BY CA. DEEPENDER KUMAR
1
Structure of FEMA
Applies to the whole of India and all branches, offices and
agencies outside India which are owned or controlled by a person
resident in India.
FEMA has 49 sections of which 9 (section 1 to 9) are substantive
and the rest are procedural/ administrative.
Section 46 of FEMA grants power to Central Government to make
rules to carry out the provision of FEMA.
Section 47 of FEMA grants power to RBI to make regulations to
implement its provisions and the rules made there under.
RBI is entrusted with the administration and implementation of
FEMA
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Substantive Provisions
Section
Description
1
Application and Commencement of FEMA
2
Definitions
3 to 9
Provisions relating to Regulations and Management
of Foreign Exchange
10 to 12
Provisions relating to Authorized Person
13 to 15
Provisions relating to Contraventions and Penalties
16 to 38
Provisions relating to Adjudication, Appeal and
Directorate of Enforcement
39 to 49
Miscellaneous Provisions
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References
Provisions of FEMA cannot be found at one place but are spread
over at different places. The FEMA contains only basic legal
framework. The practical aspects are covered in Rules made by
Central government and regulations made by RBI.
References :
(i) Foreign Exchange Management Act,1999
(ii) Rules made by Central government
(iii) Regulations/notification made by RBI
(iv) Consolidated FDI policies issued by DIPP (Annually)
(v) Press note /press release issued by DIPP (Annually)
(vi) AP (DIR Series) circular issued by RBI
(vii) Master circulars issued by RBI (Annually)
(viii) Website: www.rbi.org.in, www.dipp.nic.in, www.fipb.gov.in
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A.P. (Dir Series) Circulars

Directions issued by RBI u/s. 10(4) and 11(1) of FEMA to
Authorized Persons (AP)

These directions are called – A.P. (Dir Series) Circulars

APs are Authorized Dealers, Money Changers and banks who
are authorized to deal in Foreign Exchange

These Circulars are operational instructions to AP by RBI.

Legal validity of these Circulars have been upheld in the case
of Prof. Krishnaraj Goswami v. RBI, [2007 (6) Bom. CR 565]

Court upheld the power of RBI to issue such Circulars based
on powers conferred to RBI u/s. 10(4) & 11(1) & negated the
contention that RBI has no jurisdiction to issue such Circulars
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Notifications under FEMA
and Master Circulars

Notifications are issued by the Central Government
in the Official Gazette.

Section 47 of FEMA grants power to RBI to make
regulations.

