in connection
with banking, financing, insurance, medical assistance, legal
assistance, chit fund, real estate, transport, processing, supply of
electrical or other energy, boarding or lodging or
both, entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service free of
charge or under a contract of personal service
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
17

18. Definitions
 "person" includes—
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether
incorporated or not,
(vi) every artificial juridical person, not falling within any of the
preceding sub-clauses, and
(vii) any agency, office or branch owned or controlled by such person
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
18

19. FEMA - highlights
 provides guidelines for the free flow of foreign exchange in India.
 It prohibits foreign exchange dealing undertaken other than an
authorized person
 It also makes it clear that if any person residing in India, received any
Forex payment (without there being a corresponding inward
remittance from abroad) the concerned person shall be deemed to have
received they payment from a non authorized person.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
19

20. FEMA - highlights
 There are 7 types of current account transactions, which are totally
prohibited, and therefore no transaction can be undertaken relating to
them. These include transaction relating to lotteries, football
pools, banned magazines and a few others.
 FEMA and the related rules give full freedom to Resident of India (ROI)
to hold or own or transfer any foreign security or immovable property
situated outside India.
 Similar freedom is also given to a resident who inherits such security or
immovable property from an ROI.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
20

21. FEMA - highlights
 An ROI is permitted to hold shares, securities and properties acquired
by him while he was a Resident or inherited such properties from a
Resident.
 Certain prescribed limits have been substantially enhanced. For
instance, residence now going abroad for business purpose or for
participating in conferences seminars will not need the RBI's
permission to avail foreign exchange up to US$. 25,000 per trip
irrespective of the period of stay, basic travel quota has been increased
from the existing US$ 3,000 to US$ 5,000 per calendar year.
Dr. Tabrez Ahmad,
http://corpoolexindia.blogspot.in
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22. Manner of receipt in Foreign Exchange
Payment for Export can be received :
 in form of Draft, cheque, foreign currency notes/traveler’s cheque etc.
provided the foreign currency so received is surrendered within the
specified time period
 by debit to FCNR /NRE Account
 In rupees from the credit card servicing bank in India where payment is
made via credit card
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
22

