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  • 1. Foreign Exchange Management - an overview of Current account Transactions
  • 2. What is new in FEMA regime ?
    • Preamble itself is changed
    • All current account transactions are free
    • Capital account transactions are deregulated
    • Definition of NRI changed from purpose to residence
    • From Criminal law to Civil Law
    • Less punishment – No Imprisonment
    • Compounding powers to RBI
    • Less stringent & more business friendly
    All colored text is relevant for examination
  • 3. Foreign Exchange Market in India Regulator: Reserve Bank of India Regulation: Foreign Exchange Management Act, 1999 Authorised Dealers, Money changers Buyers and sellers: exporters, importers, individuals, Corporates, FIIs, Non-Residents, NRIs etc. Tier-I Tier - II Tier-III
  • 4. Forex Activities in India – Facilitators
    • Ministry of Finance
    • Ministry of Commerce , DGFT
    • Directorate of Enforcement
    • Customs
    • Export Promotion Councils – FIEO
    • Export Inspection Units
    • Authorised Persons
    • FEDAI
    • EXIM Bank
    • ECGC
    • RBI
  • 5. Current Account Capital Account Trade Invisibles Exports Imports Tour Travel Remittance Gift Profit/Div/int FDI Portfolio Foreign Indian Source Source (FII) (GDR/ADR) Loan (Govt/ Pvt(ECB) Foreign currency A/C RI & NRI FOREIGN EXCHANGE TRANSACTIONS
  • 6. Forex – the Concept ( contd. ) – Current & Capital Account
    • Current account transaction – All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions.
    • affects cash position of an entity – Trade-related remittances & miscellaneous remittances fully convertible - fully delegated to ADs
    • Capital account transaction – affects asset & liability position of an entity - borrowing, lending & investment – FDI , FII, ECBs , NRI deposits , Overseas Investments – expanding convertibility
  • 7. General
    • In terms of the Rules - Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Annex I)- drawal of exchange for certain categories of transactions as listed in
    • Schedule I - expressly prohibited
    • Schedule II - permitted by the ADs if approval from the Ministry/Dept of GoI is secured
    • Schedule III- prior approval of the RBI required for remittance exceeding limits .
  • 8. Schedule I
    • Remittance out of lottery winnings
    • Remittance of income from racing/riding or any other hobby etc
    • Remittance for purchase of lottery tickets, banned/ prescribed magazines , football pools, sweepstakes etc
    • Payment of commission on exports made towards investment in JV / WOS abroad of Indian companies.
    • Payment related to callback services of telephones
  • 9. Schedule I (contd…)
    • Remittance of dividend by any company where dividend balancing is applicable
    • Remittance of interest income on funds held in Non – Resident Special Rupee ( Account ) Scheme.
    • Payment of commission on exports under Rupee state credit Route, except commission upto 10% of invoice value of exports of tea and tobacco .
  • 10. Schedule II
    • Remittances which need prior approval from the dealing ministry / department of GoI and permitted up to the amounts as mentioned in the approval letter –
    • Cultural tours , Advertisement in foreign print media , Freight of vessel charted by a PSU , Payment for import by a Govt, dept. or PSU on c.i.f. basis , Multi modal transport operators making remittance to their agents abroad , hiring of transponders by TV channels , ISPs , Remittances under technical collaboration agreements etc.
  • 11. Schedule III
    • Transactions needing RBI approval for amounts exceeding delegated powers of ADs
    • – travel , gift , donation , employment , emigration , maintenance , medical expenses exceeding the estimates , higher studies exceeding the estimates, commission to agents for sale of flats etc. in India , consultancy fees ,pre incorporation expenses.
  • 12. Limits upto which ADs can release foreign Exchange Sl no Transaction Limit in US $ 1 Private visit USD 10,000 per financial year 2 Business travel, Conference, Training USD 25,000 per trip 3 Medical treatment USD 100,000 or its equivalent on self declaration basis 4 Higher studies USD 1,00,000 per academic year
  • 13. Limits upto which ADs can release foreign Exchange Sl.no. Transaction Limit 5 Employment Upto USD 1,00,000 6 Emigration Upto USD 1,00,000 7 Gift/donation USD 5,000 per remitter/donor per annum. 8 Maintenance of close relatives abroad – USD 1,00,000 per recipient 9 Cultural as sanctioned by GoI 10 LRS USD 2,00,000 per financial year
  • 14. Liberalised Remittance Scheme of USD 200000
    • Facility extended to all resident individuals
    • freely remit upto USD 200,000 per financial year for any permissible current or capital account transaction or a combination of both .
    • Not available for purposes specifically prohibited (Schedule I) or GOI (Schedule II) of FEMA(Current Account Transactions) Rules, 2000.
    • free to acquire and hold immovable property, shares or any other asset outside India without prior approval of RBI using the scheme.
  • 15. Liberalised Remittance Scheme of USD 200000
    • Free to open, hold and maintain foreign currency accounts with a bank outside India for remittances under the scheme without the prior approval of RBI .
    • Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
    • Not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories , from time to time.
  • 16. Release of Foreign Currency-restrictions
    • No release of foreign exchange for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.
    • Travellers allowed to purchase/carry foreign currency notes/coins only up to USD 2000 .
    • Balance amount in the form of traveller’s cheque or banker’s draft.
  • 17. Release of foreign Currency-Restrictions
    • Exceptions to this are
      • (a) travellers proceeding to Iraq and Libya - not exceeding USD 5000 or its equivalent;
      • (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States - entire foreign exchange released in the form of foreign currency notes or coins.
  • 18. Resident Going Abroad- Indian Currency
    • Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of GOI and RBI notes up to not exceeding Rs. 5,000/ - per person .
    • They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.
  • 19. Utilisation of forex
    • The foreign exchange acquired has to be used within 180 days of purchase .
    • If not possible, to be surrendered to an AD within 180 days .
    • Can retain upto USD 2000 in currency notes/travellers cheque .
    • Foreign Exchange purchased for a specific purpose is not utilized for that purpose, it could be utilized for any other eligible purpose permitted under the relevant regulation.
  • 20. Residents coming to India from abroad-
    • regarding Indian Currency - can bring in with him
    • up to Rs. 5,000 from any country other than Nepal or Bhutan, and
    • any amount in denomination not exceeding Rs.100 from Nepal or Bhutan.
    • Foreign Exchange- can bring without any limit.
    • If the aggregate value of the foreign exchange in the form of currency notes, bank notes or TCs brought in exceeds USD 10,000/- or its equivalent and/or
    • the value of foreign currency exceeds USD 5,000/- or its equivalent,
    • To be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.
  • 21. Thank you