Master Circulars issued by RBI every year on 1st July
to subsumes the position as on date and
consolidates all the existing circulars (subject wise).
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Some of the important definitions
Authorized Person
Capital Account Transaction
Current Account Transaction
Export
Foreign Exchange
Person
Person Resident in India
Person resident outside India
Repatriate to India
Security
Transfer
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Residential Status under FEMA
PERSON RESIDENT IN INDIA [Sec. 2(v)(i) of FEMA]:
Residing in India for more than 182 days during the course of
preceding F.Y. but doesn’t include
 a person going out of India or staying outside India, in
either case
For or on taking up employment outside India, or
for carrying business or vocation outside India, or
for any other purpose, in such circumstances as would
indicate his intention to stay outside India for uncertain
period;
 a person coming to India or staying outside India
otherwise than
for or on taking up employment in India,or
for carrying business or vocation in India , or
for any other purpose in such circumstances as would
indicate his intention to stay in India for uncertain period:
Cont…..
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Residential Status under FEMA
(ii) Any person or body corporate registered or incorporated in
India,
(iii) an office , branch or agency in India owned or controlled by
a person resident outside India,
(iv) An office branch or agency outside India owned or
controlled by a person resident in India.
PERSON RESIDENT OUTSIDE INDIA[Sec. 2(w) of FEMA]: a person
who is not resident in India.
Person: Person Includes:
(i) An Individual, (ii) a Hindu Undivided family (iii) a company (iv)
a firm (v) an association of person or body of individuals,
whether incorporated or not, (vi) every artificial juridical person,
not falling within any of the preceding sub clauses, and (vii)any
agency, office or branch owned or controlled by such person.
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Capital Account Transactions
 Definition U/s 2(e)
"capital account transaction" means a transaction
which alters the assets or liabilities, including
contingent liabilities, outside India of persons
resident in India or assets or liabilities in India of
persons resident outside India, and includes
transactions referred to in sub-section (3) of
section 6 of FEMA;
 Capital Account transactions are prohibited
unless generally permitted - they are regulated by
RBI.
Cont…….
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Capital Account Transactions
Capital account transactions are governed by Foreign
Exchange Management (Permissible Capital Account
Transaction) Regulations, 2000.
 Capital account transactions are classified into 2
schedules :Schedule I – Classes of capital account transactions
of persons resident in India
Schedule II – Classes of capital account transactions
of persons resident outside India
Cont……
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Capital Account Transactions
Schedule I:
(Classes of capital account transaction of person
resident in India)
1. Investment by a person resident in India in foreign
securities.
2. Foreign currency loans raised in India and abroad by a
person resident in India.
3. Transfer of immovable property outside India by a
person resident in India.
4. Guarantees issued by a person resident in India in
favour of a person resident outside India.
5. Loans and overdrafts (borrowings) by a person resident
in India from a person resident outside India.
Cont……
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Capital Account Transactions
6. Maintenance of foreign currency account inn India and
outside India by a person resident in India.
7. Taking out of insurance policy by a person resident in
India from an insurance company outside India.
8. Loans and overdrafts by a person resident in India to a
person resident outside India.
9. Remittance outside India of capital assets of a person
resident in India.
10.Sale and purchase of foreign exchange derivatives in
India and abroad and commodity derivatives abroad by a
person resident in India.
Cont……
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Capital Account Transactions
Schedule II:
(Classes of capital account transaction of person
resident outside India)
1.
2.
3.
Investment in India by a person resident outside
India, that is to say :
(i) issue of security by a body corporate or an
entity in India and investment therein by a person
resident outside India; and
(ii) investment by way of contribution by a person
resident outside India to a capital of a firm or a
proprietorship concern or an association of person in
India.
Acquisition and transfer of immovable property in
India by a person resident outside India.
Guarantee by a person resident outside India in favour
of, or on behalf of, a person resident in India.
Cont…..
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Capital Account Transactions
4.
Import and export of currency/currency notes
into/from India by a person resident outside India.
5. Deposits between a person resident in India and a
person resident outside India.
6. Foreign currency account in India of a person resident
outside India.
7. Remittance outside India of capital assets in India of a
person resident outside India.
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Current Account Transactions
 Definition U/s 2(j) of FEMA
"current account transaction" means a transaction
other than a capital account transaction and without
prejudice to the generality of the foregoing such
transaction includes,(i) payments due in connection with foreign trade, other
current business, services, and short term banking and
credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income
from investments,
(iii) remittances for living expenses of parents, spouse and
children residing abroad, and
(iv) expenses in connection with foreign travel, education
and medical care of parents, spouse and children;
Cont…..
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Current Account Transactions
 Current account transactions are governed by
Foreign Exchange Management (Current Account
Transactions) Rules, 2000.
 Current account transactions are divided into 3
schedules in Current Account Transactions Rules:Schedule I – Prohibited Transactions
Schedule II – Transactions requiring prior approval of
Government of India
Schedule III – Transactions requiring prior approval
of RBI
Cont……
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Current Account Transactions
Schedule I :
 Remittance out of lottery winnings
 Remittance of income from racing/riding etc., or any
other hobby
 Remittance for purchase of lottery tickets,
banned/prescribed magazines,
football
pools,
sweepstakes etc.
 Payment of commission on exports made towards
equity investment in Joint Ventures/Wholly Owned
Subsidiaries abroad of Indian companies.
 Remittance of dividend by any company to which the
requirement of dividend balancing is applicable.
 Payment related to “Call Back Services” of telephones.
 Remittance of interest income on funds held in Nonresident Special Rupee Scheme a/c.
Cont……
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Current Account Transactions
Schedule I I:
 Cultural Tours – Approval from Ministry of Human
Resources Development (Department of Education and
Culture)
 Advertisement in foreign print media for the purposes
other than promotion of tourism, foreign investments and
international bidding (exceeding US$ 10,000) by a State
Government and its Public Sector Undertakings.Approval from Ministry of Finance, Department of
Economic Affairs]
 Remittance of freight of vessel charted by a PSU-Approval
from Ministry of Surface Transport (Chartering Wing)
 Remittance of hiring charges of transponders by (a) TV
Channels (b) Internet service provider- Approval from (a)
Ministry of Information and Broadcasting and/or (b)
Ministry
of
Technology]
Communication
and
Information
Cont……
19
Current Account Transactions
Schedule I I:
 Remittance of container detention charges Ministry of
Surface Transport (Director exceeding the rate prescribed by
Director General of Shipping) – Approval from General of
Shipping
 Advertisement in foreign print media for the purposes other
than promotion of tourism, foreign investments and
international bidding (exceeding US$ 10,000) by a State
Government and its Public Sector Undertakings.- Approval
from Ministry of Finance, Department of Economic Affairs]
 Remittance of prize money/sponsorship of sports activity
abroad by a person other than International/National/State
Level sports bodies, if the amount involved exceeds US $
100,000 – Approval from Ministry of Human Resource
Development (Department of Youth Affairs and Sports)
 Remittance for membership of P & I Club- Approval from
Ministry of Finance (Insurance Division)
Cont……
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Current Account Transactions
Schedule III: (Approval from RBI)







