NRI guide 2013 ver 3.00 addendum updated upto 10 10-2013

NRI GUIDE 2013 Ver 3.00
Addendum (updated up to 10th October,2013)
This is an addendum to NRI Guide 2013

NRI GUIDE 2013
(Ver 3.00) – Addendum (updated up to 10th October,2013)
This is an addendum to NRI Guide 2013
(A Comprehensive Guide for Indians residing outside India)

Prepared by
Prakash Nair
Prakash@yourownadviser.com
www.yourownadviser.com

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Addendum to NRI Guide 2013 Ver 3.00


Table of Contents
1)
2)
3)
4)
5)
6)
7)

Differentials in tax treatment between Residents and Non-Resident
Custom Duty on Flat Panel (LCD/LED/Plasma) Television Baggage
Customs Duty Free Allowance Limit & Duty rate for Pasasngers
The Limit of carrying Rupees while travelling to India is limited to Rs. 7,500.00
Export and Import of Currency
Liberalized Remittance Scheme – Clarifications
RBI grants banks freedom to offer interest rates on NRE deposits with maturity of
3 years
8) NRI can pay RTI fees online now
9) RBI relaxes norms for non-resident investors
10) RBI clarifies its recently revised Overseas Direct Investment Guidelines
11) CNR(B)NRE deposits exemption from maintenance of CRR/SLR
12) Circular on KYC requirements for Eligible Foreign Investors investing through
PIS route
13) Compounding of Contraventions under FEMA, 1999 – Master Circular No.
9/2012-13
14) Amendment in Agreement For Avoidance Of Double Taxation And Prevention Of
Fiscal Evasion With Sweden
15) India signs DTAA with Latvia
16) NRI investment norms in real estate eased
17) Liberalised Remittance Scheme for Resident Individuals – Reporting
18) ups limit on inward remittances
19) Swap Window for Attracting FCNR (B) Dollar Funds & its salient features
20) Master Circular on Miscellaneous Remittances from India – Facilities for
Residents
21) RBI ups limit on inward remittances
23) Master Circular on Miscellaneous Remittances from India – Facilities for
Residents
24) RBI allows NRIs to transfer funds from NRO to NRE account

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1) Differentials in tax treatment between Residents and Non-Residents

The Non-resident Indians are not treated in at par with the Resident Indians when it
comes to taxation in India. The following are some of the differentials in tax treatment
between Residents and Non-Residents.
Resident Indian
Basic Tax Exemption

Non Resident Indian

Resident senior citizens
(above 60 years) and super
senior citizens (above 80
years) have a basic tax
exemption of Rs 2.5 lakh
and Rs 5 lakh, respectively.

For senior citizens and
super senior NRIs, this limit
is much lower at Rs 2 lakh
only.
Additional tax rebate of Rs.
2,000 u/s 87A of the IT Act
is also not available for
NRIs (announced in 2013
budget).

Adjustment
of
capital gains

Taxable Resident Indians can adjust NRIs cannot adjust the
his taxable capital gains taxable capital gains
against basic exemption against the basic exemption
limit.
limit. If an NRI earns Rs 2
lakh capital gains and no
other income, the full
amount is taxed at the
applicable rate.
The facility of adjusting any
taxable capital gain against
the room left over in the
basic exemption limit is
available only to resident
Indians. This facility has not
been extended to NRIs and
hence, at all times, the full
amount of capital gain

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(taxable) would be subject
to tax and not only the
portion over and above the
basic exemption limit
Income Tax Deductions
Equity Investments

Deduction under Section
80CCG
(Rajiv
Gandhi
Equity Saving Scheme) for
first-time investors in equity
can be availed of only by
resident Indians.

NRI’s are not eligible to
invest in RGESS and hence
denied the benefit of
investing in the Rajiv
Gandhi
Equity
Saving
Scheme.

Disability - Section 80U

Under Section 80U, a NRIs are not eligible to get
resident Indian can claim any tax benefit under
section 80U and 80DD.
deduction of up to Rs
50,000 if he suffers from a
disability. The deduction is
Rs 1 lakh if the disability is
severe.
Under
Section
80DD,
resident taxpayers can
claim a deduction of Rs
50,000 for the treatment of
a
disabled dependent
Again, the deduction is
higher at Rs 1 lakh in case
of severe disability.

Medical treatment - Section Under Section 80DDB, NRI’s don’t get any tax
80DDB
benefit
under
section
resident taxpayers can
80DDB.
claim a deduction of up to
Rs 40,000 for the treatment
of dependents with
specified diseases. The
deduction is higher at Rs
60,000 in case of senior

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citizens.
Tax Deducted at Source (TDS)
Buy/Sale of Real Estate When a resident Indian
such as land, building etc
purchases
a
property
valued at over Rs 50 lakh,
he has to deduct 1% TDS
and deposit it with the
government.

If the property belongs to
an NRI, the TDS is 20%
even if the property is worth
less than Rs 50 lakh.
This 20% TDS is
applicable upfront for
long term capital gain and
30% for short term capital
gains (this is an existing
clause - Section 195) when
NRIs sell any
immoveable property. This
clause is applicable even if
the sale consideration is
less than Rs. 50 lakh
An NRI selling property in
India can apply to his
assessing officer for a
certificate of non-deduction
or lower tax deduction that
is for deducting tax only on
the capital gain amount.
The new section 194-IA is
related to the tax needs to
be deducted when
someone sells any
immovable property (other
than agricultural land) to a
resident transferor of the
consideration exceeds Rs.
50 lakh the buyer needs to
deduct 1% tax from such
amount and remitted to the
Govt. (Budget 2013)

Bank Interest

5

Resident Indians can avoid NRIs are not permitted to
the TDS on bank interest by submit Form 15G for their
submitting the Form 15G or NRO deposits in banks,
and TDS is mandatory. The



15H.

TDS rate for NRO deposits
is 30.9% compared with
10.3% for fixed deposits for
resident Indians.

The TDS is applicable for a
resident Indian if the
interest exceeds Rs 10,000
in a year per bank branch.
As
mentioned
earlier
interest on Savings Bank
depostis upto Rs. 10,000 is
exempted from tax

However, this threshold
limit does not apply to NRO
deposits. Even Re 1 is
subjected to TDS at the
rate of 30.9%. The interest
earned
on
all
other
investments,
such
as
corporate deposits and
bonds, is subject to a
20.6% TDS, whereas the
rate for resident Indians is
only 10.3%
NRIs are not permitted to
submit Form 15G and
15H. Income earned on
NRE/FCNR deposit is fully
exempted from tax, more
over the NRIs can submit
the required forms and get
lower tax deduction as per
the
DTAA
agreement
between India and other
countries. For eg. those
NRIs from Saudi Arabia, if
they submit the required
forms the banks will deduct
only 10.3% tax instead of
30.09% for the interest
earned on NRO deposits

From AY 2013-14 onwards
deduction up to Rs. 10,000
for interest from savings
bank accounts is available
for all resident Indians as
per Section 80TTA of the
Income Tax Act. Benefits
under this section are not

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available for
accounts.
Capital gains on shares and No TDS is applicable on
mutual funds
short-term or long-term
capital gains earned by
resident Indians when they
sell mutual funds or stocks.

NRO

SB

However, for NRIs, there is
a 15% TDS (plus 3% cess)
on short-term capital gains
from shares and mutual
funds if the securities
transaction tax (STT) has
been paid. If no STT has
been paid, the TDS rate is
higher at 30.9%. They are
even subjected to a 10%
TDS on long-term gains
from shares and mutual
funds (unlisted)
Long term capital gains
from debt mutual funds and
corporate debentures when
sold in the secondary
market will be subject to
TDS @ 10% (plus 3%
cess) for NRIs (u/s
115E/112 of the IT Act unlisted non-equity oriented
mutual fund schemes).
Also, TDS is applicable for
selling unlisted shares even
if it is long term capital
gains.
The long term capital gain
for Equity Mutual Funds
and listed shares are totally
exempted from tax for both
residents and nonresidents, then there is no
question of deduction of tax
at source. Also note that
exemption is for those
cases of redemption of
units where STT is payable
on redemption (u/s 10(38) capital gains
Short Term capital gain on

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equity mutual funds/shares
is subject to TDS
Rental and other income

Resident Indians are liable
to pay TDS at the rate of
10% on rental income
obtained from land and
buildings.

TDS rate is higher at 30%,
along with a cess of 3%, for
the non-resident Indians. All
other taxable incomes of an
NRI are also subject to a
30% TDS, besides the
cess.

NRIs are also not eligible to invest in Post Office Monthly Income Schemes, NSC,
Senior Citizens Schemes etc, Chitty etc. If NRIs wanted to buy agricultural
land/estate/Planantation property/ Farm house etc, they need to take special
permission from RBI.
Why people are worried about the tax deduction, they can file their tax returns and get
the refund from the IT Dept. Now filing of tax return is very simple, that they can do
within 30 minutes time ( Quick Return Filing). The IT Dept. will return the money with
eligible interest. We should encourage the NRIs to file their tax returns regularly even if
they don’t have any taxable income. It is very pity to note that, lot of NRIs still doesn’t
have NRE accounts and they do the financial transactions totally against the existing
rules/regulations.
The people should understand one thing that, the basic idea of higher tax deduction
from NRIs/Foreign National should be secured at the earliest point of time so that there
is no difficulty in collection of tax subsequently at the time of regular assessment. This
will eliminate chasing such NRIs/Foreign nationals for recovery of their tax dues
subsequently, due to jurisdictional and other operational difficulties. Some of the
NRIs/Foreign Nationals are likely to have nil or at meager assets in India which may be
totally inadequate to recover the tax dues. But lot of poor NRIs suffering due to the
applicability of this clause, As mentioned earlier the NRIs can get exemption from the
TDS provided they obtain a non-deduction certificate from the concerned Assessing
Officer or they can get refund from the Income Tax authorities by way of filing proper
tax returns.

