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Fema update 25092011
Fema update 25092011
Fema update 25092011
Fema update 25092011
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Fema update 25092011

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  • 1. Investor Focusl Adding value with Quality and Commitment Key changes in Foreign Exchange laws in India
  • 2. may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for aTill now as per Regulation 8 (d) of the FEMA Notification No.4/2000- resident individual. It would be the responsibility of the residentRB dated May 3, 2000 viz. Foreign Exchange Management donor to ensure that the gift amount being remitted is under the(Borrowing and Lending in Rupees) Regulations, 2000 repayment of LRS and all the remittances under the LRS during the financial yearloan by close relative in respect of loan in rupees availed by NRI is including the gift amount have not exceeded the limit prescribedrestricted to housing loans only. The extant provision has now been under the LRS.reviewed and it has been decided that where an authorised dealerin India has granted loan to a non-resident Indian in accordancewith Regulation 7 of the Notification No. FEMA 4/2000-RB, such Contributed by CA. Sudha G. Bhushan and Cs. Rushabh Doshiloans may also be repaid by resident close relative (relative asdefined in Section 6 of the Companies Act, 1956), of the Non- As per Regulation 7 of the Notification No. FEMA 4/2000 dated May 3, 2000, viz. Foreign Exchange Management (Borrowing and LendingResident Indian by crediting the borrowers loan account through in Rupees) Regulations, 2000, as amended from time to time, anthe bank account of such relative authorised dealer in India may grant loan in rupees to a non- resident Indian.Under the revised position a resident individual is permitted to lend to a Non resident Indian (NRI)/ Person of IndianIn terms of A.P. (DIR Series) Circular No. 24 dated December 20, Origin (PIO) close relative [means relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic2006 and A.P. (DIR Series) Circular No. 9 dated September 26, 2007 transfer, subject to the following conditions:the remittances towards gift and donation by a resident individualwas included in the Liberalised Remittance Scheme. As per the (i) the loan is free of interest and the minimum maturity of the loanrevised provision resident individual have been permitted to make is one year;a rupee gift to a NRI/PIO who is a close relative of the resident (ii) the loan amount should be within the overall limit under theindividual [close relative as defined in Section 6 of the Companies Liberalised Remittance Scheme of USD 200,000 per financial year available for a resident individual. It would be the responsibility ofAct, 1956] by way of crossed cheque /electronic transfer. The the lender to ensure that the amount of loan is within theamount should be credited to the Non-Resident (Ordinary) Rupee Liberalised Remittance Scheme limit of USD 200,000 during theAccount (NRO) a/c of the NRI / PIO and credit of such gift amount financial year; 2
  • 3. (iii) the loan shall be utilised for meeting the borrowers personal Indian close relatives shall not be eligible to operate the accountrequirements or for his own business purposes in India; during the life time of the resident account holder.(iv) the loan shall not be utilised, either singly or in association withother person, for any of the activities in which investment bypersons resident outside India is prohibited, namely;  the business of chit fund, or  Nidhi Company, or Non-Resident Indian (NRI), as defined in FEMA Notification No.  agricultural or plantation activities or in real estate business, 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management or construction of farm houses, or (Deposit) Regulations, 2000,, may be permitted to open NRE /  trading in Transferable Development Rights (TDRs). FCNR(B) account with their resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on ‘former orExplanation: For the purpose of item (c) above, real estate business survivor’ basis. The resident close relative shall be eligible toshall not include development of townships, construction of operate the account as a Power of Attorney holder in accordanceresidential / commercial premises, roads or bridges. with extant instructions during the life time of the NRI/ PIO account(v) The loan amount should be credited to the NRO a/c of the NRI holder. Till now the NRI are not permitted to open the account Contributed by CA. Sudha G. Bhushan and Cs. Rushabh Doshi/PIO. Credit of such loan amount may be treated as an eligible credit jointly with the residents.to NRO a/c;(vi) the loan amount shall not be remitted outside India; and(vii) repayment of loan shall be made by way of inward remittancesthrough normal banking channels or by debit to the Non-residentOrdinary (NRO) / Non-resident External (NRE) / Foreign Currency Any transfer by way of security of any security includingNon-resident (FCNR) account of the borrower or out of the sale shares/convertible debentures from resident to person residentproceeds of the shares or securities or immovable property against outside India resident in India requires prior approval of the Reservewhich such loan was granted. Bank. The value of security to be transferred together with any security transferred by the transferor, as gift, to any person residing outside India which was not to exceed the rupee equivalent of USD 25,000 during a calendar year has been enhanced to USD 50,000 per financial year.As per RBI/2011-12/173 September 15, 2011 A.P. (DIR Series)Circular No. 12 Individuals resident in India are permitted to includenon-resident close relative(s) (relatives as defined in Section 6 of theCompanies Act, 1956) as a joint holder(s) in their resident bankaccounts on ‘former or survivor’ basis. However, such non- resident Resident individuals shall now be permitted to include resident close relative(s) as defined in the Companies Act, 1956 as a joint 3
  • 4. holder(s) in their EEFC/RFC bank accounts on ‘former or survivor’basis. However, such resident Indian close relative, now being madeeligible to become joint account holder, shall not be eligible to For any further clarification you may get in touch with your team atoperate the account during the life time of the resident accountholder. CA. Sudha G. Bhushan |||CS. Rushabh Doshi |||CS. Hemant Shah Contact us atHitherto, in terms of Schedule 3, 4 and 5 of the FEMA Notification 09769033172 ||| 09769134554No. 20/2000-RB dated May 3, 2000, sale proceeds of ForeignInvestments in India were treated as eligible credit to NRE/FCNR (B)accounts, where the purchase consideration was paid by the Non-resident Indians / Persons of Indian Origin out of inward remittanceor funds held in their NRE/FCNR (B) accounts and subject to Contributed by CA. Sudha G. Bhushan and Cs. Rushabh Doshiapplicable taxes, if any. It is now clarified that the same facilitywould be available to NRIs/ PIOs under Regulation 11 of the saidNotification.It has now been decided that the medical expenses in respect of NRIclose relative (relative as defined in Section 6 of the Companies Act,1956) paid by a resident individual, being in the nature of a residentto resident transaction may be covered under the term “servicesrelated thereto” under Regulation 2(i) of Notification No. FEMA 16/2000- RB dated May 3, 2000. [Under the Regulation 2(i) theresident may make payment in rupees towards meeting expenseson account of boarding, lodging and services related thereto ortravel to and from and within India of a person resident outsideIndia who is on a visit to India]. 4

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