23. Manner of receipt in Foreign Exchange
Contd.
 From a rupee account held in the name of exchange house with an
authorised dealer if the amount does not exceed Rs 2 lacs
 In the form of precious metals
 Payment can be received in cash from Foreign Travelers in India if the
same foreign exchange is duly surrendered
 RBI also permits offsetting of export proceeds against import payables
etc. after obtaining prescribed certificate from CA/Cost Accountant in
this regard
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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24. Manner of payment in Foreign Exchange
 Payment shall be made in a currency appropriate to the country of
shipment of goods
 Drawal of Foreign Currency means drawal from an authorised person
and includes opening of letter of credit, use of international credit card
etc. which has an effect of creating foreign exchange liability
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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25. Liberalized Remittance Scheme
 Under the Liberalized Remittance Scheme, all resident
individuals, including minors, are allowed to freely remit up to USD
200,000 per financial year (April – March) for any permissible current
or capital account transaction or a combination of both.
 Under the Scheme, resident individuals can acquire and hold
immovable property or shares or debt instruments or any other assets
outside India, without prior approval of the Reserve Bank. Individuals
can also open, maintain and hold foreign currency accounts with banks
outside India for carrying out transactions permitted under the
Scheme.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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26. Contravention and compounding
 Contravention is a breach of the provisions of the Foreign Exchange
Management Act (FEMA), 1999 and rules/ regulations/ notification/
orders/ directions/ circulars issued there under. Compounding refers
to the process of voluntarily admitting the contravention, pleading
guilty and seeking redressal
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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27. Hedging of Price Risk in Commodities
 A person resident in India is permitted to enter into a contract in a
commodity exchange or market outside India to hedge price risk in
commodities imported / exported, domestic transactions, freight
risk, etc., through the Authorised Dealer Category - I (AD Category –
I) banks.
 The role of Authorized Dealer banks here is primarily to provide
facilities for remitting foreign currency amounts towards margin
requirements from time to time, subject to verification of the
underlying exposure.
 There are two channels through which residents can undertake hedge
i.e. .Authorized Dealers’ Delegated Route and Reserve Bank’s
Approval Route
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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28. Forex facilities
 The legal framework for administration of foreign exchange
transactions in India is provided by the Foreign Exchange Management
Act, 1999. Under the Foreign Exchange Management Act, 1999
(FEMA), which came into force with effect from June 1, 2000, all
transactions involving foreign exchange have been classified either as
capital or 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.
Dr. Tabrez Ahmad,
http://corpoolexindia.blogspot.in
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29. Guidelines for Travel
 Foreign exchange can be purchased from any authorized person, such
as Authorized Dealer (AD) Category-I bank and AD Category II.
 Full-Fledged Money Changers (FFMCs) are also permitted to release
exchange for business and private visits.
 An Authorized Dealer is any person specifically authorized by the
Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign
exchange or foreign securities and normally includes banks.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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30. Guidelines for Travel
 For private visits abroad, other than to Nepal and Bhutan, viz., for
tourism purposes, etc., any resident can obtain foreign exchange up to
an aggregate amount of USD 10,000, from an Authorized Dealer, in any
one financial year, on self-declaration basis, irrespective of the number
of visits undertaken during the year. This limit of USD 10,000 or its
equivalent per financial year for private visits can also be availed of by a
person who is availing of foreign exchange for travel abroad for any
purposes, such as, for employment or immigration or studies.
 A resident Indian is allowed to take INR of denomination of Rs.100 or
lesser denomination to Nepal and Bhutan without limit.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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31. Guidelines for Travel
 For business trips abroad to countries, other than to Nepal and
Bhutan, a person can avail of foreign exchange up to USD 25,000 per
visit. Visits in connection with attending of an international
conference, seminar, specialized training, study tour, apprentice
training, etc., are treated as business visits. Release of foreign exchange
exceeding USD 25,000 for business travel abroad (other than to Nepal
and Bhutan), irrespective of the period of stay, requires prior
permission from the Reserve Bank.
 Investments in Bhutan are permitted in Indian Rupees as well as in
freely convertible currencies.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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32. Guidelines for Travel
 Travelers going to all countries other than (a) and (b) below are allowed
to purchase foreign currency notes / coins only up to USD 3000.
Balance amount can be carried in the form of travelers cheque or
banker’s draft.
 Exceptions to this are
(a) travelers proceeding to Iraq and Libya who can draw foreign exchange
in the form of foreign currency notes and coins not exceeding USD
5000 or its equivalent
(b) travelers proceeding to the Islamic Republic of Iran, Russian
Federation and other Republics of Commonwealth of Independent
States who can draw entire foreign exchange in the form of foreign
currency notes or coins.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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33. Guidelines for Travel | Medical Treatment
 AD Category I banks and AD Category II, may release foreign exchange
up to USD 100,000 or its equivalent to resident Indians for medical
treatment abroad on self declaration basis, without insisting on any
estimate from a hospital/doctor in India/abroad.
 A person visiting abroad for medical treatment can obtain foreign
exchange exceeding the above limit, provided the request is supported
by an estimate from a hospital/doctor in India/abroad.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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34. Guidelines for Travel Medical Treatment
 An amount up to USD 25,000 is allowed for maintenance
expenses of a patient going abroad for medical treatment or check-up
abroad, or to a person for accompanying as attendant to a patient going
abroad for medical treatment/check-up.
 The amount of USD 25,000 allowed to the patient going abroad is in
addition to the limit of USD 100,000 mentioned above.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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35.  Use of International Credit Cards (ICCs) / ATMs/ Debit Cards can be
made for travel abroad in connection with various purposes and for
making personal payments like subscription to foreign
journals, internet subscription, etc. The entitlement of foreign
exchange on International Credit Cards (ICCs) is limited by the credit
limit fixed by the card issuing authority only. With ICCs one can (i)
meet expenses/make purchases while abroad (ii) make payments in
foreign exchange for purchase of books and other items through
internet in India. If the person has a foreign currency account in India
or with a bank overseas, he/she can even obtain ICCs of overseas banks
and reputed agencies.
Dr. Tabrez Ahmad,
http://corpoolexindia.blogspot.in
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36. FEMA, which has replaced FERA, had become the need ofth
e hour since FERA had become incompatible with the postliberalisation policies of the Govt of India. FEMA has
brought a new management regime of Foreign Exchange
consistent with the emerging frame work of the WTO
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
36

37. NRI & PIO
NRI is a person resident outside India who is a citizen of India
PIO means a citizen of any country other than Bangladesh or
Pakistan, if:
 held anytime an Indian Passport
 either of his parents or grand parents were citizen of India
 the person is a spouse of an Indian origin or of a person referred
above
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
37