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4) Custom Duty on Flat Panel (LCD/LED/Plasma) Television Baggage
NOTIFICATION No. 84 /2013-Customs (N.T.)
New Delhi, the 19th August, 2013
G.S.R. (E). – In exercise of the powers conferred by section 79 of the Customs Act,
1962 (52 of 1962), the Central Government hereby makes the following rules to further
amend the Baggage Rules, 1998, namely:1. (1) These rules may be called the Baggage (Second Amendment) Rules, 2013.
(2) They shall come in to force on the 26th day of August, 2013.
2.
In the Baggage Rules, 1998, in Annex I, after item 5 relating to Gold or silver, in
any form, other than ornaments, the following item shall be inserted, namely:“6. Flat Panel (LCD/LED/Plasma) Television.”.
[F.No.354/112/2013-TRU]
[Raj Kumar Digvijay]
Under Secretary to the Government of India
Note. – The principal rules were published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i) vide notification No. 30/98-Customs (N.T.), dated the
2nd June, 1998 [GSR 296 (E), dated the 2nd June, 1998] and last amended
vide notification No.25/2013-Customs (N.T.), dated the 1st March, 2013 published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)vide number G.S.R.
139 (E), dated the 1st March, 2013

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5) Customs Duty Free Allowance Limit & Duty rate for Pasasngers
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART II, SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
New Delhi, the 10th September, 2013
Corrigendum
G.S.R. – In the notification of the Government of India, in the Ministry of Finance
(Department of Revenue), No. 90/2013 – Customs (N.T.), dated the 29th August, 2013,
published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide
number G.S.R. 584 (E) dated the 30th August, 2013,
(i)

in Form I, for

“Please report to Customs Officer at the Red Channel counter in case answer to any of
the above question is ‘Yes’.
Signature of Passenger …………………………”
read
“Please report to Customs Officer at the Red Channel counter in case answer to any of
the above question is ‘Yes’.
Signature of Passenger …………………………
IMPORTANT INFORMATION
Items prohibited for import include:
1. Maps and literature where Indian external boundaries have been shown incorrectly.
2. Narcotic Drugs and Psychotropic Substances.
3. Goods violating any of the legally enforceable intellectual property rights.

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4. Wild life products.
5. Counterfeit Currency notes/coin or fake Currency notes.
6. Specified Live Birds and animals.
Customs Duty Free Allowance
Eligible Passenger

Origin Country
Nepal,

Passengers of Indian origin Bhutan,
and foreigners of over 10
years of age residing in India Myanmar,

Duty Free Allowance

Rs. 6,000

China
Other than
Nepal,
Passengers of Indian origin
Bhutan,
and foreigners of over 10
years of age residing in India
Myanmar,

Rs. 35,000

China
Tourists of foreign origin

Anywhere

Indian passenger who has
been residing abroad for over Anywhere
one year
Anywhere
All passengers
Anywhere
Passenger of 18 years and
above

Anywhere

Gifts and souvenirs worth
Rs. 8,000
Gold jewellery:
Gentleman – Rs. 50,000
Lady – Rs. 1,00,000
Alcohol liquor or wine: 2
litres
Cigarettes: 200 numbers
or Cigars upto 50 or
Tobacco 250 grams
One laptop computer
(note book computer)

Customs duty is leviable @ 36.05% (Basic Customs duty @ 35% + Education Cess
@3%) on the value of dutiable goods that is in excess of the Duty Free Allowance.
Indian Customs is responsible for protecting the nation against the illegal import of
prohibited items. Indian Customs officers have the authority to question you and to
examine you and your personal property. If you are one of the passengers selected for

11



questioning / examination, you will be treated in a courteous, professional and dignified
manner.
If your baggage is mishandled / lost on arrival, please obtain endorsement of free
allowance, if any, from Customs Officer at Mishandled Baggage Counter.
For updated information on items prohibited/restricted for import or in case of any
difficulty or complaint, please contact the Customs PRO.
INDIAN CUSTOMS WELCOMES YOU TO INDIA
[F. No. 520/13/2013-Cus.VI]
(S.C.Ganger)
Under Secretary to the Government of India

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6) The Limit of carrying Rupees while travelling to India is limited to Rs. 7,500.00
RBI Clarification on Export and Import of Currency
RBI/2013-14/233
A.P. (DIR Series) Circular No. 39
September 6, 2013
To
All Category – I Authorised Dealer Banks
Madam/ Sir,
Export and Import of Currency
Attention of Authorised Persons is invited to Regulation (2) of Foreign Exchange
Management (Export and Import of Currency) (Amendment) Regulations, 2009, notified
vide Notification No. FEMA 195/RB-2009 dated July 7, 2009, in terms of which, any
person resident in India may take outside India or having gone out of India on a
temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency
notes of Government of India and Reserve Bank of India notes up to an amount not
exceeding Rs.7,500 per person.
2. As part of providing greater flexibility to the resident individuals travelling abroad, the
existing limit, mentioned above, has been enhanced to Rs. 10,000 per person.
3. Accordingly, any person resident in India:
i) may take outside India (other than to Nepal and Bhutan) currency notes of
Government of India and Reserve Bank of India notes up to an amount not exceeding
Rs.10,000 (Rupees ten thousand only) per person; and
ii) who had gone out of India on a temporary visit, may bring into India at the time of his
return from any place outside India (other than from Nepal and Bhutan), currency notes
of Government of India and Reserve Bank of India notes up to an amount not exceeding
Rs.10,000 (Rupees ten thousand only) per person.
4. Authorised Persons may bring the contents of this circular to the notice of their
constituents, customers and foreign counter parties concerned.
5. Reserve Bank of India has since amended the relevant Regulations vide Notification
No.FEMA.258/2013-RB dated February 15, 2013, notified vide G.S.R.No.480(E) dated
July 12, 2013

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5. The directions contained in this circular have been issued under sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-in-Charge

RBI enhances limit of Indian Currency for Resident individual travelling abroad
from Rs. 7,500 to Rs. 10,000
The amount has been enhanced to Rs 10,000 a person compared with Rs 7,500 earlier
In a bid to provide greater flexibility to resident individuals travelling abroad and to
attract more foreign exchange inflows in India, the Reserve Bank of India (RBI) on
Friday enhanced the limit of Indian rupees any person residing in India can take outside
the country or a person who has gone out of India on a temporary visit can bring into
India.
The amount has been enhanced to Rs 10,000 a person compared with Rs 7,500 earlier.
“Any person resident in India might take outside India (other than to Nepal and Bhutan)
currency notes of government and RBI notes up to an amount not exceeding Rs 10,000
a person and who had gone out of India on a temporary visit, might bring into India at
the time of his return from any place outside India (other than from Nepal and Bhutan),
currency notes of government and RBI notes up to an amount not exceeding Rs 10,000
a person,” said RBI in a notification on Friday.

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7) Export and Import of Currency

Indian Currency limit for Resident individuals travelling abroad
RBI/2013-14/233
September 6, 2013
To
Madam/ Sir,
Attention of Authorised Persons is invited to Regulation (2) of Foreign Exchange
Management (Export and Import of Currency) (Amendment) Regulations, 2009, notified
vide Notification No. FEMA 195/RB-2009 dated July 7, 2009, in terms of which, any
person resident in India may take outside India or having gone out of India on a
temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency
exceeding Rs.7,500 per person.
2. As part of providing greater flexibility to the resident individuals travelling abroad, the
existing limit, mentioned above, has been enhanced to Rs. 10,000 per person.
3. Accordingly, any person resident in India:
i) may take outside India (other than to Nepal and Bhutan) currency notes of
Government of India and Reserve Bank of India notes up to an amount not exceeding
Rs.10,000 (Rupees ten thousand only) per person; and
ii) who had gone out of India on a temporary visit, may bring into India at the time of his
return from any place outside India (other than from Nepal and Bhutan), currency
exceeding Rs.10,000 (Rupees ten thousand only) per person.
4. Authorised Persons may bring the contents of this circular to the notice of their
constituents, customers and foreign counter parties concerned.
No.FEMA.258/2013-RB dated February 15, 2013, notified vide G.S.R.No.480(E) dated
July 12, 2013
11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are without
Yours faithfully,
(Rudra Narayan Kar)

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8) Liberalized Remittance Scheme – Clarifications
RBI/2013-14/222
A.P. (DIR Series) Circular No.32
September 04, 2013
To
All Authorised Dealer Category-I Banks
Madam / Sir,
Liberalized Remittance Scheme – Clarifications
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the
A.P. (DIR Series) Circular No. 24 dated August 14, 2013. In this connection, Reserve
Bank has been receiving queries from the various stakeholders and Authorised Dealer
banks. All such queries have been collated and are given at the annex together with
the answers/ clarifications.
2. AD Category – I banks may bring the contents of this circular to the notice of their
constituents and customers concerned.
3. The directions contained in this circular have been issued under Sections 10(4) and
11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are without
Yours faithfully,
(C. D. Srinivasan)
Chief General Manager
[Annex to A.P.(DIR Series)
Circular No.32 of 04.09.2013]
Clarifications on Liberalized Remittance Scheme (LRS)
S.
No.
1

Query

Answer / Clarification

Whether LRS can be used
for acquisition of both
unlisted and listed shares
of an overseas company?

In terms of the extant FEMA provisions LRS can be
used to acquire both listed and unlisted shares of an
overseas company. The Master Circular dated July
1, 2013 has been suitably modified.

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2

Can a resident
individual use the other
limits under Schedule III to
FEM CAT Rules 2000, as
amended from time to time,
such as remittances for
education, health / medical
expenses over and above
the LRS limit?