Individuals can avail of foreign exchange facility for the following
purposes within the limit of USD 2,50,000 only. Any additional
remittance in excess of the said limit for the following purposes shall
require prior approval of the Reserve Bank of India.
(i) Private visits to any country (except Nepal and Bhutan).
(ii) Gift or donation.
(iii) Going abroad for employment.
(iv) Emigration*
(v) Maintenance of close relatives abroad.
(vi) Travel for business, or attending a conference or specialised training
or for meeting expenses for meeting medical expenses, or check-up
abroad, or for accompanying as attendant to a patient going abroad for
medical treatment/check-up.
(vii) Expenses in connection with medical treatment abroad*
(viii) Studies abroad*
(ix) Any other current account transaction
* Note the Individual may avail of exchange facility for an amount in excess of the limit
prescribed under the LRS Scheme if it is so required by a country of emigration,
medical institute offering treatment or the university, respectively
21
Current Account Transactions
Schedule III: (Approval from RBI)

Other Than Individuals
The following remittances by persons other than individuals shall require
prior approval of the Reserve Bank of India.
(i) Donations exceeding one per cent of their foreign exchange earnings during
the previous three financial years or USD 5,000,000, whichever is less, for
 creation of Chairs in reputed educational institutes;
 contribution to funds (not being an investment fund) promoted by
educational institutes;
 contribution to a technical institution or body or association in the field of
activity of the donor Company.
(ii) Commission, per transaction, to agents abroad for sale of residential flats or
commercial plots in India exceeding USD 25,000 or five per cent of the
inward remittance whichever is more.
(iii) Remittances exceeding USD 10,000,000 per project for any consultancy
services in respect of infrastructure projects and USD 1,000,000 per project,
for other consultancy services procured from outside India.
(iv) Remittances exceeding five per cent of investment brought into India or USD
100,000 whichever is higher, by an entity in India by way of reimbursement
of pre-incorporation expenses.
22
FOREIGN
INVESTMENT
IN INDIA
23
Significance of Foreign Investment
1. Through foreign investment
extend their business activity
countries.
corporations
into foreign
2. The main object of Foreign investment is to
acquire or retain control over markets and/or
productive resources.
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Relevant FEMA Regulations
Consolidated FDI
Policy, DIPP,
Commerce
Ministry
AP Dir
Circulars –
RBI’s Changes
FEMA
Regulations –
Mode of
Investment
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Foreign
Investment
Foreign Direct
Investments
Automatic
Route
Govt.
Route
Foreign
Portfolio
Investments
FIIs
NRIs, PIO,
QFIs
Foreign Venture
Capital
Investments
SEBI regd.
FVCI
VCF,
IVCUs
Other
Investments
FIIs
NRIs, PIO,
QFIs
Investments on
non-repatriatable
basis
NRIs, PIOs
Persons
Resident
outside
India
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Foreign Direct Investment
Foreign Investments under Portfolio Investment
Scheme (PIS)
Foreign Venture Capital Investments
Other Foreign Investments
Immovable Properties in India
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GOVT. ROUTE
BAN ROUTE
•
•
•
Business of Chit Fund
Nidhi Company
Agriculturalor
Plantation activities
• Real Estate business*
or construction of farm
house
• Tradingin Transferable
Development Rights
(TDRs)
• LotteryBusiness,
Gambling and betting
• Manufacture of cigars,
cigarettes or tobacco,
etc
(limited extent as defined
by regulations)
•
•
•
•
•
The foreign investor or
the Indian company
should obtain prior
approval
of
the
Government of India,
Ministry of Finance,
Foreign
Investment
Promotion
Board
(FIPB)/ SIA for the
investment. Some are:
Tea sector including
tea plantation (100%)
Defence Industry
Print Media
Broadcasting
AUTOMATIC
ROUTE
The foreign investor or the
Indian company does not
require any approval from
the Reserve Bank or
Government of India for
the investment. Some are:
•E-commerce activities
•Wholesale trading
•Industrial Parks
•Construction: Townships,
Housing, Built-up
infrastructure
•Coal and Lignite
Automatic Route depends
on sector, sectoral cap
and capitalisation norms
and
other
eligible
activities.
28