38. Facilities available to NRI & PIO
 Bank Accounts: NRE A/C, FCNR A/C, NRO A/C
 Repatriation Limit: upto USD 1 million per year from NRO Account
 Housing Loans: can obtain Housing Loans for purchasing property in
India
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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39. Acquisition of Immovable Property by NRI &
PIO in India
 Permitted to purchase Residential and Commercial Property without
RBI’S Permission
 No Limitation on the Number / size of the Property
 Purchase of Agricultural Land/ Plantation Property/ Farm Houses
requires RBI Permission
 PIO should not be a citizen of Pakistan , Bangladesh , Sri Lanka
, Afghanistan , China , Iran , Nepal , Bhutan
 Citizen of above Countries not permitted to acquire Immovable
Property except by way of Lease for less than five years without
permission of RBI
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
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40. Acquisition by NRI & PIO in India Contd.
Payment can be made by NRI / PIO out of
n
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Funds remitted to India through normal banking channel or
Funds held in NRE / FCNR / NRO account maintained in India
No payment can be made either by traveler's cheque or by foreign
currency notes and also no payment can be made outside India.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
40

41. Difference between FEMA & Income Tax
Provisions
One major distinction is in Income tax unlike FEMA purpose of stay is
not relevant and only the period of stay is relevant
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
41

42. Types of AccountsNRE (Non Resident External)
 It’s a Rupee Account
 Amount Principal as well Interest is freely repatriable
 Transfer from/to FCNR A/c permitted
 Any form of Account is maintainable
 Term Deposit permitted minimum for one and maximum for three
years
 Nomination/ Joint Holding can be done in name of /with non resident
Disadvantages:
If Rupee depreciates savings of person counted in USD depreciates
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
42

43. Types of AccountsNRO (Non Resident Ordinary)
 It’s a Rupee Account
 Current incomes in the account is freely repatriable
 Principal amount is repatriable upto USD 1 million Dollar subject to
applicable taxes
 Any form of Account is maintainable
 Term Deposit permitted minimum for one and maximum for three
years
 Nomination/ Joint Holding can be done in name of /with resident also
Disadvantages:
If Rupee depreciates savings of person counted in USD depreciates
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
43

44. Foreign Currency Non Resident Account
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Maintained in Foreign Exchange
No loss or gain due to fluctuations
Both Principal & Interest are repatriable
NRI can open this account
Residents of Pakistan and Bangladesh requires prior RBI approval
Joint Account only with NRI is permissible
Can be opened with funds remitted from outside India through normal
Banking Channels and those are of repatriable nature
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
44

45. Manner of Repatriation
It can be done in the following manner:
 Sell it to Authorised Person in India in exchange for Rupees
 Retain in an account with an authorised dealer
 Use it for discharge of a debt or liability denominated in foreign
exchange in the manner specified by RBI
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
45

46. Repatriation
“Repatriate to India" means bringing into India the realized foreign
exchange and the selling of such foreign exchange to an authorized person in India in
exchange for rupees, or
 the holding of realized amount in an account with an authorized
person in India to the extent notified by the Reserve Bank,
 It includes use of the realized amount for discharge of a debt or liability
denominated in foreign exchange
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
46

47. Surrender
 Any Foreign Exchange earned by a person other than person resident in
India not used for permissible purposes should be surrendered within
60 days of such acquisition / purchase
 However if acquired for Foreign Travel within 90 days if the exchange is
in currency and coins and 180 days if it is in traveler’s cheque or if the
same is acquired by person resident in India
These provisions are not applicable to Foreign Currencies of Nepal and
Bhutan
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
47

48. Current Account Transactions
 Any person may sell or draw foreign exchange to or from an authorized
person if such sale or drawal is a current account transaction.
 The Central Government may, in public interest and in consultation
with the Reserve Bank, impose such reasonable restrictions for current
account transactions as may be required from time to time.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
48

49. Current Account Transactions Contd.
The definition is inclusive and any expenditure which is not a capital
account transaction will be current account transaction. It includes:
 payments due in connection with foreign trade, other current
business, services, and short-term banking and credit facilities in the
ordinary course of business
 payments due as interest on loans and as net income from investments
 remittances for living expenses of parents, spouse and children residing
abroad, and
 expenses in connection with foreign travel, education and medical care
of parents, spouse and children
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
49

50. Current Account Transactions
Few Examples
 Payment for imports of goods
 Remittance of interest on investment made and funds borrowed from
abroad after tax deductions
 Remittance of Dividend if the investment was allowed without any
condition
 Booking with Airlines/Shipping
 Salary/remuneration to Foreign Directors subject to restrictions in any
other law
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
50