17

As per the current guidelines of LRS, only gift and
donation (from the list of items under Schedule III to
FEM CAT Rules, 2000), by a resident individualhave
been subsumed under the LRS limit. For all other
purposes such as educational and medical expenses
the limits of LRS and Schedule III to FEM CAT Rules
2000 are separate, distinct, mutually exclusive and
over and above each other respectively.
In this context, it may be noted that under the extant
guidelines under FEMA the following remittances
can be made over and above the annual limit of USD
75000 permissible under LRS:
1. A resident individual can make remittances for
meeting expenses for medical treatment abroad
up to the estimate from a doctor in India or
hospital/ doctor abroad under general permission
(without any RBI approval – Para 9 of Schedule III
to FEM CAT Rules, 2000, as amended from time
to time).
2. A resident individual can make remittances up to
USD 25,000 for maintenance expenses of a
patient going abroad for medical treatmentor
check-up abroad or for accompanying as
attendant to a patient going abroad for medical
treatment/ check-up (without any RBI approval –
Para 8 of Schedule III to FEM CAT Rules, 2000,
as amended from time to time).
3. A resident individual can make remittances for
studies up to the estimates from the institutions
abroad or USD 100,000, whichever is higher
(without any RBI approval – Para 10 of Schedule
III to FEM CAT Rules, 2000, as amended from
time to time). This is over and above the
remittance limit of USD 75,000 which can be
made under the LRS route for the same.
4. A resident individual can also make all other
remittances (other than donation and gifts) as
stipulated under Schedules III to FEM CAT Rules,
2000, as amended from time to time.
5. A resident individual can also carry out other
permissible current account transactions
(transactions which are not explicitly prohibited
under Schedule I, or restricted under Schedules II
and III, to FEM CAT Rules, 2000, as amended
from time to time) without any limits through an



AD Bank in India subject to the AD bank verifying
the bonafides of the transaction (para 6 to Annex
1 of ADMA CircularNo.11 dated May 16, 2000).
Therefore notwithstanding the revised guidelines and
reduction in the LRS limit these guidelines do not
affect genuine transactions.

3

4

As per para 2 (iii) of AP (Dir
Series)Circular No.24
dated August 14,
2013Notification FEMA
263/2013-RB is dated
August 5, 2013 but the
said Notification as
available on the website is
dated March 5, 2013?
What is the correct date of
this Notification?

The said Notification is dated March 5, 2013 but
gazetted on August 5, 2013. As per Regulation 1(ii)
of thisNotification, this Notification shall come into
force from the date of publication in Official Gazette,
accordingly the effective date of thisnotification is
August 5, 2013 (while the date of the notification is
March 5, 2013).

Can resident individuals
make remittances under
LRS for investments in
immovable properties
abroad which were
acquired under instalment
basis?

Resident individuals are permitted to make
remittances for acquiring immovable property within
the annual limit of USD 75000 for already contracted
cases, i.e. only for those contracts which were
entered into on or before the date of the circular, i.e.,
August 14, 2013, subject to satisfaction of the
genuineness of the transactions by the AD bank.
Such cases should be immediately reported post
facto to the Reserve Bank of India by the A D banks.

18



9) RBI grants banks freedom to offer interest rates on NRE deposits with
maturity of 3 years
RBI/2013-14/215
UBD.BPD.(PCB) CIR No.8/13.01.000/2013-14
The Chief
Executive
All Primary (Urban) Co-operative Banks

September 3, 2013
Officers

Dear Sir/Madam,
Deregulation of Interest Rates on
Non-Resident (External) Rupee (NRE) Deposits
Please refer to our circular UBD.BPD.(PCB) CIR No.16/13.01.000/2011-12 dated
December 28, 2011 on Deregulation of Interest Rates on Non-Resident (External)
Rupee (NRE) Deposits and Ordinary Non- Resident (NRO) Accounts.
2. In terms of paragraph 2 ibid, interest rates offered by banks on NRE deposits cannot
be higher than those offered by them on comparable domestic rupee deposits.
However, in order to pass on the benefit of exemption provided on incremental
NRE deposits with maturity of 3 years and above from CRR/ SLR requirements, it has
been decided to give banks the freedom to offer interest rates on such deposits without
any ceiling. The extant ceiling on NRO Accounts will continue.
3. All other instructions in this regard, as amended from time to time, will remain
unchanged.
4. These instructions will be valid up to November 30, 2013, subject to review.
5. An amending directive UBD.BPD.DIR No.3/13.01.000/2013-14 dated August 30,
2013 is enclosed.
Yours faithfully,
(A.K.Bera)
Principal Chief General Manager
UBD.BPD.DIR No. 3 /13.01.000/2013-14
August 30, 2013
Deregulation of Interest Rates on Non-Resident
(External) Rupee (NRE) Deposits
In exercise of the powers conferred by Section 35A, read with Section 56 of the Banking
RegulationAct, 1949, and in modification of the directive UBD.BPD.DIR No.
5/13.01.000/2011-12 dated December 28, 2011 on Deregulation of Interest Rates on
Non-Resident (External) (NRE) Depositsand Ordinary Non-Resident (NRO) Accounts,
the Reserve Bank of India being satisfied that it is necessary and expedient in the public
interest so to do, hereby directs that banks are free to offer interest rates without any

19



ceiling on NRE deposits with maturity of 3 years and above. The extant ceiling on NRO
Accounts will continue. These instructions will be valid up to November 30, 2013,
subject to review.
(S.
Karuppasamy)
Executive Director

10) NRI can pay RTI fees online now
Department of Posts, Ministry of Communications & IT, today in association with
Department of Personnel and Training launched Electronic Indian Postal Order (eIPO)
to enable Indian citizens abroad to pay RTI fee online. This is a facility to purchase an
Indian Postal Order electronically by paying a fee on-line through e-Post Office Portal
i.e. https://www.epostoffice.gov.in. It can also be accessed through India Post
website www.indiapost.gov.in.
At present, this facility is available only for Indian Citizens abroad across the globe to
facilitate them to seek information under the RTI Act, 2005. Both Debit and Credit of any
Bank powered by Visa/Master can be used for this purpose. All the requirements for
filling an RTI application as well as other provisions regarding eligibility, time limit,
exemptions etc; as provided in the RTI Act, 2005 will continue to apply.
The applicant needs to register on the website to create his/her profile for the first time.
He has to select the Ministry/Department from whom he desires to seek information
under the RTI Act and theeIPO so generated can be used to seek information from that
Ministry/Department only. A printout of the eIPO is to be attached with the RTI
application sent in hard copy. In case RTI application is filed electronically, eIPO is
required to be attached as an attachment.

20



11) RBI relaxes norms for non-resident investors
Allows them to take FDI route, buy shares directly on stock exchanges
In yet another step to attract foreign money, the Reserve Bank of India (RBI) allowed
non-resident investors to acquire shares of listed Indian companies through stock
exchanges under the foreign direct investment (FDI) scheme.
The central bank has said such investment will be allowed only if the non-resident
investor has already “acquired and continues to hold control” according to the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations.
At present, foreign institutional investors (FIIs), qualified foreign institutions and nonresident Indians (NRIs) are eligible to acquire shares on stock exchanges in compliance
with FEMA regulations, but they are not permitted to acquire shares on bourses under
the FDI scheme.
According to experts, the new regulation will pave the way for foreigners to be treated
on a par with FIIs, as they can buy shares in the company they control (in line with
the SEBI takeover code regulations) through on-market deals. Earlier, they were
allowed to do so only through off-market deals.

“This will also have tax implications, as stock market transactions don’t attract capital
gains. Also, the move to allow such acquisitions to be funded through dividend paid to
NRIs is significant.
Such transaction should happen through a registered broker, RBI said in a notification.
Earlier, a non-resident wasn’t permitted to acquire shares on stock exchange.
Some experts were of the view that the move was a step towards fuller convertibility of
the rupee. “This is a step towards full convertibility of the rupee. Right now, we allow
repatriation of capital to a select class of investor and in select assets. Now, this window
has been opened to even foreign individuals and NRIs. This makes India a more
attractive investment destination,” said Sivarama Krishnan, executive director, risk
advisory services of consultant firm PwC.
The central bank has also laid out certain conditions for the sources of funds for
purchase of shares. The amount should be paid by way of inward remittance through
normal banking channels, the RBI said. It further said the amount can be paid by way of
debit to the NRE/FCNR account of the person concerned or paid by debit to a noninterest-bearing escrow account (in rupees) maintained in India.
Further, the consideration amount can be paid out of the dividend paid by Indian

21



investee company, in which the said non-resident holds control. Such dividends,
however, should have been credited to specially designated non-interest bearing rupee
account for acquisition of shares on the floor of stock exchange.
RBI has also said that the original and resultant investments have to be in line with the
extant FDI policy and FEMA regulations in respect of sectoral cap, entry route, reporting
requirement, and documentation.
LURING FOREIGN FUNDS
* NRIs qualify only if they have “acquired and continue to hold control” under Sebi
norms
* Foreigners could be treated on a par with FIIs as they get on-market-deal window
* Deals can only happen through a registered broker
* Some experts say step a precursor to fuller convertibility of the rupee
* Share purchase should be paid by inward remittance through banking channels
* Amount can be paid via debit to NRE/FCNR accounts or via debit to non-interest
bearing escrow account
Source : Economic Times

22



12) RBI clarifies its recently revised Overseas Direct
Investment Guidelines
The Reserve Bank of India has today issued certain clarifications with respect to the applicability
of the revised guidelines in respect of overseas direct investment notified on August 14, 2013 to
facilitate genuine outward investment requirements of the Indian companies. The
clarifications/answers to the queries raised by different stakeholders are contained in its AP (Dir)
Circular No. 30 dated September 04, 2013. Among others, it has been clarified that in respect of
funding of overseas direct investments by way of External Commercial Borrowings, instead of
limit of 100 per cent of the net worth, the earlier limit of 400 per cent of the net worth will
continue to apply.
It may be noted that the Reserve Bank of India had announced the revised guidelines for
overseas direct investment by Indian parties on August 14, 2013. This measure had been taken in
the context of current macro-economic situation. It was not the intention of the Reserve Bank of
India to restrict bona-fide and genuine overseas direct investment transactions by Indian
companies.
Alpana Killawala
Principal Chief General Manager
Press Release : 2013-2014/483