A person resident outside India or an entity
incorporated outside India subject to FDI policy issued
by DIPP.
Bangladesh’s Citizen/Entity can invest after taking
FIPB approval can invest under FDI Scheme in allowed
sectors.
Pakistan’s Citizen/Entity can invest after taking FIPB
approval can invest under FDI Scheme in allowed
sectors (except defence, space and atomic energy and
sectors/ activities prohibited for foreign investment).
NRIs, resident and citizens of Nepal or Bhutan are
permitted to invest in shares/ convertible debentures
of Indian Company.
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


Equity Shares
Compulsorily Convertible Debentures/Preference shares into equity
shares and warrants
Prior to December 30, 2013, issue of other types of preference shares
such as nonconvertible, optionally convertible or partially convertible,
were to be in accordance with the guidelines applicable for External
Commercial Borrowings (ECBs). On and from December 30, 2013 it has
been decided that optionality clauses may henceforth be allowed in
equity shares and compulsorily and mandatorily convertible preference
shares/debentures to be issued to a person resident outside India under
the Foreign Direct Investment (FDI) Scheme. The optionality clause will
oblige the buy-back of securities from the investor at the price
prevailing/value determined at the time of exercise of the optionality so
as to enable the investor to exit without any assured return.
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Instruments
Pricing Guidelines
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


The pricing of the partly paid equity shares shall be determined upfront and 25%
of the total consideration amount (including share premium, if any), shall also be
received upfront; The balance consideration towards fully paid equity shares shall
be received within a period of 12 months.
The time period for receipt of the balance consideration within 12 months shall
not be insisted upon where the issue size exceeds rupees five hundred crore and
the issuer complies with Regulation 17 of the SEBI (Issue of Capital and Disclosure
Requirements(ICDR)) Regulations regarding monitoring agency. Similarly, in case
of an unlisted Indian company, the balance consideration amount can be received
after 12 months where the issue size exceeds rupees five hundred crores.
However, the investee company shall appoint a monitoring agency on the same
lines as required in case of a listed Indian company under the SEBI (ICDR)
Regulations. Such monitoring agency (AD Category -1 bank) shall report to the
investee company as prescribed by the SEBI regulations, ibid, for the listed
companies.
The pricing of the warrants and price/ conversion formula shall be determined
upfront and 25% of the consideration amount shall also be received upfront. The
balance consideration towards fully paid up equity shares shall be received within
a period of 18 months
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
Inward remittance through normal banking channels.

Debit to NRE / FCNR (B) account of a person concerned
maintained with an AD category I bank.



Conversion of royalty / lump sum / technical knowhow fee due
for payment or conversion of ECB, shall be treated as
consideration for issue of shares.
Conversion of import payables / pre incorporation expenses /
share swap can be treated as consideration for issue of shares
with the approval of FIPB.
Debit to non-interest bearing Escrow account in Indian Rupees
in India which is opened with the approval from AD Category – I
bank and is maintained with the AD Category I bank on behalf
of residents and non-residents towards payment of share
purchase consideration.
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Intimation
•Intimations of Receipt of Share Application Money submitted to RBI through
Authorised Dealer Category- I Bank (AD) within 30 days of receipt of remittance.
•Foreign Inward Remittance Certificate (FIRC) obtain from AD, with proper indication
of purpose of remittance
•In case Investor and Remitter are different, then No Objection Certificate (NOC)
should obtained from Remitter in favour of Investor
•Know Your Customer should be obtained for Investor and Remitter, as the case
may be.
•Unique Identification Number (UIN) will be provided by RBI for every remittance.
Allotment of Shares/CCDs/CCPS
•Allotment should be made with 180 days of receipt of funds
•Pricing Guidelines issued by RBI to be followed.
•Refund of excess share application money through Normal Banking Channel, if not
allotted within 180 days otherwise approval to be taken from RBI.
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FC-GPR
• Submitted to RBI through AD Bank within 30 days of allotment.
• Along with Share Valuation from Chartered Accountant.
• Compliance Certificate from Company Secretary.
• Board Resolution
• Copy of Letter of UIN allotted of RBI.
• Brief of CCD/CCPS agreement, in case CCD/CCPS are issued.
• MOA & AOA in case of Subscriber to Memorandum Shares.
• Registration Number will be provided by RBI on allotment.
Annual Reporting by Indian Company
• Annual Return on Foreign Liabilities and Assets to be filed by 15
July, every year.
• It is to be filed by email, fla@rbi.org.in
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



