NRI GUIDE 2013 Ver 3.00
Addendum (updated up to 10th October,2013)
This is an addendum to NRI Guide 2013

NRI GUIDE 2013
(...
Table of Contents
1)
2)
3)
4)
5)
6)
7)

Differentials in tax treatment between Residents and Non-Resident
Custom Duty on F...
1) Differentials in tax treatment between Residents and Non-Residents

The Non-resident Indians are not treated in at par ...
(taxable) would be subject
to tax and not only the
portion over and above the
basic exemption limit
Income Tax Deductions
...
citizens.
Tax Deducted at Source (TDS)
Buy/Sale of Real Estate When a resident Indian
such as land, building etc
purchases...
15H.

TDS rate for NRO deposits
is 30.9% compared with
10.3% for fixed deposits for
resident Indians.

The TDS is applicab...
available for
accounts.
Capital gains on shares and No TDS is applicable on
mutual funds
short-term or long-term
capital g...
equity mutual funds/shares
is subject to TDS
Rental and other income

Resident Indians are liable
to pay TDS at the rate o...
4) Custom Duty on Flat Panel (LCD/LED/Plasma) Television Baggage
NOTIFICATION No. 84 /2013-Customs (N.T.)
New Delhi, the 1...
5) Customs Duty Free Allowance Limit & Duty rate for Pasasngers
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
P...
4. Wild life products.
5. Counterfeit Currency notes/coin or fake Currency notes.
6. Specified Live Birds and animals.
Cus...
questioning / examination, you will be treated in a courteous, professional and dignified
manner.
If your baggage is misha...
6) The Limit of carrying Rupees while travelling to India is limited to Rs. 7,500.00
RBI Clarification on Export and Impor...
5. The directions contained in this circular have been issued under sections 10(4) and
11(1) of the Foreign Exchange Manag...
7) Export and Import of Currency

Indian Currency limit for Resident individuals travelling abroad
RBI/2013-14/233
A.P. (D...
8) Liberalized Remittance Scheme – Clarifications
RBI/2013-14/222
A.P. (DIR Series) Circular No.32
September 04, 2013
To
A...
2

Can a resident
individual use the other
limits under Schedule III to
FEM CAT Rules 2000, as
amended from time to time,
...
AD Bank in India subject to the AD bank verifying
the bonafides of the transaction (para 6 to Annex
1 of ADMA CircularNo.1...
9) RBI grants banks freedom to offer interest rates on NRE deposits with
maturity of 3 years
RBI/2013-14/215
UBD.BPD.(PCB)...
ceiling on NRE deposits with maturity of 3 years and above. The extant ceiling on NRO
Accounts will continue. These instru...
11) RBI relaxes norms for non-resident investors
Allows them to take FDI route, buy shares directly on stock exchanges
In ...
investee company, in which the said non-resident holds control. Such dividends,
however, should have been credited to spec...
12) RBI clarifies its recently revised Overseas Direct
Investment Guidelines
The Reserve Bank of India has today issued ce...
26, 2013, and having maturity of three years and above, mobilised by banks will be
exempt from maintenance of CRR and SLR....
15) Compounding of Contraventions under FEMA, 1999 – Master Circular No.
9/2012-13
COMPOUNDING OF CONTRAVENTIONS UNDER FEM...
minimizing transaction costs, while taking severe view of willful, malafide and fraudulent
transactions.
2. Compounding Po...
4.1 An application for compounding of a contravention under FEMA, 1999 may be
submitted to the Compounding Authority (CA) ...
a. whether the contravention is technical and / or minor in nature and needs only an
administrative cautionary advice;
b. ...
(iv) the repetitive nature of the contravention, the track record and / or history of noncompliance of the contravener;
(v...
(Compounding Proceedings) Rules, 2000, that the contravener had never made an
application for compounding of any contraven...
G.S.R.443(E) dated November 2, 2002
G.S.R. 609 (E) dated September 13, 2004 and
G.S.R. 613 (E) dated August 27, 2008
In ex...
4. Power of Reserve Bank to compound contravention 1

[(1) If any Person contravenes any provisions of Foreign Exchange Ma...
(b) in case where the sum involved in such contravention is more than rupees five
lakhs but less than rupees ten lakhs, by...
(1) The Compounding Authority may call for any information, record or any other
documents relevant to the compounding proc...
3. Whether the applicant is resident in India or resident outside India [Please refer to
Section 2(v) of the Act]
4. Name ...
* date of reporting to RBI and not AD
TABLE B
Name of
Investor