13) FCNR(B)NRE deposits exemption from maintenance of CRR/SLR
RBI/2013-14/190
RPCD.CO.RRB/RCB.BC.No. 20 /03.05.33/2013-14
August 19, 2013
All Regional Rural Banks/
Scheduled State Cooperative Banks
Dear Sir,
Section 42(1) of the Reserve Bank of Inida Act, 1934 and Section 24 of the Banking
Regulation Act, 1949 – FCNR(B)/NRE deposits – exemption from maintenance of
CRR/SLR
At present, banks are required to include all Foreign Currency Non-Resident Bank
[FCNR (B)] and Non-Resident (External) Rupee (NRE) deposit liabilities for computation
of Net Demand and Time Liabilities (NDTL) and for maintenance of CRR and SLR.
2. Banks are advised that with effect from fortnight beginning August 24, 2013,
incremental FCNR (B) deposits as also NRE deposits with referance base date of July

23



26, 2013, and having maturity of three years and above, mobilised by banks will be
exempt from maintenance of CRR and SLR. To amplify, if a bank had a total FCNR (B)
deposit base of say USD 100 as on the base date, and mobilises an incremental
deposit of say USD 20, that portion of USD 20 which has a maturity of 3 years and
above will not be part of NDTL and will qualify for CRR and SLR exemption. The same
principle will apply for calculation of NRE deposits for exemption from maintenance of
CRR/SLR requirements. However, any transfer from Non-Resident (Ordinary) (NRO)
accounts to NRE accounts shall not qualify for such exemptions.
3. Please acknowledge receipt to our Regional Office concerned.
Yours faithfully,
(Madhavi Sharma)

14) Circular on KYC requirements for Eligible Foreign Investors investing through
PIS route
SEBI has vide its circular dated September 12, 2013 detailed KYC requirements of
Eligible Foreign Investors investing through PIS route. The requirements are based on
the recommendations of “Committee on Rationalization of Investment Routes and
Monitoring of Foreign Portfolio Investments” under the Chairmanship of Shri K. M.
Chandrasekhar.
a) The Eligible Foreign Investors have been divided into three categories. Category I
includes government or government related entities. Category II entities are regulated
entities in other jurisdictions. Category III are non regulated entities.
b) The circular provides for minimum documentation requirements.
c)
The requirements for obtaining photo identities, address proofs or any other
documentary requirements of the beneficial owner, senior management personnel,
authorized signatories have been done away with for the Category I and II
eligible foreign investors.
Attention is also drawn to Rule 9(2) of the PML (Maintenance of Records) Rules, 2005
(Government of India, Ministry of Finance, Department of Revenue, Notification dated
August 27, 2013) which provides that a reporting entity may rely on third party client due
diligence subject to conditions mentioned therein.
The simplification in the rules should lead to smoother on-boarding of eligible foreign
investors and result in higher inflows into the country.

24



15) Compounding of Contraventions under FEMA, 1999 – Master Circular No.
9/2012-13
COMPOUNDING OF CONTRAVENTIONS UNDER FEMA, 1999
MASTER CIRCULAR NO. 9/2012-13, Dated 2-7-2012
The compounding of contraventions under Foreign Exchange Management Act
(FEMA), 1999 is a voluntary process by which an applicant can seek compounding of
an admitted contravention of any provision of FEMA, 1999 under Section 13(1) of the
FEMA, 1999.
2. This Master Circular consolidates the existing instructions on the subject of
“Compounding of Contraventions under FEMA, 1999” at one place. The list of
underlying circulars /notifications, consolidated in this Master Circular, is furnished in the
Appendix.
3. This Master Circular is being issued with a sunset clause of one year. This circular
will stand withdrawn on July 1, 2013 and be replaced by an updated Master Circular on
the subject.
1. General
1.1 In terms of Section 13(1), Chapter IV of FEMA 1999, if any person contravenes any
provision of FEMA, 1999, or any rule, regulation, notification, direction or order issued in
exercise of the powers under this Act, or contravenes any condition subject to which an
authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a
penalty up to thrice the sum involved in such contravention where the amount is
quantifiable or up to Rupees Two lakh, where the amount is not quantifiable and where
the contravention is a continuing one, further penalty which may extend to Rupees Five
thousand for every day after the first day during which the contravention continues. The
provisions of Section 15 of FEMA, 1999 permit compounding of contraventions and
empower the Compounding Authority to compound any contravention as defined under
Section 13 of the ACT on an application made by the person committing such
contravention. In terms of rule 4 of the Foreign Exchange (Compounding Proceedings)
Rules, 2000, the powers to compound the contraventions have been prescribed for
compounding authorities with regard to the sum involved in such contravention and no
contravention shall be compounded unless the amount involved in the contravention is
quantifiable.
1.2 The Government of India has, in consultation with the Reserve Bank placed the
responsibility of administering compounding of contraventions with the Reserve Bank,
except contraventions under Section 3(a) of FEMA, 1999. Accordingly, Foreign
Exchange (Compounding Proceedings) Rules, 2000 have been framed by the
Government of India empowering the Reserve Bank to compound contraventions under
FEMA, 1999 with a view to provide comfort to individuals and corporate community by

25



minimizing transaction costs, while taking severe view of willful, malafide and fraudulent
transactions.
2. Compounding Powers
2.1 The compounding powers of the Reserve Bank and the Directorate of Enforcement
(DoE), respectively, are as under:
(a) Reserve Bank has been empowered to compound the contraventions of all the
Sections of FEMA, 1999, except clause (a) of Section 3 of the Act, ibid.
(b) Directorate of Enforcement would exercise powers of compounding under clause (a)
of Section 3 of FEMA, 1999 (dealing essentially with Hawala transactions).
2.2 For effective implementation of compounding process under FEMA, 1999, the
Government of India has framed the procedure for compounding of contraventions.
Once a contravention has been compounded by the Compounding Authority, no
proceeding or further proceeding will be initiated or continued, as the case may be,
against the contravener.
3. Delegation of Powers
3.1 As a measure of customer service and in order to facilitate the operational
convenience, compounding powers were delegated to the Regional Offices of the
Reserve Bank of India mentioned below to compound the contraventions of FEMA
involving (i) delay in reporting of inward remittance, (ii) delay in filing of form FC-GPR
after allotment of shares and (iii) delay in issue of shares beyond 180 days (viz.
paragraphs 9(1)(A), 9(1)(B) and 8, respectively, of the Schedule I to the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident Outside
India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated 3rd
May 2000 and as amended from time to time:
(a) Paragraphs 9 (1) (A) and 9 (1) (B) of Schedule I to FEMA 20/2000-RB dated May 3,
2000 Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Kochi, Patna
and Panaji for amount of contravention below Rupees One hundred lakh only (Rs.
1,00,00,000 /-).
(b) Paragraphs 9 (1) (A), 9 (1) (B) and 8 of Schedule I to FEMA 20/2000-RB dated May
3, 2000 Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi for
amount of contravention without any limit.
4. Process of Compounding

26



4.1 An application for compounding of a contravention under FEMA, 1999 may be
submitted to the Compounding Authority (CA) on being advised of a contravention
under FEMA, 1999, either through a memorandum or suo moto on being made or on
becoming aware of the contravention. The format of the application is appended to the
Foreign Exchange (Compounding Proceedings) Rules, 2000 (Annex-I).
4.2 Along with the application in the prescribed format, the applicant may also furnish
the details as per the enclosed Annexes (Annex-II) relating to Foreign Direct
Investment, External Commercial Borrowings, Overseas Direct Investment and Branch
Office / Liaison Office, as applicable, a copy of the Memorandum of Association and
latest audited balance sheet along with an undertaking that they are not under
investigation of any agency such as DOE, CBI, etc. in order to complete the
compounding process within the time frame.
4.3 All applications for compounding whether on the advice of the Regional Office
concerned or suo-moto, relating to the contraventions mentioned at paragraph 3.1 (a)
and (b) above and up to the amount of contravention stated therein, may be submitted
by the companies/individuals falling under the jurisdiction of the aforesaid Regional
Offices directly to the Regional Office concerned, together with the prescribed fee of
Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and
payable at the concerned Regional Office. Applications for compounding of all other
contraventions together with the prescribed fee of Rs.5000/- by way of a demand draft
drawn in favour of “Reserve Bank of India” and payable at Mumbai may be submitted to:
The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)],
Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai400001.
4.4 On receipt of the application for compounding, the proceedings would be concluded
and an order issued by the CA within 180 days from the date of the receipt of the
application for compounding. The time limit for this purpose would be reckoned from the
date of receipt of the completed application for compounding by the Reserve Bank.
4.5 The CA may call for any additional information, record or any other document
relevant to the compounding proceedings. Such additional information/ documents are
required to be submitted within the period as may be specified by the CA and the
application may be rejected if such information/documents are not submitted within the
prescribed time.
4.6 The application will be examined in terms of sub rule (1) of rule (4) of the Foreign
Exchange (Compounding Proceedings) Rules, 2000 to assess whether the
contravention is compoundable and the amount of contravention is accordingly
quantified.
4.7 The nature of contravention is ascertained keeping in view, inter alia, the following
indicative points :