51. Restrictions on Current Account
Transactions
The following requires prior approval of RBI:
 Gifts and Donations above USD 5000
 Corporate Donation above 1 % of Foreign Exchange Earning during 3
previous years or USD 5 million, whichever is less
 Commission to Agents abroad for sale of residential/commercial plots
in India above 5 % of Inward Remittance or USD 25000 , whichever is
higher
 Consultancy Charges paid abroad for more than USD 1 million
 Reimbursement of Pre-incorporation expenses above 5% of FDI or
USD 1 lac whichever is higher
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
51

52. Prohibited Current Account Transactions
 Drawal of exchange for travel to or with residents of Nepal/Bhutan
 Commission on export to JV/WOS abroad
 Commission on Rupee Trade
 Call back Charges
 Remittance out of Lottery, racing etc.
 Bogus Prizes / Fictitious Schemes etc.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
52

53. Release of Exchange for Travel
The following do not require any approval from RBI:
 Upto USD 10,000 or equivalent in one financial year for one or more pvt
visits abroad (nepal and Bhutan being exempted )
 Upto USD 25,000 for business visits
 Upto
USD 1,00,000 for person going to abroad
employment, education (yearly) and for medical Treatment
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
for
53

54. Business and Commercial Remittance
Abroad
 Foreign Technology Agreements are permitted except in High Priority
Industries
 Payment can be made on lump sum or Royalty based on sales or by
issue of Equity Shares after deducting TDS
 There are no limitations on royalty payment and payment of Technical
Fees
 No collaboration permitted in Lottery, Gambling etc.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
54

55. Import of Goods & Services
Import of Goods and Services is also a Current Account Transaction
and is freely permitted however few procedures are required to be
followed as
 Obtaining of Import License if required
 Opening of Letter of Credit
 CA Certificate for deduction of TDS for payment made outside
 Gold may be imported by nominated agencies/banks on consignment
basis
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
55

56. Export of Goods & Services
 Exporter should make proper Declaration in prescribed
forms to Authorised Dealers
 Declaration
is
not
required
in
case
Trade
Samples, Baggage, Gifts less than 5 lacs etc.
 Export of Goods on following requires prior approval
 Lease/hire
 Counter Trade
 Export on Elongated Credit Terms
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
56

57. Capital Account Transactions
 "capital account transaction" means a transaction which alters the
assets or liabilities, including contingent liabilities, outside India of
persons resident in India or assets or liabilities in India of persons
resident outside India, and includes transactions like:

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Changes in Assets/ Liabilities
Transfer/ issue of security
Borrowing/ Lending
Export, import or holding of currency or currency notes
Giving guarantee
 Capital Account Transaction are deemed to be prohibited unless
permitted and Current Account Transactions are deemed to be
permitted unless prohibited
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
57

58. Foreign Direct Investment
Investing in India
Government Route
(FIPB)
Automatic Route
General Rule
No prior Permission Required
Only informing RBI within 30
days
of issue and reciept of funds
Prior Permission Required
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
58

59. Who can make FDI?
 Person Resident outside India except of Pakistan
 Entity incorporated outside except Pakistan & Bangladesh
 Person Resident of Bangladesh & entities incorporated there can make
investment in India in form of shares and conv. Debentures with prior
approval of RBI
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
59

60. Industrial Policy towards Foreign Investment
FDI in shares is permitted 100% in all industries except the following:
 Proposals requiring Industrial License
 Investment exceeding 24% inn SSI reserved items
 Investment in Defense sector upto 26%
 Foreign collaborator having previous tie up
 Acquisition in shares of existing Company
 Prohibited Sectors
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
60

61. Prohibited Sectors


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Retail Trading (except single brand retailing)
Atomic Energy
Lottery Business
Gambling Betting etc.
Business of chit fund
Nidhi Company
Trading in TDRs
Activity /sector not opened for private sector investment
Agriculture except few prescribed
Plantation except tea plantation
Real Estate Business except few prescribed
Manufacture of Cigars, cigarettes etc.
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
61

62. Activities requiring Government Approval

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Petroleum Sector
Investing Companies in Infrastructure and Service Sector
Defense & Strategic Industries
Atomic Minerals
Print Media
Broadcasting
Postal Services
Courier Services
Establishment & operation of Satellite
Development of Integrated Township
Tea Sector
Asset Reconstruction Company
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
62

63. Penalties for Contravention under FEMA
 The Penalty could be up to thrice the sum involved where amount is
quantifiable
 If the Amount is not quantifiable , penalty upto Rs 2 lacs can be
imposed
 If contravention is of continuing nature, further penalty up to Rs 5000
per day during which the contravention continues can be imposed
Dr. Tabrez
Ahmad, http://corpoolexindia.blogspot.in
63

64. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in
64

65. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in
65

66. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in
66