[The following guest post is contributed by Ananya Banerjee, who is a Fifth Year B.A.LL.B (Honours) Student at the University of Calcutta (Department of Law)]
The Reserve Bank of India (“RBI”), through several notifications dated December 29, 2015, January 12, 2016 and January 21, 2016, has consolidated and revised nine sets of Regulations under the Foreign Exchange Management Act, 1999. The update is said to be in line with the evolving business environment and changing practices in cross-border transactions. The step has also been taken to promote and facilitate ease of doing business in India. This post contains excerpts of such revised Regulations.
Acquisition and Transfer of Immovable Property outside India
The Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2000, and all its subsequent amendments were repealed and replaced by the 2015 Regulations. Through A.P. (DIR Series) Circular No. 43/2015-16 [(1)/7(R)] dated February 4, 2016, the RBI has instructed the authorized dealers (“AD”) of the same. The new Regulations have laid down six exceptions under which a person resident in India would not require RBI approval for acquisition or transfer of immovable property outside India. Indian companies having overseas offices shall be eligible to acquire such property for business and residential purposes subject to the threshold of total remittances as prescribed. The initial expense must not exceed 15% of the average annual sales/income or turnover of the Indian entity during the last 2 financial years, or 25% of the net worth of the entity, whichever is higher. The recurring expenses must not exceed 10% of the average annual sales/income during the preceding 2 financial years. These Regulations have come into effect from January 21, 2016.
Definition of Currency
Through A.P. (DIR Series) Circular No.48/2015-16 [(1)/15(R)], dated February 4, 2016, the RBI has informed the Ads that the Notification No. FEMA 15 (R)/2015 – RB has superseded the previous notification dated May 3, 2000, from December 29, 2015, although, the definition of currency has been kept similar to the earlier notification.
Possession and Retention of Foreign Currency
The Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000, with all its subsequent amendments has been repealed and replaced by the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015, which has come into effect on December 29, 2015. The RBI has directed the ADs regarding the limits for possession or retention of foreign currency or foreign coins. While an authorised person within the scope of his authority shall not be subjected to any limit and any person can possess foreign coins without any limit, retention of foreign currency notes, bank notes and foreign currency traveler’s cheques shall be subject to a limit of USD 2,000 in aggregate, which shall also have further conditions as provided under the new Regulations. However, a person resident in India but not permanently residing herein shall have no such limit, provided the foreign currency was acquired, held or owned by him when the person was resident outside India and he brought such currency in accordance with the applicable laws.
Realisation, Repatriation and Surrender of Foreign Exchange
The Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015 have superseded the old Regulations with all subsequent amendments. A person resident in India shall, with the general or special permission of RBI, take all reasonable steps to repatriate any foreign exchange due or accrued to him. Such person shall not do anything or refrain from doing anything which results in delay or cessation of receipt of such foreign exchange. The manner of repatriation would include –
(i) selling to an authorised person in India in exchange of Indian currency;
(ii) retaining the amount in an account kept with an AD, subject to the extent specified by RBI; or
(iii) using it to discharge a debt or liability in accordance with the guidelines of the RBI.
Repatriation would be deemed to occur once the person receives payment in Indian currency in India, from any account (maintained with an AD) of a bank or exchange house, situated overseas.
Time Limit for Repatriation: Every person, not being an individual, must repatriate the amount so received within seven days from the date of receipt in case the foreign exchange becomes due or accrued as: a) remuneration for rendering services; b) settlement of lawful obligation; c) income on assets held outside India; or b) inheritance, settlement or gift.
In all other cases, such foreign exchange must be repatriated within 90 days from the date of receipt. When a person, not being an individual resident, acquires or purchases any foreign exchange for the purposes mentioned in his declaration (in accordance with applicable law), such person shall surrender such amount or any unused portion thereof within 60 days of such acquisition or purchase.
Any unspent foreign exchange acquired or purchased by any person not being an individual resident of India, for the purpose of foreign travel, must be repatriated within 90 days of return of such traveler to India, provided however, in case of such foreign exchange is in the form of traveller’s cheques.
For a resident individual, the time limit of surrender of any foreign exchange, received, realized, unspent or unused by such person, would be 180 days from the relevant date.
Export and Import of Currency
The Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 and all amendments thereto are superseded by the 2015 Regulations, with effect from December 29, 2015.