27



a. whether the contravention is technical and / or minor in nature and needs only an
administrative cautionary advice;
b. whether the contravention is serious in nature and warrants compounding of the
contravention; and
c. whether the contravention, prima facie, involves money-laundering, national and
security concerns involving serious infringement of the regulatory framework.
However, the Reserve Bank reserves the right to classify the contraventions as stated
above and neither the contravener nor others have any right to classify any
contravention as technical suo moto.
4.8 The disposal of the compounding application is made by issue of a Compounding
Order specifying the provisions of FEMA,1999 or any rule, regulation, notification,
direction or order issued in exercise of the powers under FEMA, 1999, in respect of
which contravention has taken place.
4.9 Where there is sufficient cause for further investigation, the Reserve Bank may refer
the matter to the Directorate of Enforcement for further investigation and necessary
action under FEMA, 1999, or to the Anti- Money Laundering Authority instituted under
the Prevention of Money Laundering Act (PMLA), 2002 or to any other agencies, as
deemed fit. Such applications will be disposed of by returning the application to the
applicant.
5. Scope and Manner of Compounding
5.1 The CA will exercise jurisdiction in respect of the contraventions admitted to have
been committed in relation to any of the provisions of the FEMA, 1999, or any rule,
regulation, notification, direction or order issued in exercise of the powers under FEMA,
1999.
5.2 The application for compounding will be disposed of on merits, upon consideration
of the records and submissions and at the absolute discretion of the CA. The following
factors, which are only indicative, may be taken into consideration for the purpose of
passing the Compounding Order and for arriving at the quantum of sum on payment of
which contravention shall be compounded:
(i) the amount of gain of unfair advantage, wherever quantifiable, made as a result of
the contravention;
(ii) the amount of loss caused to any authority / agency / exchequer as a result of the
contravention;
(iii) economic benefits accruing to the contravener from delayed compliance or
compliance avoided;

28



(iv) the repetitive nature of the contravention, the track record and / or history of noncompliance of the contravener;
(v) contravener’s conduct in undertaking the transaction and disclosure of full facts in
the application and submissions made during the personal hearing; and
(vi) any other factor considered relevant and appropriate.
6. Issue of the Compounding Order
6.1 An opportunity for personal hearing is given to the applicant for further submission
of documents in person in support of the application within a specified period. The
contravener or its authorized representative can choose not to appear in person or
make any submissions before the CA for personal hearing The CA will proceed with the
processing of the compounding application on the basis of information and documents
available in the application for compounding.
6.2 The Compounding Authority will pass a compounding order on the basis of the
averments made in the application as well as other documents and submissions made
in this context by the contravener during the personal hearings, if any.
6.3 Where the compounding of any contravention is made after making of a complaint
under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the
compounding order made under sub rule (2) of Rule 8 of Foreign Exchange
(Compounding Proceedings) Rules, 2000 will be provided to the applicant (the
contravener) and also to the Adjudicating Authority.
7. Post-compounding procedure
7.1 The sum for which the contravention is compounded as specified in the order of
compounding under sub-rule (2) of Rule 8 of Foreign Exchange (Compounding
Proceedings) Rules, 2000 is payable by way of a demand draft in favour of the
“Reserve Bank of India” within fifteen days from the date of the order of compounding of
such contravention. The demand draft has to be deposited in the manner as directed in
the compounding order.
7.2 On realization of the demand draft for the sum for which contravention is
compounded, a certificate in this regard shall be issued by the Reserve Bank subject to
the specified conditions, if any, in the order.
7.3 The provisions of the Rules do not confer any right on the contravener, after a
compounding order is passed, to seek to withdraw the order or to hold the compounding
order as void or request a review of the order passed by the CA.
7.4 In case of failure to pay the sum compounded within the time specified in the
compounding order, it shall be deemed in terms of Rule 10 of the Foreign Exchange

29



(Compounding Proceedings) Rules, 2000, that the contravener had never made an
application for compounding of any contravention under these Rules.
7.5 In respect of the contraventions of FEMA, 1999 (as defined in section 13 of the
FEMA, 1999), which are not compounded by the Compounding Authority, other relevant
provisions of FEMA, 1999, including reference to the Directorate of Enforcement shall
apply.
8. Pre-requisites for compounding process
8.1 In respect of a contravention committed by any person within a period of three years
from the date on which a similar contravention committed by him was compounded
under the Compounding Rules, such contraventions would not be compounded. Such
contravention would be dealt with under relevant provisions of the FEMA, 1999 for
contravention. Any second or subsequent contravention committed after the expiry of a
period of three years from the date on which the contravention was previously
compounded shall be deemed to be a first contravention.
8.2 Contraventions relating to any transaction where proper approvals or permission
from the Government or statutory authority concerned, as the case may be, have not
been obtained, such contraventions would not be compounded unless the required
approvals are obtained from the authorities concerned.
8.3 Cases of contravention, such as, those having a money laundering angle, national
security concern and / or involving serious infringements of the regulatory framework or
where the contravener fails to pay the sum for which contravention was compounded
within the specified period in terms of the compounding order, shall be referred to the
Directorate of Enforcement for further investigation and necessary action under FEMA,
1999 or to the authority instituted for implementation of the Prevention of Money
Laundering Act 2002, (PMLA) or to any other agencies, for necessary action, as
deemed fit.
8.4 The Reserve Bank generally advises the persons concerned of their choice and
option to make an application for compounding as and when such contraventions come
to its notice. The facts constituting such contraventions will be brought to the notice of
the Directorate of Enforcement in case no application for compounding is made within
the time indicated by the Reserve Bank.
ANNEX-I
FOREIGN EXCHANGE (COMPOUNDING PROCEEDINGS) RULES, 2000
NOTIFICATION NO. G.S.R.383(E) DATED 3RD MAY 2000
As amended vide

30



G.S.R.443(E) dated November 2, 2002
G.S.R. 609 (E) dated September 13, 2004 and
G.S.R. 613 (E) dated August 27, 2008
In exercise of the powers conferred by section 46 read with sub-section (1) of section 15
of the Foreign Exchange Management Act, 1999 (42 of 1999) the Central Government
hereby makes the following rules relating to compounding contraventions under chapter
IV of the said Act, namely:1. Short title and commencement (1) These rules may be called the Foreign Exchange (Compounding Proceedings)
Rules 2000.
(2) They shall come into force on the 1st day of June, 2000.
2. Definitions - In these rules, unless the context otherwise requires (a) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);
(b) ‘authorised officer’ means an officer authorised under sub-rule (1) of rule 3;
(c) ‘applicant’ means a person who makes an application under section 15 (1) of the
Act to the compounding authority;
(d) ‘Compounding Order’ means an order issued under sub-section (1) of Section 15 of
the Act;
(e) ‘Form’ means a form appended to these rules;
(f) ‘section’ means a section of the Act;
(g) all other words and expressions used in these rules and not defined but defined in
the Act, shall have the meaning respectively assigned to them in the Act.
3. (1) ‘Compounding Authority’ means the persons authorised by the Central
Government under sub-section (1) of section 15 of the Act, namely;
(a) an officer of the Enforcement Directorate not below the rank of Deputy Director or
Deputy Legal Adviser (DLA).
(b) An officer of the Reserve Bank of India not below the rank of the Assistant General
Manager.

31



4. Power of Reserve Bank to compound contravention 1

[(1) If any Person contravenes any provisions of Foreign Exchange Management Act,
1999 (42 of 1999) except clause (a) of Section 3 of the Act.]
(a) in case where the sum involved in such contravention is ten lakhs rupees or below,
by the Assistant General Manager of the Reserve Bank of India;
(b) in case where the sum involved in such contravention is more than rupees ten lakhs
but less than rupees forty lakhs, by the Deputy General Manager of Reserve Bank of
India;
(c) in case where the sum involved in the contravention is rupees forty lakhs or more
but less than rupees hundred lakhs by the General Manager of Reserve Bank of India;
(d) in case the sum involved in such contravention is rupees one hundred lakhs or
more, by the Chief General Manager of the Reserve Bank of India;
Provided further that no contravention shall be compounded unless the amount involved
in such contravention is quantifiable.
(2) Nothing contained in sub-section (1) shall apply to a contravention committed by any
person within a period of three years from the date on which a similar contravention
committed by him was compounded under these rules.
Explanation: For the purposes of this rule, any second or subsequent contravention
committed after the expiry of a period of three years from the date on which the
contravention was previously compounded shall be deemed to be a first contravention.
(3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall
exercise the powers to compound any contravention subject to the direction, control and
supervision of the Governor of the Reserve Bank of India.
(4) Every application for compounding any contravention under this rule shall be made
in Form to the Reserve Bank of India, Exchange Control Department, Central Office,
Mumbai along with a fee of Rs. 5000/- by Demand Draft in favour of compounding
authority.
5. The Power of Enforcement Directorate to compound contraventions 2

[(1) If any Person contravenes provisions of Section 3(a) of Foreign Exchange
Management Act.]
(a) in case where the sum involved in such contravention is five lakhs rupees or below,
by the Deputy Director of the Directorate of Enforcement;

32



(b) in case where the sum involved in such contravention is more than rupees five
lakhs but less than rupees ten lakhs, by the Additional Director of the Directorate of
Enforcement;
(c) in case where the sum involved in the contravention is rupees ten lakhs or more but
less than fifty lakhs rupees by the Special Director of the Directorate of Enforcement;
(d) in case where the sum involved in the contravention is rupees fifty lakhs or more but
less than one crore rupees by Special Director with Deputy Legal Adviser of the
Directorate of Enforcement;
(e) in case the sum involved in such contravention is one crore rupees or more, by the
Director of Enforcement with Special Director of the Enforcement Directorate.
Provided further that no contravention shall be compounded unless the amount involved
in such contravention is quantifiable.
(2) Nothing contained in sub-section (1) shall apply to a contravention committed by any
person within a period of three years from the date on which a similar contravention
committed by him was compounded under these rules.
Explanation: For the purposes of this rule, any second or subsequent contravention
committed after the expiry of a period of three years from the date on which the
contravention was previously compounded shall be deemed to be a first contravention.
(3) Every officer of the Directorate of Enforcement specified under sub-rule (1) of this
rule shall exercise the powers to compound any contravention subject to the direction,
control and supervision of the Director of Enforcement.
(4) Every application for compounding any contravention under this rule shall be made
in Form to the Director, Directorate of Enforcement, New Delhi, along with a fee of
Rs.5000 by DD in favour of the Compounding Authority.
6. Where any contravention is compounded before the adjudication of any contravention
under section 16, no inquiry shall be held for adjudication of such contravention in
relation to such contravention against the person in relation to whom the contravention
is so compounded.
7. Where the compounding of any contravention is made after making of a complaint
under sub-section (3) of section 16, such compounding shall be brought by the authority
specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on
such notice of the compounding of the contravention being given, the person in relation
to whom the contravention is so compounded shall be discharged.
8. Procedure for Compounding -

