Taxmann's Foreign Exchange Management Manual | Set of 2 Volumes

I-7

CONTENTS PAGE

CONTENTS PAGE

Division Heads

List of Basic Notifications

List of Amending Notifications

List of Notifications

List of Master Directions

List of FDI Circulars and Press Notes

List of Prescribed Forms

Glossary of Important Definitions

Short title, extent, application and commencement

Definitions

Dealing in foreign exchange, etc.

Holding of foreign exchange, etc.

Current account transactions

Capital account transactions

Export of goods and services

Realisation and repatriation of foreign exchange

Exemption from realisation and repatriation in certain cases

I-7

CONTENTS

I-8 PAGE

2.11 2.12 2.12

2.13 2.14 2.15 2.15

Omitted by the Finance Act, 2017, w.e.f. 26-5-2017

Omitted by the Finance Act, 2017, w.e.f. 26-5-2017

2.15 2.16 2.17 2.17 2.18 2.18 2.19

Omitted by the Finance Act, 2017, w.e.f. 26-5-2017 Omitted by the Finance Act, 2017, w.e.f. 26-5-2017 Omitted by the Finance Act, 2017, w.e.f. 26-5-2017

Omitted by the Finance Act, 2017, w.e.f. 26-5-2017 Omitted by the Finance Act, 2017, w.e.f. 26-5-2017 Omitted by the Finance Act, 2017, w.e.f. 26-5-2017

­

2.19 2.19 2.19 2.19 2.20

2.20 2.21 2.21 2.21

2.21 2.21 2.21 2.22

2.22 2.22

I-9

CONTENTS PAGE

­ ­ ­ ­

­

­ ­

­ ­ ­ ­

­

­

­ ­ ­ ­

CONTENTS

I-10 PAGE

­

­

I-11

CONTENTS PAGE

­

­ ­

­

­ ­

­ ­ ­

­

­ ­

­

­ ­

­

­

­ ­

CONTENTS

I-12 PAGE

­

­ ­

­ ­

­ ­

­ ­

­ ­ ­

­ ­

­

­

­

­

­

I-13

CONTENTS PAGE

­

­

­

­

­

­

­

CONTENTS

I-14 PAGE

­ ­

­

­

­

­

­

­ ­ ­

I-15

CONTENTS PAGE

­ ­

­

­

­ ­

­ ­

­ ­

­ ­ ­ ­

­ ­ ­

­ ­

­­

­­

­­ ­­

CONTENTS

I-16 PAGE

­

­

­

­ ­

I-17

CONTENTS PAGE

­ ­ ­

­ ­­

­ ­ ­ ­ ­

*See Volume 2.

CONTENTS

I-18 PAGE

CHAPTER 19 : CHAPTER 20 : CHAPTER 21 : CHAPTER 22 : CHAPTER 23 : CHAPTER 24 : CHAPTER 25 : CHAPTER 26 : CHAPTER 27 : CHAPTER 28 : CHAPTER 29 : CHAPTER 30 : CHAPTER 31 : CHAPTER 32 : CHAPTER 33 : CHAPTER 34 : CHAPTER 35 : CHAPTER 36 : CHAPTER 37 : CHAPTER 38 : CHAPTER 39 : CHAPTER 40 : CHAPTER 41 : CHAPTER 42 : CHAPTER 43 : CHAPTER 44 : CHAPTER 45 : CHAPTER 46 : CHAPTER 47 : CHAPTER 48 : CHAPTER 49 : CHAPTER 50 : CHAPTER 51 : CHAPTER 52 : CHAPTER 53 : CHAPTER 54 : SUBJECT INDEX

*See Volume 2.

­

­ ­

­ ­ ­

­ ­

­ ­ ­

I-19

CONTENTS PAGE

­

­

­

*See Volume 2.

3.3

FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT TRANSACTIONS) RULES, 2000* GSR 381(E), dated 3-5-2000 - In exercise of the powers conferred by section 5 and sub-section (1) and clause (a) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999, and in consultation with the Reserve Bank, the Central Government having considered it necessary in the public interest, makes the following rules, namely :— Short title and commencement.

1. (1) These rules may be called the Foreign Exchange Management (Current Account Transactions) Rules, 2000.

(2) They shall come into effect on the 1st day of June, 2000.

Definitions.