Export and Import of Indian Currency: A person resident in India (i) may take outside India currency notes of Government of India and RBI notes of an amount not exceeding Rs. 25,000/- in aggregate; (ii) may take or send outside India up to two commemorative coins; and (iii) may bring in India, currency notes and RBI notes up to an amount of Rs. 25,000/- while returning to India after a temporary visit to a place outside the country. However, Nepal and Bhutan shall not be considered for deciding a place outside India.
Import of Foreign Exchange: Foreign exchange can be sent into India without any limit, except in the form of foreign currency notes, bank notes and traveler’s cheques. A person may bring into India foreign exchange (except for unissued notes) without any limit, subject to a declaration made in the Currency Declaration Form (“CDF”), at the time of his arrival in India. However, no such declaration would be required if the aggregate amount brought by such person, through currency notes, bank notes or traveler’s cheques, at one time, does not exceed USD 10,000 or its equivalent and/or if the foreign exchange value of the currency notes brought is within USD 5,000 or its equivalent.
Export of Foreign Exchange and Currency Notes: While an authorised person shall be eligible to send out any foreign exchange acquired in normal course of business, any other person shall be subjected to the conditions specified for this purpose. However, any person resident outside India may take out of India any unspent foreign exchange, provided, such amount does not exceed the amount brought by him and declared by him in the CDF upon arrival.
Export and Import to or from Nepal and Bhutan: While there is no limit in export and import of currency to and from Nepal and Bhutan, a person travelling from India to those two countries shall be permitted to carry up to Rs. 25,000/- in currency notes of denomination Rs. 500 and Rs. 1,000. However, in no circumstance, any currency note of denomination Rs. 100 shall be taken, sent or carried out of India to those two countries.
Prohibition of Export of Coins: No person shall be allowed to take or send out of India any Indian coins covered under the Antique and Art Treasure Act of 1972.
Foreign Currency Accounts by Person Residents in India
The regulations issued under the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000, as amended from time to time, have been replaced by the new Regulations through a notification dated January 21, 2016. A person resident in India may open, hold and maintain with an AD in India, the following accounts:
(i) Exchange Earner’s Foreign Currency Account;
(ii) Resident Foreign Currency Account;
(iii) Resident Foreign Currency (Domestic) Account;
(iv) Diamond Dollar Account.
For opening, holding and maintaining either of the above-mentioned accounts, the relevant regulations have to be followed.
In addition to and subject to the foregoing, the following person, resident in India, shall also be eligible to open a foreign currency account, viz. (i) any unit in a Special Economic Zone; (ii) an exporter, provided he/it either is exporting services and engineering goods on deferred payment terms, or, has undertaken a turnkey project or a construction contract abroad; (iii) the Indian agents of foreign airlines/shipping companies; (iv) ship manning/crew managing agencies; (v) project offices set up in India in accordance with relevant FEMA regulations; (vi) Indian companies receiving foreign direct investment; and (vii) organizers of international seminars/conferences/conventions etc.
Subject to the conditions specified hereinabove, ADs having branch/head office/correspondence outside India; a branch of an Indian bank; an Indian body corporate (including company and firm) in the name of its foreign branch/representative; an Indian Party making overseas investment; a person raising external commercial borrowing; a person going abroad for studies; and such other person resident in India, as specified, shall be eligible to open foreign currency accounts outside India. Subject to other conditions, the accounts can be current, savings or term deposit accounts, unless otherwise provided, in case of accounts opened by individuals and in the form of current or term deposit accounts, in case of others. Such account can be held jointly or singly in the name of the eligible person.
Postal Orders/Money Orders
The Post Office (Postal Orders/Money Orders), 2015 has superseded the original Notification No.FEMA.18/2000-RB, with effect from December 29, 2015. Vide the notification the RBI has given general permission to any person to buy foreign exchange in the form of postal order or money order from any Indian Post Office.
Export of Goods and Services
The RBI, through FEMA 23(R)/2015-RB, dated January 12, 2016, has notified the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, replacing the old Regulations dated May 3, 2000.
Declaration of Exports: The exporters of goods and software in physical or any other form, carrying out export through Customs manual ports, are required to furnish declaration specifying the relevant particulars in the manner and form set out for that purpose. Such declaration shall mention the full export value (or the value which the exporter expects to receive). In case of export of services, where no Form is specified in these Regulations, no declaration would be required. However, the exporter shall be liable to realize the amount of foreign exchange and to repatriate the same to India in accordance with the applicable laws.