33



(1) The Compounding Authority may call for any information, record or any other
documents relevant to the compounding proceedings.
(2) The Compounding Authority shall pass an order of compounding after affording an
opportunity of being heard to all the concerned as expeditiously as possible as and not
later than 180 days from the date of application.
9. Payment of amount compounded 3

The sum for which the contravention is compounded as specified in the order of
compounding under sub-rule (2) of rule 8, shall be paid by demand draft in favour of the
Compounding Authority within fifteen days from the date of the order of compounding of
such contravention.
10. In case a person fails to pay the sum compounded in accordance with the rule 9
within the time specified in that rule, he shall be deemed to have never made an
application for compounding of any contravention under these rules and the provisions
of the Act for contravention shall apply to him.
11. No contravention shall be compounded if an appeal has been filed under section 17
or section 19 of the Act.
12. Contents of the order of the Compounding Authority (1) Every order shall specify the provisions of the Act or of the rules, directions,
requisitions or orders made there under in respect of which contravention has taken
place along with details of the alleged contravention.
(2) Every such order shall be dated and signed by the Compounding Authority under his
seal.
13. Copy of the order - One copy of the order made under rule 8(2) shall be supplied to
the applicant and the Adjudicating Authority as the case may be.
Format of Application
FORM
(See Rule 4 or 5)
(To be filled in duplicate and shall be accompanied by certified copy of the
Memorandum issued)
1. Name of the applicant (in BLOCK LETTERS)
2. Full address of the applicant (including Phone and Fax Number and email id)

34



3. Whether the applicant is resident in India or resident outside India [Please refer to
Section 2(v) of the Act]
4. Name of the Adjudicating Authority before whom the case is pending
5. Nature of the contravention [according to sub-section (1) of Section 13]
6. Brief facts of the case
7. Details of fee for application of compounding
8. Any other information relevant to the case
I/We declare that the particulars given above are true and correct to the best of my/our
knowledge and belief and that I/We am/are willing to accept any direction/order of the
Compounding Authority in connection with compounding of my/our case.
Dated : (Signature of the Applicant)
Name

ANNEX-II- FDI
DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING
OF CONTRAVENTION RELATING TO FOREIGN DIRECT INVESTMENT IN INDIA
♦ Name of the applicant
♦ Date of incorporation
♦ Nature of activities under taken
♦ Brief particulars about the foreign investor
♦ Details of foreign inward remittances received by Applicant Company from date of
incorporation till date
TABLE A
Sl.
No.

Name of
Remitter

Total Amount
(INR)

Date of
Receipt

Reported to RBI
on*

Total

35



Delay if
any

* date of reporting to RBI and not AD
TABLE B
Name of
Investor

Date of
allotment of
shares

Number of
shares
allotted

Amount for
which shares
allotted

Date of
reporting to
RBI*

Delay if
any

Total
TABLE C
In case there is excess share application money
Sl. Name of
No. Remitter

Total
Amount
(INR)

Date of
Receipt

Excess
share
application
money

Date of
refund of
share
application
money

Amount
in forex

RBI
approval
letter and
date

Total
TABLE D
Authorised Capital
Sl.
No.

Date

Authorised
Capital

With effect
from

Date of Board
meeting

Date of filing with
ROC

A= B+C
Please give supporting documents Table A- Copies of FIRC with date stamp of receipt
at RBI Table B- Copies of FCGPR with date stamp of receipt at RBI Table C – letter
seeking refund/ allotment of shares- approval letter from RBI A2 form
♦ Copies of Balance Sheet during the period of receipt of share application money and
allotment of shares
♦ Nature of contravention and reasons for the contravention
♦ A declaration that they are not under investigation of any agency such as DoE, CBI,
etc

36



ANNEX II- ECB
OF CONTRAVENTION RELATING TO EXTERNAL COMMERCIAL BORROWING
♦ Brief particulars about the foreign
lender
♦ Is the applicant an eligible borrower?
♦ Is the lender eligible lender?
♦ Is the lender an equity holder?
♦ What is the level of his holding at the
time of loan agreement?
Details of ECB
♦ Date of Loan agreement
♦ Amount in Foreign Currency and
Indian Rupee
♦ Rate of interest
♦ Period of loan
♦ Repayment particulars
♦ Details of draw down

Date of
draw down

Amount in Foreign
Currency

Amount in
INR

♦ Details of LRN Number- application and receipt
♦ Details of ECB 2 returns submitted; Period of return: Date of submission
♦ Details of Utilization of ECB in Foreign Currency and Indian Rupee
♦ All supporting documents may be submitted

etc

37



ANNEX-II- ODI
OF CONTRAVENTION RELATING TO OVERSEAS INVESTMENT
♦ Name of Overseas entity
♦ Date of incorporation of overseas entity
♦ Nature of activities under taken by overseas entity
♦ Nature of entity- WOS/JV
♦ Details of remittance sent- Date of remittance; Amount in FCY and in INR
♦ Details of other financial Commitment
♦ Details of UIN applied and received
♦ Date of receipt of share certificate
♦ Approval of other regulators if required
♦ Details of APRs submitted: For the period ended; date of submission
etc
ANNEX II- BRANCH OFFICE / LIAISON OFFICE
OF CONTRAVENTION RELATING TO BRANCH/LIAISON OFFICE IN INDIA

38



♦ Date of approval for opening of Liaison Office/ Branch Office
♦ Validity period of the approval
♦ income and expenditure of the LO/BO
♦ Dates of submission of Annual activity Certificates
etc

APPENDIX
LIST OF RULES/ A.P. (DIR SERIES) CIRCULARS CONSOLIDATED IN THE MASTER
CIRCULAR COMPOUNDING OF CONTRAVENTIONS OF FEMA, 1999
Rules Sl
No

Rules No.

Date

1

Foreign Exchange (Compounding Proceedings) Rules,
2000

May 3, 2000

2

2002 (Amendment)

November 2,
2002

3

2004 (Amendment)

September 13,
2004

4

2004 (Amendment)

August 27, 2008

A.P.(DIR Series) Circular No. 56 dated June 28, 2010.
A.P.(DIR Series) Circular No. 57 dated December 13, 2011.
____________
1. GSR 613(E) dated August 27, 2008

39



2. GSR 609 (E) dated September 13, 2004
3. GSR 443(E) dated November 2, 2002

16) Amendment in Agreement For Avoidance Of Double Taxation And Prevention
Of Fiscal Evasion With Sweden
NOTIFICATION NO. 63/2013, DATED 14-8-2013
S.O.2459(E) - Whereas a Protocol (hereinafter referred to as the said Protocol)
amending the convention between the Government of the Republic of India and the
Government of the Kingdom of Sweden for the avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to taxes on Income and on Capital, which was
signed at New Delhi on the 24th June, 1997, was signed on the 7th February, 2013 in
Stockholm ;
And whereas, the date of entry into force of the said Protocol is the 16th day of August,
2013, being the thirtieth day after the receipt of the later of the notifications of the
completion of the procedures required by the respective laws for the entry into force of
this Protocol, in accordance with Paragraph 2 of Article 3 of the said Protocol;
And whereas, Paragraph 2 of Article 3 of the said Protocol provides that the Amending
Protocol shall enter into force on the thirtieth day after the receipt of the later of the
notifications and shall thereupon have effect forthwith ;
Now, therefore, in exercise of the powers conferred by section 90 of the Income- tax
Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of
the said Protocol, as set out in the Annexure hereto, shall be given effect to in the Union
of India with effect from the 16th August, 2013.
Protocol Amending the Convention between the Government of the Republic of India
and The Government of The Kingdom of Sweden for The Avoidance of Double Taxation
and The Prevention of fiscal evasion with respect to taxes on income and on capital,
which was Signed at New Delhi on 24th June, 1997.
The Government of the Republic of India and the Government of the Kingdom of
Sweden;
Desiring to conclude a Protocol (hereinafter referred to as “Amending Protocol”) to
amend the Convention between the Government of the Republic of India and the
Government of the Kingdom of Sweden for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to taxes on Income and on Capital, which was
signed at New Delhi on 24th June, 1997 and which entered into force on 25th
December, 1997 (hereinafter referred to as “the Convention”).