2. In these rules, unless the context otherwise requires,— (a) “Act” means the Foreign Exchange Management Act, 1999 (42 of 1999); (b) “Drawal” means drawal of foreign exchange from an authorised person and includes opening of Letter of Credit or use of International Credit Card or International Debit Card or ATM Card or any other thing by whatever name called which has the effect of creating foreign exchange liability; (c) “Schedule” means a schedule appended to these rules; (d) the words and expressions not defined in these rules but defined in the Act shall have the same meanings respectively assigned to them in the Act. Prohibition on drawal of Foreign Exchange.

3. Drawal of foreign exchange by any person for the following purpose is prohibited, namely : (a) a transaction specified in the Schedule I; or (b) a travel to Nepal and/or Bhutan; or (c) a transaction with a person resident in Nepal or Bhutan : Provided that the prohibition in clause (c) may be exempted by RBI subject to such terms and conditions as it may consider necessary to stipulate by special or general order. *MASTER DIRECTIONS : Liberalized Remittance Scheme (LRS) [No. 7/2015-16, dated 1-1-2016]; Other Remittance

Facilities [No. 8/2015-16, dated 1-1-2016]; Export of Goods & Services [No. 16/2015-16, dated 1-1-2016] and Import of Goods and Services [No. 17/2016-17, dated 1-1-2016].

LATEST CLARIFICATIONS : See AP (DIR Series) (2004-05) Circular No. 46, dated 14-6-2005.

See AP (DIR Series) (2006-07) Circular No. 24, dated 20-12-2006; Circular No. 34, dated 2-3-2007; Circular No. 38, dated 5-4-2007; Circular Nos. 45 to 47, dated 30-4-2007; Circular No. 63, dated 25-5-2007 and Circular No. 77, dated 29-6-2007.

AP (DIR Series) (2008-09) Circular No. 40, dated 10-12-2008.

AP (DIR Series) (2009-10) Circular No. 10, dated 5-10-2009, Circular No. 50, dated 4-5-2010, Circular No. 52, dated 13-5-2010 and Circular No. 54, dated 26-5-2010.

AP (DIR Series) (2010-11) Circular Nos. 29, dated 22-12-2010 and 56, dated 29-4-2011.

AP (DIR Series) (2011-12) Circular No. 32, dated 10-10-2011, No. 82, dated 21-2-2012, No. 90, dated 6-3-2012, No. 102, dated 2-4-2012 and No. 118, dated 7-5-2012.

AP (DIR Series) (2012-13) Circular No. 83, dated 20-2-2013, Circular No. 106, dated 23-5-2013, Circular No. 107, dated 4-6-2013 and Circular No. 122, dated 27-6-2013.

AP (DIR Series) (2013-14) Circular No. 138, dated 3-6-2014 and Circular No. 151, dated 30-6-2014.

AP (DIR Series) (2014-15) Circular No. 5, dated 17-7-2014, Circular No. 14, dated 25-7-2014, Circular No. 19, dated 11-8-2014, Circular No. 40, dated 21-11-2014 and Circular No. 106, dated 1-6-2015.

AP (DIR Series) (2016-17) Circular No. 27, dated 12-1-2017.

AP (DIR Series) (2017-18) Circular No. 23, dated 12-4-2018 and No. 32, dated 19-6-2018.

AP (DIR Series) (2020-21) Circular No. 11, dated 16-2-2021.

3.6

3.7

PROHIBITION ON DRAWAL OF FOREIGN EXCHANGE

Sch. I

Prior approval of Government of India.

4. No person shall draw foreign exchange for a transaction included in the Schedule II without prior approval of the Government of India : Provided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account 1[***] of the remitter.

1a [Prior approval of Reserve Bank.

5. Every drawal of foreign exchange for transactions included in Schedule III shall be governed as provided therein: Provided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter.]

2 [6. (1) Nothing contained in rule 4 or rule 5 shall apply to drawal made out of funds held in Exchange Earners’ Foreign Currency (EEFC) account of the remitter.

(2) Notwithstanding anything contained in sub-rule (1), restrictions imposed under rule 4 or rule 5 shall continue to apply where the drawal of foreign exchange from the Exchange Earners’ Foreign Currency (EEFC) account is for the purpose specified in items* 10 and 11 of Schedule II, or items 3, 4, 11, 16* and 17 of Schedule III as the case may be.]

3 [Use of International Credit Card while outside India.

7. Nothing contained in rule 5 shall apply to the use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.]

SCHEDULE I 4

[Transactions which are prohibited] (See Rule 3)

1. Remittance out of lottery winnings.

2. Remittance of income from racing/riding, etc., or any other hobby.

3. Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes etc.