With a view to promoting the ease of reporting of transactions
under foreign direct investment, the Reserve Bank of India,
under the aegis of the e-Biz project of the Government of India
has enabled the filing of the following returns with the Reserve
Bank of India viz.
Advance Remittance Form (ARF) - used by the companies to
report the foreign direct investment (FDI) inflow to RBI; and
FCGPR Form - which a company submits to RBI for reporting
the issue of eligible instruments to the overseas investor
against the above mentioned FDI inflow.
(A.P (DIR Series) Circular No.77 dated February 12, 2015)
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Consent letter of buyer and seller
Shareholding Pattern of Investee
Company (before and after)
Share Valuation Certificate from
Chartered Accountant
Copy of Brokers’ Note, if Stock
exchange Sale
Undertaking from buyer for his
eligibility of accruing shares as per
Sectoral limit and pricing guidelines.
Undertaking form FIIs, not breached
SEBI guidelines
Sale by Non-Resident to
Resident
Sale by Resident to NonResident
FC-TRS Submitted to RBI through AD
Bank by Resident in Quadruplicate
within 60 days of receipt of Sale
Consideration
FC-TRS Submitted to RBI through AD
Bank by Resident in Quadruplicate
within 60 days of payment of Sale
Consideration
Consent letter of buyer and seller
NRIs- Consideration from NRE/NRO
account
Share Valuation Certificate from
Chartered Accountant
No Objection/Tax Clearance from
Income Tax authority/Chartered
Accountant
Undertaking from buyer for his
eligibility of accruing shares pricing
guidelines.
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DOWN STREAM FDI
Foreign Company
Direct FDI
Indian Company
Indirect FDI
Another Indian
Company
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Condition for Indirect FDI
•FDI via Indian Cos
•Owned & Controlled by Resident Indian Citizens =
Domestic Investment not counted as FDI
•Owned or Controlled by NRs = Indirect FDI
•Ownership
•>50% of Capital (Eq / CCDs / CCPS)
•Control
•Right to appoint a majority of Directors or to control
management or policy decisions including by virtue of
their Shareholding or Management Rights or Share
Holders Agareement or Voting Agreements
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Foreign Venture Capital Investments
A SEBI registered Foreign Venture capital
Investor (FVCI)
with specific approval from the Reserve
Bank
invest in IVCU or VCF or in a scheme
floated by such VCFs
subject to the condition that the
domestic VCF is registered with SEBI.
FVCIs can purchase equity / equity linked instruments /
debt / debt instruments, debentures of an IVCU or of a
VCF or in units of schemes / funds.
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Limited Liability Partnership (LLP) formed and
registered under the Limited Liability Partnership
Act, 2008 shall be eligible to accept Foreign Direct
Investment (FDI) under Government approval route.
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
Indian Depository Receipts (IDR)

Purchase of other securities by FIIs

Investment by Multilateral Development Banks (MDBs)