40



Have agreed as follows:
ARTICLE 1
Article 27 (Exchange of Information) of the Convention shall be deleted and replaced by
the following Article:
“ARTICLE27
EXCHANGE OF INFORMATION
1. The competent authorities of the Contracting States shall exchange such information
(including documents or certified copies of the documents) as is foreseeably relevant for
carrying out the provisions of this Convention or to the administration or enforcement of
the domestic laws concerning taxes of every kind and description imposed on behalf of
the Contracting States, or of their political sub-divisions or local authorities, insofar as
the taxation thereunder is not contrary to the Convention. The exchange of information
is not restricted by Articles 1 and 2.
2. Any information received under paragraph 1 by a Contracting State shall be treated
as secret in the same manner as information obtained under the domestic laws of that
State and shall be disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment or collection of, the enforcement
or prosecution in respect of, the determination of appeals in relation to the taxes
referred to in paragraph 1, or the oversight of the above. Such persons or authorities
shall use the information only for such purposes. They may disclose the information in
public court proceedings or in judicial decisions. Notwithstanding the foregoing,
information received by a Contracting State may be used for other purposes when such
information may be used for such other purposes under the laws of both States and the
competent authority of the supplying State authorises such use.
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose
on a Contracting State the obligations:
(a) to carry out administrative measures at variance with the laws and administrative
practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws or in the normal course
of the administration of that or of the other Contracting State;
(c) to supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or information the disclosure of
which would be contrary to public policy (ordre public).
4. If information is requested by a Contracting State in accordance with this Article, the
other Contracting State shall use its information gathering measures to obtain the

41



requested information, even though that other State may not need such information for
its own tax purposes. The obligation contained in the preceding sentence is subject to
the limitations of paragraph 3 but in no case shall such limitations be construed to
permit a Contracting State to decline to supply information solely because it has no
domestic interest in such information.
5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting
State to decline to supply information solely because the information is held by a bank,
other financial institution, nominee or person acting in an agency or a fiduciary capacity
or because it relates to ownership interests in a person.”
ARTICLE 2
The following new paragraph shall be added to the Protocol to the Convention after the
paragraph titled ” With reference to Article 25:”
“With reference to Article 27:
1. A Contracting State may allow representatives of the competent authority of the other
Contracting State to enter the territory of the first-mentioned Contracting State to
interview individuals and examine records with the written consent of the persons
concerned. The competent authority of the second-mentioned Contracting State shall
notify the competent authority of the first-mentioned Contracting State of the time and
place of the meeting with the individuals concerned.
2. At the request of the competent authority of one Contracting State, the competent
authority of the other Contracting State may allow representatives of the competent
authority of the first-mentioned Contracting State to be present at the appropriate part of
a tax examination in the second-mentioned Contracting State.
3. If the request referred to in paragraph 2 is acceded to, the competent authority of the
Contracting State conducting the examination shall, as soon as possible, notify the
competent authority of the other Contracting State about the time and place of the
examination, the authority or official designated to carry out the examination and the
procedures and conditions required by the first-mentioned Contracting State for the
conduct of the examination. All decisions with respect to the conduct of the tax
examination shall be made by the Contracting State conducting the examination.”
ARTICLE 3
1. Each of the Contracting States shall notify the other, in writing, of the completion of
the procedures required by its law for the entry into force of this Amending Protocol.
2. This Amending Protocol shall enter into force on the thirtieth day after the receipt of
the later of these notifications and thereupon have effect forthwith.

42



3. This Amending Protocol shall remain in effect as long as the Convention remains in
effect.
In witness whereof the undersigned, duly authorised thereto by their respective
Governments, have signed this Amending Protocol.
Done in duplicate at Stockholm this 7th day of Feb, 2013 in the Hindi, Swedish and
English languages, all texts being equally authentic. In case of divergence between the
texts, the English text shall be the operative one.
[F. NO. 505/02/1981-FTD-I]
AKHILESH RANJAN Jt. Secy.

17) India signs DTAA with Latvia
An Agreement and Agreed Note Signed Between India and Latvia for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
(DTAA)
The Government of India today signed an Agreement and the Agreed Note for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to
Taxes on Income (DTAA) with the Government of Latvia. The Agreement and the
Agreed Note were signed by Shri Salman Khurshid, External Affairs Minister, on behalf
of the Government of India and Mr. Edgars Rinkevics, Minister of Foreign Affairs, on
behalf of the Government of Latvia here today. Latvia is the third Baltic country with
which DTAA has been signed by India. Earlier DTAAs have been signed and have
come into force with Lithuania and Estonia.
The DTAA provides that business profits will be taxable in the source if the activities of
an enterprise constitute a permanent establishment (PE) in the source state. The
Agreement provides for fixed place PE, building site, construction or assembly PE,
service PE, Off-shore exploration/exploitation PE and agency PE.
The Agreement incorporates para 2 in Article concerning Associated Enterprises. This
would enhance recourse to Mutual Agreement Procedure to relieve double taxation in
cases involving transfer pricing adjustments.
Dividends, interest and royalties & fees for technical services income will be taxed both
in the country of residence and in the country of source. The low level of withholding
rates of taxation for dividend, interest and royalties and fees for technical services

43



(10%) will promote greater investments, flow of technology and technical services
between the two countries.
The Agreement further incorporates provisions for effective exchange of information
between tax authorities of the two countries in line with latest international standard,
including exchange of banking information and supplying of information without
recourse to domestic interest. Further, the Agreement provides for sharing of
information to other agencies with the consent of supplying state.
The Agreement also has an article on assistance in collection of taxes. This article also
includes provision for taking measures of conservancy.The Agreement incorporates
anti-abuse (limitation of benefits) provisions to ensure that the benefits of the
Agreements are availed of by the genuine residents of the two countries.
The Agreement will provide tax stability to the residents of India and Latvia and will
facilitate mutual economic cooperation between the two countries. It will also stimulate
the flow of investment, technology and services between India and Latvia

18) NRI investment norms in real estate eased
Among the various investment options available for non-resident Indians (NRIs), real
estate plays a dominant role due to its rate of appreciation and the periodical returns on
the investment. Whether it is a residential or commercial property investment, NRIs can
invest through their representatives in India by giving a power of attorney to act on their
behalf.
A copy of the power of attorney should be notarised with the Indian consulate in the
respective country which will provide authenticity on their behalf for an investment in
property in India. The property can be registered in the name of the NRI, and the power
of attorney holder can sign on their behalf by producing a copy of the power of attorney
to the appropriate authorities .
If a NRI decides to acquire a house through a power of attorney , he can still proceed
abroad. This is because, for the purposes of income tax and wealth tax, the power of
attorney holder accompanied by the actual possession of the property through the
agreement to sell is deemed to be the owner of the property for the purposes of Section
27 of the Income Tax Act.
A general power of attorney in favour of the NRI’s relatives will enable them to sell the
property and arrange to repatriate the sale proceeds through an authorised foreign
exchange dealer after payment of the taxes due. They can also rent out the property
and credit the proceeds to a NRO account.

44



Similarly, NRIs can seek home loans through their power of attorney holder and
documents can be signed on their behalf while investing in property. They can issue the
EMI cheques on behalf of their relatives here as the Reserve Bank of India (RBI) has
relaxed the norms of operation of joint accounts considerably recently.A significant
development is the proliferation of housing finance companies and banks in countries
abroad. In the Gulf, Dubai boasts of many housing finance companies and banks
having arrangements with exchange houses. Home loans can be processed through
overseas representative offices for NRIs. As a result, the power of attorney enables
their relatives to interact directly with developers in India. A number of nationalised
banks have remittance arrangements with the exchange houses.
The RBI also said that any citizen who was earlier residing in a foreign country can own
or transfer property or other assets in that nation if it was acquired during the time of his
residence there. A person resident in India is free to hold, own, transfer or invest in
foreign currency, foreign security or any property situated outside India if such currency,
security or property was acquired, held or owned when he was resident outside India or
inherited from a person who was resident outside India.
Similarly, returning NRIs can retain and reinvest the income earned on investments
made under the Liberalised Remittance Scheme. There was lack of clarity earlier as to
whether the income earned on assets held abroad by NRIs who have returned to India
for permanent settlement and assets held outside India through Liberalised Remittance
Scheme are required to be realised and repatriated to India. Now, the RBI has clarified
that income and sale proceeds of assets held abroad need not be repatriated to India
and can be retained and invested outside India.
Foreign exchange rules eased
The RBI has recently allowed NRIs to hold joint accounts with Indian residents, a move
that helps increase remittances. The central bank has also permitted sale proceeds of
foreign investments in India to accrue to NRE or FCNR accounts after tax deductions,
under the Foreign Exchange Management Act (FEMA).
Foreign Currency Non-Resident (FCNR) account and Non-resident External (NRE)
account are opened by NRIs with Indian banks. As per the recommendations of the
committee constituted to review facilities available under FEMA, the central bank has
taken such steps.
The RBI has allowed residents of India to include nonresident close relative in their
resident bank accounts on ‘former or survivor’ basis.
However, such non-resident relative will not be eligible to operate the account during
the resident’s lifetime. It also permitted NRIs to open NRE and FCNR accounts with
their resident close relatives . In this case, the resident relative can operate the account
as a power of attorney holder.Source: Economic Times

45



19) Liberalised Remittance Scheme for Resident Individuals – Reporting
RBI/2012-13/504
A. P. (DIR Series) Circular No. 106
May 23, 2013
To
Madam / Sir,
Liberalised Remittance Scheme for Resident Individuals – Reporting
Attention of all Authorised Dealer Category – I (AD Category – I) banks is invited to A.
P. (DIR Series) CircularNo.36 dated April 04, 2008, in terms of which, AD Category -I
banks were required to furnish information on the number of applications received and
the total amount remitted under the Liberalised Remittance Scheme (the Scheme), on a
monthly basis, in the prescribed format in both hard copy as well as soft copy in Excel
format. All AD banks were also advised to submit themonthly statement before 5th of
the succeeding month to the Reserve Bank of India.
2. Since October 2008, AD Banks were required to submit the LRS data through the
Online ReturnsFiling System (ORFS) of Reserve Bank, in addition to submitting the
same in hard copy.
3. It has now been decided, to collect the data in soft form only and to dispense with the
submission of hard copies of the monthly statements by the AD banks. Accordingly, with
effect from July 01, 2013, AD Category – I banks are required to upload the data (LRS
data of June 2013) in ORFS on or before fifth of the following month. Where there is no
data to furnish, AD banks are advised to upload ‘nil’ figures in the ORFS system.
4. AD banks can upload the LRS data by accessing ORFS through the URL
https://secweb.rbi.org.in/ORFSMainWeb as hitherto.
5. In case any clarifications are required, AD banks may send their queries through email or contact by phone at 22601000 extn:2676 or 22701232 (direct)
6. The directions contained in this circular have been issued under Sections 10(4) and
11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are
without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)

46



20) RBI ups limit on inward remittances
Foreign Remittances – RBI ups limit of inward remittance to 30 in a year
The Reserve Bank of India (RBI) on Friday raised the limit on the number of foreign
remittances an individual can receive from 12 to 30 per calendar year. However, the cap
on the amount of each transaction has been kept unchanged at $2,500 per person.
This had been a long-standing demand from money transfer agents who had received
such requests from customers.
According to experts, India is the largest receiver of remittances from other countries. A
report released by the World Bank suggested remittances to India would be $64 billion
in 2011, marginally higher than those to China. The World Bank had revised the
estimates from $58 billion on the basis of the view that a weak rupee and robust
economic activities in the Gulf countries would lead to a surge in remittances

RBI/2011-12/596
A. P. (DIR Series) Circular No. 132
June 8, 2012
To,
All Authorised Persons, who are Indian Agents under Money Transfer Service Scheme.
Madam/ Sir,
Money Transfer Service Scheme
Attention of all Authorised Persons (APs), who are Indian Agents under the Money
Transfer Service Scheme (MTSS) is invited to paragraph 5 © of the Notification dated
June 4, 2003 on MTSS and the specific permission accorded to them under FEMA,
1999 by the Reserve Bank to undertake inward cross-border money transfer activities in
India, through tie-up arrangements with Overseas Principals.
2. It has been decided to increase the number of remittances from 12 to 30 to be
received by a single individual beneficiary in a calendar year.
3. All other instructions contained in the said Notification ibid, as amended from time to
time remain unchanged.
4. These guidelines would also be applicable mutatis mutandis to all Sub Agents of the
Indian Agents under MTSS and it will be the sole responsibility of the APs (Indian
Agents) to ensure that their Sub Agents also adhere to these guidelines.