4. Payment of commission on exports made towards equity investment in Joint Ventures/Wholly Owned Subsidiaries abroad of Indian companies.

5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable.

5 [6. Payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco.]

7. Payment related to “Call Back Services” of telephones.

8. Remittance of interest income on funds held in Non-resident Special Rupee Scheme a/c.

1. Words “or Exchange Earners’ Foreign Currency (EEFC) Account” omitted by the FEM (Current Account Transactions) (Amendment) Rules, 2001, w.e.f. 30-3-2001.

1a. Substituted by the FEM (Current Account Transactions) Amendment Rules, 2015, w.e.f. 26-5-2015. Prior to its substitution, rule 5, as amended by the FEM (Current Account Transactions) (Amendment) Rules, 2001, w.e.f.

30-3-2001, read as under : “5. Prior approval of Reserve Bank.—No person shall draw foreign exchange for a transaction included in the Schedule III without prior approval of the Reserve Bank : Provided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter.”

2. Inserted, ibid.

3. Inserted by the FEM (Current Account Transactions) (Amendment) Rules, 2003, w.e.f. 15-1-2003.

4. Inserted by the FEM (Current Account Transactions) (Amendment) Rules, 2005, w.e.f. 27-7-2005.

5. Substituted by the FEM (Current Account Transactions) (Second Amendment) Rules, 2003, w.e.f. 1-5-2003. *‘10’ & ‘16’ need to be omitted.

Sch. II

CURRENT ACCOUNT TRANSACTIONS RULES, 2000

3.8

SCHEDULE II 6

[Transactions which require prior approval of the Central Government] (See Rule 4)

Purpose of Remittance 1. Cultural Tours 2. 7[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.

3. Remittance of freight of vessel charted by a PSU 4. Payment of import 8[through ocean transport] by a Govt. Department or a PSU on c.i.f. basis 5. Multi-modal transport operators making remittance to their agents abroad 9 [6. Remittance of hiring charges of transponders by (a) TV Channels (b) Internet service providers 7. Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping 10 8. [***] 9. 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 10. 11[***] 11. Remittance for membership of P & I Club

Ministry/Department of Govt. of India whose approval is required Ministry of Human Resources Development (Department of Education and Culture) Ministry of Finance, Department of Economic Affairs]

Ministry of Surface Transport (Chartering Wing) Ministry of Surface Transport (Chartering Wing) (i.e., other than f.o.b. and f.a.s. basis) Registration Certificate from the Director General of Shipping Ministry of Information and Broadcasting Ministry of Communication and Information Technology] Ministry of Surface Transport (Director General of Shipping) [***] Ministry of Human Resource Development (Department of Youth Affairs and Sports) 10

Ministry of Finance (Insurance Division)

6. Inserted by the FEM (Current Account Transactions) (Amendment) Rules, 2005, w.e.f. 27-7-2005.

7. Item 2 substituted by the FEM (Current Account Transactions) (Amendment) Rules, 2001, w.e.f. 30-3-2001.

Earlier item 2 was amended by the FEM (Current Account Transactions) (Amendment) Rules, 2000, w.e.f.

9-8-2000.

8. Inserted by the FEM (Current Account Transactions) (Fourth Amendment) Rules, 2003, w.e.f. 27-10-2003.

9. Inserted by the FEM (Current Account Transactions) (Amendment) Rules, 2004, w.e.f. 13-9-2004. Prior to its insertion, item 6 was omitted by the FEM (Current Account Transactions) (Amendment) Rules, 2002, w.e.f.

22-10-2002.

10. Omitted by the FEM (Current Account Transactions) (Amendment) Rules, 2010, w.r.e.f. 16-12-2009. Prior to its omission, item 8 read as under : “8. Remittances under technical collaboration agreements Ministry of Industry and where payment of royalty exceeds 5% on local sales and Commerce” 8% on exports and lump sum payment exceeds US $ 2 million 11. Omitted by the FEM (Current Account Transactions) (Amendment) Rules, 2004, w.e.f. 13-9-2004.