Foreign Investment in Tier I and Tier II instruments
issued by banks in India
Qualified Foreign Investors (QFIs) investment in the
units of Domestic Mutual funds
Infrastructure Debt Funds (IDF)
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Other Foreign Investments
Purchase of other securities by NRIs
 On non-repatriation basis without any limit
 Purchase shares / convertible debentures issued by an
Indian company
 Government securities, treasury bills, units of domestic
mutual funds, units of Money Market Mutual Funds
 on-convertible debentures issued by an Indian Company
On repatriation basis without any limit
 Government dated securities
 Treasury bills or units of domestic mutual funds;
 Bonds issued by a public sector undertaking (PSU) in India
and
 Shares in Public Sector Enterprises being disinvested by
the Government of India, provided the purchase is in
accordance with the terms and conditions stipulated in the
notice inviting bids.
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Exit Option
Buyback of
Shares
Reduction of
Capital
Buyout by
Promoter
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Voluntary
Liquidation
46
OVERSEAS
DIRECT
INVESTMENT
47
Introduction
 Investment by an Indian party, either under
Automatic or Approval route, by way of
contribution to capital or subscription to the
MOA of foreign entity or by way of purchase of
existing shares of foreign entity either by
 Investment through stock exchange; or
 Private placement; or
 Market purchase; or
 Investment in a Joint Venture or Wholly Owned
Subsidiary abroad.
But does not include Portfolio Investment.
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Reference Material
FEMA Notification No.
120/RB-2004 dated
July7, 2004
Notification
AP (DIR) series
Circular issued
from time to time
AP (DIR
Series )
Circular
Master Circular on Direct
Investments by residents
in Joint Venture /Wholly
Owned Subsidiary
abroad
Master
Circular
Website
www.rbi.org.in
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Significance of ODI
 Promoting global business by Indian entrepreneurs.
 Promote economic and business
between India and other countries.
co-operation
 Transfer of technology and skill, share R & D.
 Access to global market and promote brand image.
 Increase in exports of Plant & Machinery and goods
and services
 Source of Foreign Exchange Earnings – dividend,
royalty, technical know-how and other entitlements.
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Eligible to make overseas investment/Indian
party
.
.
.
• Resident corporate entities
• Registered Partnership Firms/LLPs
• Individual/ Trust/ Society
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

'Wholly Owned Subsidiary (WOS)' means a foreign
entity formed, registered or incorporated in
accordance with the laws and regulations of the
host country, whose entire capital is held by the
Indian party;
'Joint Venture (JV)' means a foreign entity formed,
registered or incorporated in accordance with the
laws and regulations of the host country in which
the Indian party makes a direct investment
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


'Financial commitment' means the amount of
direct investment by way of contribution to
equity and loan and guarantees issued by an
Indian party to or on behalf of its overseas Joint
Venture Company or Wholly Owned Subsidiary
(with in the 400 per cent of the net worth of the
last audited balance sheet of the Indian party)
(In case of individual it will the limit under LRS
scheme)
Net worth means – paid up capital and free
reserve in the Indian party
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Prohibitions
Real
Estate
Banking
Business
• Buying and selling of real estate or trading in TDRs
but does not include development of townships,
construction of residential/commercial premises,
roads or bridges).
• However, Indian banks operating in India can set up
JV/WOS abroad provided they obtain clearance
under the Banking Regulation Act 1949.
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General Permission
General permission has been granted to persons
residents in India for purchase / acquisition of
securities in the following manner:
out of the funds held in RFC account;
as bonus shares on existing holding of foreign
currency shares; and
when not permanently resident in India, out of their
foreign currency resources outside India.
General permission is also available to sell the shares
so purchased or acquired.
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Mode of Investment
Step down
subsidiary
(operating)
JV /WOS
Investment
Mode.
Guarantee to
JV/WOS/step
down subsidiary
Investment
through SPV
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Modes of Funding - ODI
Proceeds
raised
through
ADR/GDR
Balance in
EEFC account
Drawal of
foreign
exchange
from AD bank
Funding
Modes
In exchange of
ADR / GDR
Swap of
shares
Capitalization
of export
dues
Proceeds of
ECB/FCCB
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Automatic Route
An Indian Party does not
require any prior approval from
the Reserve Bank for making
overseas direct investments.
The
Indian
Party
should
approach an Authorized Dealer
Category – I bank with an
application in Form ODI and
the prescribed enclosures /
documents for effecting the
remittances
towards
such
investments.
Approval Route
Proposals not covered by the
conditions
under
the
automatic route require the
prior approval of the Reserve
Bank for which a specific
application in form ODI with
the documents prescribed
therein is required to be
made
through
the
Authorized Dealer Category
– I banks.
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Compliances
Step 1
Resolution/Special
Resolution
Investment in overseas entity
• Board
for
Step 2
• Valuation of shares only if it is acquisition of
existing company
Step 3
• Reporting in Form ODI within 30 days from the
remittance*
Step 4
• RBI will allot UIN for investment in entity. Second
remittance to the JV/WOS cannot be made unless
UIN for the first remittance is received.
Step 5
• Filing of share certificate with AD bank within
6 months
Cont…….
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Step 6
• Post investment changes/setting up step down
subsidiary need to be reported within 30 days
Step 7
• Filing of APR by 30th June of every year
Step 8
• Filing of FLA by 15th July of every year
Step 9
• Repatriate to India all dues viz. dividends,
royalty, technical fees, etc within 60 days of
falling due.
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ODI Form
Part I
Part II
•File within 30 days from the date of ODI Made
•To be filed by AD Bank for Reporting of Remittances
•APR file every year by 30th June as per the
audited/unaudited financial statements of JV/WOS abroad
Part III
•File at the time of disinvestment of ODI with 30 days from
the date of disinvestment
Part IV
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Significance of UIN
UIN can apply Online – Automatic Generated mail
for Allotment of UIN (by the AD Bank))