Declaration in Form EDF shall be submitted in duplicate to the Commissioner of Customs. Declaration in Form SOFTEX shall be submitted for export of computer/audio/video/ television software, in triplicate to the designated official of Ministry of Information Technology, Government of India at the Software Technology Parks (“STPs”) of India or at the Free Trade Zones or Special Economic Zones (“SEZ”) in India. Each copy of the declaration must include Importer-Exporter Code number. Each declaration must also be backed up by evidences supporting such declaration.
Exemption: Regulation 4 exempts certain export of goods and/or software from the liability of declaration which includes export of: trade samples; personal effects of travelers; ship’s stores, trans-shipment cargo etc. under such circumstance as specified; gift of goods not exceeding 5 lakh rupees (which would require the declaration of the exporter to that effect); aircrafts/aircraft engines for repair/overhauling activities, subject to re-import within six months; goods, free of cost, on re-export basis; goods found defective, for the purpose of replacement; goods imported from foreign entities on loan; goods permitted by relevant authorities as prescribed; goods sent outside for testing, subject to re-import and such other goods as mentioned in the Regulations.
Other Provisions: Unless otherwise authorised by the RBI, the amount of export shall be realized in accordance with the provisions of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 as amended from time to time, through an AD. The full export value shall be realized and repatriated within nine months from the date of export, provided that, if such goods are exported to a foreign warehouse with RBI’s permission, such value shall be paid to the AD as soon as the value is realized and in any case, within 15 months of the shipment of goods. However, the RBI may extend the time limit in case there is any reasonable cause. In case of export from SEZ, STPs, Export Oriented Units etc., the full export value must be repatriated within nine months from the date of export.
The documents pertaining to export shall be submitted to the authorised dealer mentioned in the relevant export declaration form, within 21 days from the date of export, or from the date of certification of the SOFTEX Form. Certain exports regarding trade agreements, rupee credit etc. would be subjected to RBI guidelines and would require prior approval. The Regulations also lay down provisions which prohibit any person from doing any act/omission which would result in delay of realization of the value of export. An exporter shall also be eligible to receive advance payment, subject to the provisions of Regulation 15.
Through a notification dated December 29, 2015, the RBI has replaced the Foreign Exchange Management (Insurance) Regulations, 2000 with the Foreign Exchange Management (Insurance) Regulations, 2015. These regulations control the general and life insurance policies issued by an insurer outside India, to a person resident in India.
General Insurance: A person resident in India may take or continue to hold a health insurance policy issued by an insurer outside India on a condition that the total remittance does not exceed the limit prescribed under the Liberalised Remittance Scheme (Currently, upto USD 250,000 can be remitted under the Scheme in a financial year for any permitted current or capital account transaction or a combination of both). No person shall, without the approval of Insurance Regulatory Development Authority, take out/renew any insurance policy for any property in India or ship/vessel/aircraft registered in India with any insurer whose principal place of business is outside India. However, a person can take out/continue to hold a general insurance issued by such insurer mentioned above if such policy is held under a specific/general permission granted by the Central Government.
If a person, resident in India, holds a general insurance policy taken from an insurer outside India during a time such person was a resident outside India, he may continue to hold such policy. Where the premium of a general insurance policy is remitted from India, the maturity proceeds or any claim amount shall be repatriated through normal banking channels within seven days from the receipt of such amount.
Life Insurance: A resident may take or continue to hold life insurance coming under the purview of these Regulations under a specific or general permission of the RBI. Regulation 4 of these Regulations also lays down provisions regarding repatriation of the maturity benefits and/or claim amounts.
The Foreign Exchange Management Act, 1999 came into effect from June 1, 2000. There are several Regulations framed under the main Act and there have been several amendments to these Regulations, making it cumbersome to follow. The revised Regulations discussed above have replaced all the relevant Regulations along with their amendments. This revision not only facilitates ease of doing business, it has successfully captured the current business trend. Hence, the supersession of nine sets of Regulations under the Act by fresh set of Regulations has been welcomed by parties interested in carrying out cross-border transactions.
- Ananya Banerjee