3.9

PRIOR APPROVAL OF RESERVE BANK 12

Sch. III

[SCHEDULE III

(See rule 5) Facilities for individuals 1. 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: Provided that for the purposes mentioned at item numbers (iv), (vii) and (viii), the individual may avail of exchange facility for an amount in excess of the limit prescribed under the Liberalised Remittance Scheme as provided in regulation 4 to FEMA Notification 1/2000-RB, dated the 3rd May, 2000 (hereinafter referred to as the said Liberalised Remittance Scheme) if it is so required by a country of emigration, medical institute offering treatment or the university, respectively: Provided further that if an individual remits any amount under the said Liberalised Remittance Scheme in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 (US Dollars Two Hundred and Fifty Thousand Only) by the amount so remitted: Provided also that for a person who is resident but not permanently resident in India and— (a) is a citizen of a foreign State other than Pakistan; or (b) 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, may make remittance up to his net salary (after deduction of taxes, contribution to provident fund and other deductions).

Explanation: For the purpose of this item, a person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which does not exceed three years, is a resident but not permanently resident:

12. Substituted by the FEM (Current Account Transactions) Amendment Rules, 2015, w.e.f. 26-5-2015. Earlier, Schedule III was amended by the FEM (Current Account Transactions) (Amendment) Rules, 2009, w.r.e.f.

30-4-2007, FEM (Current Account Transactions) (Amendment) Rules, 2009, w.r.e.f. 20-12-2006, FEM (Current Account Transactions) (Amendment) Rules, 2006, w.e.f. 10-7-2006, FEM (Current Account Transactions) (Amendment) Rules, 2004, w.e.f. 13-9-2004, FEM (Current Account Transactions) (Second Amendment) Rules, 2003, w.e.f. 1-5-2003, FEM (Current Account Transactions) (Third Amendment) Rules, 2003, w.e.f. 5-9-2003, FEM (Current Account Transactions) (Amendment) Rules, 2002, w.e.f. 22-10-2002, FEM (Current Account Transactions) (Second Amendment) Rules, 2002, w.e.f. 17-12-2002 and FEM (Current Account Transactions) (Amendment) Rules, 2001, w.e.f. 30-3-2001.

Sch. III

CURRENT ACCOUNT TRANSACTIONS RULES, 2000

3.10

Provided also that a person other than an individual may also avail of foreign exchange facility, mutatis mutandis, within the limit prescribed under the said Liberalised Remittance Scheme for the purposes mentioned hereinabove.

Facilities for persons other than individual 2. 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— (a) creation of Chairs in reputed educational institutes, (b) contribution to funds (not being an investment fund) promoted by educational institutes; and (c) 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.

Explanation:—For the purposes of this sub-paragraph, the expression “infrastructure” shall mean as defined in Explanation to para 1(iv)(A)(a) of Schedule I of FEMA Notification 3/2000RB, dated the May 3, 2000. (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.

Procedure 3. The procedure for drawal or remit of any foreign exchange under this Schedule shall be the same as applicable for remitting any amount under the said Liberalised Remittance Scheme.]

Foreign Exchange Management Manual | Set of 2 Volumes AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

Taxmann TAXMANN July 2022 40th Edition 9789356222434 3116 PAPERBACK

Rs. : 6595 | USD : 154

Description The Present Publication is the 40th Edition & updated till 11th July 2022. This book is compiled/authored by Taxmann's Editorial Board.

It is a compendium of amended, updated & annotated text of the following laws: · Foreign Exchange Management Act (FEMA) along with the following: o 35+ Rules, Regulations & Directions framed under FEMA, arranged alphabetically & chronologically, that issued by the Central Government & RBI o Notifications issued under FEMA  Basic Notifications · 25+ from the Central Government · 50+ from the RBI  40+ Amending Notifications  Notifications · 50+ from the Central Government · 440+ from the RBI o 20+ Master Directions updated till 11th July 2022 o Memorandum of Instructions · Law Relating to Foreign Contributions along with the following: o 4+ Acts o Relevant Rules & Regulations o Notifications o Directions o Guidelines o Case Laws Digest o FAQs o SOPs & Charters, etc. · Law Relating to Prevention of Money Laundering along with the following: o Prevention of Money Laundering Act, 2002 o Relevant Notifications o 14+ Rules & Regulations o Relevant Directions · EURO Issue, Issue of Foreign Currency Convertible Bonds, Ordinary Shares through Depository Receipt Mechanism, Issue of Foreign Currency Exchange Bonds · 3+ Allied Acts/5+ Rules & Guidelines · Foreign Direct Investment (FDI) Policy along with the following: o Consolidated FDI Policy o 20+ Circulars & Press Notes (2017-2021) o Summary Table of Section-wise FDI Policy · Tribunal, Appellate Tribunal and Other Authorities o Tribunal Reforms Act & Rules o Relevant Sections of the Finance Act, 2017 o Tribunal (Conditions of Service) Rules, 2021

ORDER NOW