Second Remittance can’t be made without getting
UIN
Single UIN allotted for every investment made in a
particular JV/WOS abroad by Indian party/resident
individual
Mandatory to quote UIN in APR and ODI form at the
time of second remittance and other correspondence
with AD Bank
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Setting of JV/WOS BY Resident Individual
under ODI Scheme
With effect from August 05, 2013, a resident individual (single or in
association with another resident individual or with an ‘Indian Party’ as
defined in the Notification) satisfying the criteria as per Schedule V of the
Notification, may make overseas direct investment in the equity shares
and compulsorily convertible preference shares of a Joint Venture (JV) or
Wholly Owned Subsidiary (WOS) outside India. The limit of overseas direct
investment by the resident individual shall be within the overall limit
prescribed by the Reserve Bank of India under the provisions of Liberalised
Remittance Scheme, as prescribed by the Reserve Bank .
(i) Resident individual is prohibited from making direct investment in a JV
or WOS abroad which is engaged in the real estate business or banking
business or in the business of financial services activity.
(ii) The JV or WOS abroad shall be engaged in bonafide business activity.
(iii)Resident individual is prohibited from making direct investment in a JV
/ WOS [set up or acquired abroad individually or in association with
other resident individual and / or with an Indian party] located in the
countries
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identified by the Financial Action Task Force (FATF) as "non co-operative
countries and territories" as available on FATF website www.fatf-gafi.org
or as notified by the Reserve Bank.
(iv) The resident individual shall not be on the Reserve Bank’s Exporters
Caution List or List of defaulters to the banking system or under
investigation by any investigation / enforcement agency or regulatory
body.
(v) The JV or WOS, to be acquired / set up by a resident individual under
this Schedule, shall be an operating entity only and no step down
subsidiary is allowed to be acquired or set up by the JV or WOS.
(vi) For the purpose of making investment under this Schedule, the
valuation shall be as per Regulation 6(6)(a) of this Notification
(vii) The financial commitment by a resident individual to / on behalf of
the JV or WOS, other than the overseas direct investments as defined
under Regulation 2(e) read with Regulation 20A of this Notification, is
prohibited.
(viii) Resident Individual has to follow all the reporting requirement, post
investment changes requirement and disinvestment requirement as an
Indian party follow.
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Disinvestment
Liquidation
of JV/WOS
Transfer of
Shares
Writing off
Investment
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Limit Raised- USD 125,000 per financial year to USD
250,000 per financial year for both capital and
current account transactions
(A.P. (DIR Series) Circular No. 106 dated June 1, 2015)
PERMISSABLE CAPITAL ACCOUNT TRANSACTIONS
 opening of foreign currency bank account abroad;
 purchase of property abroad;
 making investments abroad;
 setting up WOS and JV abroad;
 extending loans*
*including loans in INR to NRIs who are relatives as
defined in Companies Act, 2013.
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Private visits to any country (except Nepal and Bhutan)
ii.
Gift or donation.
iii.
Going abroad for employment
iv.
Emigration*
v.
Maintenance of close relatives abroad
vi.
Travel for business, or attending a conference or specialized training
or for meeting expenses for meeting medical expenses, or check-up
abroad, or for accompanying as attendant to a patient going abroad
for medical treatment/ check-up.
vii.
Expenses in connection with medical treatment abroad*
viii.
Studies abroad*
ix.
Any other current account transaction
NOTE- Remittance in excess of the said limit- Prior Approval of RBI
i.
*Individuals may avail of exchange facility for an amount in excess of the
overall limit prescribed under the LRS, if it is so required by a country of
emigration, medical institute offering treatment or the university
respectively.
Cont….
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Individual remits any amount under the said LRS in a
financial year, then the applicable limit for such
individual would be reduced from USD 250,000 by
the amount so remitted:
For a person who is resident but not permanently
resident in India and
• is a citizen of a foreign State other than Pakistan; or
• is a citizen of India, who is on deputation to the office
or branch of a foreign company or subsidiary or joint
venture in India of such foreign company,
Remittance up to his net salary
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
Donations for educational institutions;
Commissions to agents abroad for sale of
residential flats/commercial plots in India;