47



5. Authorised Persons (Indian Agents) may bring the contents of this circular to the
notice of their constituents concerned.
6. The directions contained in this Circular have been issued under Sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions/approvals if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)

RBI/2013-2014/234
FMD.MOAG. No.84 /01.06.016/2013-14
September 6, 2013
To
All Scheduled Banks [excluding Regional Rural Banks (RRBs)]
Dear Sir/ Madam,
Swap Window for Attracting FCNR (B) Dollar Funds
Please refer to the RBI Press Release 2013-2014/494 dated September 04, 2013 on
the captioned subject.
2. It has been decided to introduce a US Dollar-Rupee swap window for fresh FCNR (B)
dollar funds, mobilised for a minimum tenor of three years and over.
3. The salient features of the new swap facility are as under:
(a) The swap facility will be available to the scheduled commercial banks (excluding
RRBs) for fresh FCNR(B) deposits mobilized in any permitted currency (as specified in
the RBI Master Circular onInterest Rates on FCNR (B) Deposits dated July 1, 2013) for
the tenor of minimum three years. However, the swap facility with RBI will be available
in US Dollars only. The tenor of the swap will be for three years or more in line with the
tenor of the underlying FCNR deposits.
(b) The swap window will be operated on a daily basis on all working days in
Mumbai (except Saturdays and holidays). However, a particular bank can avail of the
swap facility only once in a week. During any particular week, the maximum amount of
dollars that banks would be eligible to swap with RBI would be equal to the fresh
FCNR(B) deposits for minimum tenor of three years mobilized in equivalent US Dollar
terms during the preceding week(s).

48



(c) Under the swap arrangement, a bank can sell US Dollars in multiples of USD one
million to RBI and simultaneously agree to buy the same amount of US Dollars at the
end of the swap period. The swap will be undertaken at a fixed rate of 3.5 per cent per
annum.In the first leg of the transaction, the bank will sell US Dollars to RBI at RBI
Reference Rate or any other rate as may be mutually agreed upon. The settlement of
the first leg of the swap will take place on spot basis from the date of transaction. In the
reverse leg of the swap transaction, Rupee funds will have to be returned to RBI along
with the swap premium to get the US Dollars back.
(d) Banks desirous of availing the swap facility will have to furnish a declaration duly
signed by their authorised signatories that they have mobilised the fresh FCNR(B)
deposits for minimum tenor of three years during the preceding week(s).
(e) The swap facility will be operationalised by the Financial Markets Department of RBI
at Mumbai. RBI would exercise the right to decide on the day of operation and the
number of banks that can avail of the facility on any particular day keeping in view the
market conditions and other relevant factors.
(f) The underlying deposits will have a minimum lock-in period of one year. However,
premature withdrawal of such deposits would be permitted after one year. Accordingly,
swaps undertaken with RBI cannot be cancelled before one year. In case of premature
withdrawal of deposits after one year, the banks may approach RBI for termination of
the swap. Banks desirous of terminating a swap will have to furnish a declaration duly
signed by their authorised signatories that they have allowed premature withdrawal of
FCNR (B) deposits. In the event of pre-termination of a swap, the swap cost would be
re-fixed for the completed period of the swap at 400 bps above the concessional
contracted rate of 3.5 per cent offered to the banks plus the prevailing USD/INR swap
rate in the market for the residual tenor of the original swap (towards the replacement
cost). RBI’s decision regarding the re-pricing of the swap at the time of termination shall
be final and no request for any modification or revision to the same would be
entertained.
(g) The new swap window comes into effect on September 10, 2013 and will remain
open up to November 30, 2013. RBI will reserve the right to close the scheme earlier
with prior notice.
(h) The terms and conditions governing the FCNR (B) mobilized during the period the
swap windowremains open shall remain as specified in the RBI Master Circular
on Interest Rates on FCNR (B) Deposits dated July 1, 2013 read with Circular
DBOD.Dir.BC. 38/13.03.00/2013-14 dated August 14, 2013 issued by our Department
of Banking Operations and Development.
(i) Eligible banks can approach the Financial Markets Department by e-mail with their
request for US Dollar swap facility indicating the amount of US Dollars to be swapped,
tenor of the swap along with the declaration as mentioned at (d) above.
Yours sincerely
(G. Mahalingam)
Principal Chief General Manage

49



22) 22) Master Circular on Miscellaneous Remittances from India – Facilities for
Residents

Non- resident including NRI may acquire shares of a listed Indian company on the stock
exchange through a registered broker under FDI scheme
RBI/2013-14/232
September 6, 2013
To
Madam/ Sir,
Purchase of shares on the recognised stock exchanges in accordance with SEBI
(Substantial Acquisition of Shares and Takeover) Regulations
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to
Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide
Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time.
2. At present, Foreign Institutional Investors, Qualified Foreign Investors and Non
Resident Indians are eligible to acquire shares on the recognised stock exchanges in
compliance with the conditions under Schedule 3, 4, 5 and 8 of FEMA Notification No.
20. A non-resident is not permitted to acquire shares on stock exchange under FDI
scheme under Schedule 1 of FEMA Notification No. 20.
3. The issue of acquisition of shares under the FDI Scheme by a non-resident on
a recognised stock exchange has been reviewed and as a further measure of
liberalization, it has been decided that a non resident including a Non Resident Indian
may acquire shares of a listed Indian companyon the stock exchange through a
registered broker under FDI scheme provided that:
i. The non-resident investor has already acquired and continues to hold the control in
accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations;
ii. The amount of consideration for transfer of shares to non-resident consequent to
purchase on the stock exchange may be paid as below:
1.
by way of inward remittance through normal banking channels, or
2. by way of debit to the NRE/FCNR account of the person concerned maintained with
an authorised dealer/bank;
3. by debit to non-interest bearing Escrow account (in Indian Rupees) maintained in
India with the AD bank in accordance with Foreign Exchange Management (Deposit)
Regulations, 2000;

50



4. the consideration amount may also be paid out of the dividend payable by Indian
investee company, in which the said non-resident holds control as (i) above, provided
the right to receive dividend is established and the dividend amount has been credited
to specially designated non –interest bearing rupee account for acquisition of shares
on the floor of stock exchange.
iii. The pricing for subsequent transfer of shares to non-resident shareholder shall be in
accordance with the pricing guidelines under FEMA;
iv. The original and resultant investments are in line with the extant FDI policy and
FEMA regulations in respect of sectoral cap, entry route, reporting requirement,
documentation, etc;
4. AD Category – I banks may bring the contents of the circular to the notice of their
customers/constituents concerned.
No.FEMA.279/2013-RB dated July 10, 2013 notified vide G.S.R.No.591 (E) dated
September 4,2013 and Notification No.FEMA.280/2013-RB dated July 10, 2013 notified
vide G.S.R.No.531 (E) , dated August 5,2013.
11(1) of theForeign Exchange Management Act (FEMA), 1999 (42 of 1999) and are
without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully
(Rudra Narayan Kar)
Chief General Manager In-Charge

23) RBI allows NRIs to transfer funds from NRO to NRE account
The Reserve Bank allowed non-resident Indians (NRIs) to transfer funds from nonresident ordinary (NRO) account to Non-Resident External (NRE) account subject to a
ceiling of $1 million in a financial year.
In May 2012, the Reserve Bank of India allowed, Non Resident Indians (NRIs) to
transfer money from non-resident ordinary (NRO) to non- resident external (NRO)
accounts. Prior to that the only mechanism to transfer money into NRE accounts was
through remittance from abroad or from another NRE account.
However, certain conditions now have to be met before freely transferring money from
NRO account to NRE account.
The conditions are
1. The maximum limit for movement of funds overseas or to NRE accounts is USD 1

51



Million in a financial year
2. The source of funds in the NRO deposits/accounts should be repatriable
3. Taxes as applicable should be paid on the funds before the transfer, which means
the certificates 15 CA and CB will need to be submitted to the bank to initiate the
transfer.

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Disclaimer
The information contained in this e-book is intended to assist/educate NRIs regarding various taxes and other
important information they should know. The information does not constitute tax or investment advice or an to invest
or to provide management services, recommendation to join any plan/scheme or open account with any financial
intermediaries/brokers or other institutions or prepare tax returns or deal with Government related matters and is
subject to errors, omission, correction, completion and amendment, without notice. It is not my intention to state,
indicate or imply in any manner that current or past results/rules/laws are indicative of future results or expectations
and which are subject to change. As with all investments, there are associated risks and you could lose money
investing. Prior to making any investment or tax related decision , a prospective investor or tax payer should consult
with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and
suitability of that investment.

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NRI guide 2013 ver 3.00 addendum updated upto 10 10-2013

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