Remittances for consultancy services and
Remittances for reimbursement of preincorporation expenses
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


Section 13 of FEMA- Any Procedural aspect not
followed within time frame allowed will attract
penalty (a) maximum to thrice of sum involved in
contravention
if not quantifiable then INR 200,000/Where such contravention is a continuing one,
further penalty of maximum INR 5000/- every day.
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


Section 15- Any contravention under section 13 may, on an
application made by the person committing such contravention, be
compounded within one hundred and eighty days from the date of
receipt of application by the Director f Enforcement or such other
officers of the Directorate of Enforcement and officers of the Reserve
Bank as may be authorised in this behalf by the Central Government in
such manner as may be prescribed.
Compounding of contravention can be done subject to para 7.2 of A.P.
(DIR Series) Circular No. 56 Dated June 28, 2010
Para 7.2 Contraventions relating to any transaction
approvals or permission from the Government or
authority concerned, as the case may be, have not been
contraventions would not be compounded unless
approvals are obtained from the concerned authorities.
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where proper
any statutory
obtained, such
the required
72
Acts and Regulations to operate and Regularizes
of Foreign Exchange transitions :
S. No.
Name of Act/ Regulation
1
Foreign Exchange Management Act,1999
2
Foreign Exchange Management (Export And Import Of Currency)
Regulations, 2000
3
Foreign Exchange Management (Acquisition And Transfer Of Immovable
Property In India) Regulations, 2000
Foreign Exchange Management (Acquisition And Transfer Of Immovable
Property Outside India) Regulations, 2000
Foreign Exchange Management (Adjudication Proceedings And Appeal) Rules,
2000
Foreign Exchange Management (Borrowing And Lending In Rupees)
Regulations, 2000
Foreign Exchange Management (Borrowing Or Lending In Foreign
Exchange) Regulations, 2000
4
5
6
7
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S. No.
8
9
Name of Act/ Regulation
Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and
Payment of Interest) Rules, 2000
Foreign Exchange Management (Authentication of Documents) Rules, 2000
10
Foreign Exchange Management (Current Account Transactions) Rules, 2000
11
Foreign Exchange (Compounding Proceedings) Rules, 2000
12
14
Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000
Foreign Exchange Management (Issue of Security in India by a Branch, Office or
Agency of a Person Resident outside India) Regulations, 2000
Foreign Exchange Management (Deposit) Regulations, 2000
15
Foreign Exchange Management (Guarantees) Regulations, 2000
13
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S. No.
16
Name of Act/ Regulation
19
Foreign Exchange Management (Realisation, Repatriation and Surrender of
Foreign Exchange) Regulations, 2000
Foreign Exchange Management ( Foreign Currency Accounts by a Person
Resident in India) Regulations, 2000
Foreign Exchange Management (Possession and Retention of Foreign Currency)
Regulations, 2000
Foreign Exchange Management (Insurance) Regulations, 2000
20
Foreign Exchange Management (Remittance of Assets) Regulations, 2000
21
Foreign Exchange Management (Manner of Receipt and Payment) Regulations,
2000
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000
Foreign Exchange Management (Establishment in India of Branch or Office or
other place of business) Regulations, 2000
17
18
22
23
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S. No.
Name of Act/ Regulation
24
Foreign Exchange Management (Export of Goods and Services) Regulations, 2000
25
Foreign Exchange Management (Investment in Firm or Proprietary Concern in
India) Regulations, 2000
Foreign Exchange Management (Foreign Exchange Derivative Contracts)
Regulations, 2000
Currency Futures (Reserve Bank) Directions, 2008
26
27
28
29
30
31
Foreign Exchange Management (Transfer or Issue of any Foreign Security)
Regulations, 2004
Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002
Foreign Exchange Management [Withdrawal of General Permission to Overseas
Corporate Bodies (OCBs)] Regulations, 2003
Foreign Exchange Management (Crystallization of Inoperative Foreign Currency
Deposits) Regulations, 2014
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CA Deepender Kumar
DEEPENDER ANIL & ASSOCIATES
Head Office
101, E-36, Jawahar park, Laxmi
Nagar, Delhi-110092
Branch Office
Plot-5A, IInd Floor, Sector-3A,
Rachna, Vaishali, Ghaziabad (UP)201010
Mob No: 9910099584
9312245584
deepanilassociates@gmail.com
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