Date of
allotment of
shares

Number of
shares
allotted

Am...
ANNEX II- ECB
DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING
OF CONTRAVENTION RELATING TO EXTERNAL COMMERC...
ANNEX-II- ODI
DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING
OF CONTRAVENTION RELATING TO OVERSEAS INVESTM...
♦ Date of approval for opening of Liaison Office/ Branch Office
♦ Validity period of the approval
♦ Nature of activities u...
2. GSR 609 (E) dated September 13, 2004
3. GSR 443(E) dated November 2, 2002

16) Amendment in Agreement For Avoidance Of ...
Have agreed as follows:
ARTICLE 1
Article 27 (Exchange of Information) of the Convention shall be deleted and replaced by
...
requested information, even though that other State may not need such information for
its own tax purposes. The obligation...
3. This Amending Protocol shall remain in effect as long as the Convention remains in
effect.
In witness whereof the under...
(10%) will promote greater investments, flow of technology and technical services
between the two countries.
The Agreement...
Similarly, NRIs can seek home loans through their power of attorney holder and
documents can be signed on their behalf whi...
19) Liberalised Remittance Scheme for Resident Individuals – Reporting
RBI/2012-13/504
A. P. (DIR Series) Circular No. 106...
20) RBI ups limit on inward remittances
Foreign Remittances – RBI ups limit of inward remittance to 30 in a year
The Reser...
5. Authorised Persons (Indian Agents) may bring the contents of this circular to the
notice of their constituents concerne...
(c) Under the swap arrangement, a bank can sell US Dollars in multiples of USD one
million to RBI and simultaneously agree...
22) 22) Master Circular on Miscellaneous Remittances from India – Facilities for
Residents

Non- resident including NRI ma...
4. the consideration amount may also be paid out of the dividend payable by Indian
investee company, in which the said non...
Million in a financial year
2. The source of funds in the NRO deposits/accounts should be repatriable
3. Taxes as applicab...
53

Addendum to NRI Guide 2013 Ver 3.00

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  1. 1. NRI GUIDE 2013 Ver 3.00 Addendum (updated up to 10th October,2013) This is an addendum to NRI Guide 2013 NRI GUIDE 2013 (Ver 3.00) – Addendum (updated up to 10th October,2013) This is an addendum to NRI Guide 2013 (A Comprehensive Guide for Indians residing outside India) Prepared by Prakash Nair Prakash@yourownadviser.com www.yourownadviser.com Join Kerala Syndicate Social Network Group http://groups.google.com/group/kerala-syndicate/ Follow me on Face book https://www.facebook.com/Yourownadviser Website: www.yourownadviser.com 1 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  2. 2. Table of Contents 1) 2) 3) 4) 5) 6) 7) Differentials in tax treatment between Residents and Non-Resident Custom Duty on Flat Panel (LCD/LED/Plasma) Television Baggage Customs Duty Free Allowance Limit & Duty rate for Pasasngers The Limit of carrying Rupees while travelling to India is limited to Rs. 7,500.00 Export and Import of Currency Liberalized Remittance Scheme – Clarifications RBI grants banks freedom to offer interest rates on NRE deposits with maturity of 3 years 8) NRI can pay RTI fees online now 9) RBI relaxes norms for non-resident investors 10) RBI clarifies its recently revised Overseas Direct Investment Guidelines 11) CNR(B)NRE deposits exemption from maintenance of CRR/SLR 12) Circular on KYC requirements for Eligible Foreign Investors investing through PIS route 13) Compounding of Contraventions under FEMA, 1999 – Master Circular No. 9/2012-13 14) Amendment in Agreement For Avoidance Of Double Taxation And Prevention Of Fiscal Evasion With Sweden 15) India signs DTAA with Latvia 16) NRI investment norms in real estate eased 17) Liberalised Remittance Scheme for Resident Individuals – Reporting 18) ups limit on inward remittances 19) Swap Window for Attracting FCNR (B) Dollar Funds & its salient features 20) Master Circular on Miscellaneous Remittances from India – Facilities for Residents 21) RBI ups limit on inward remittances 22) Swap Window for Attracting FCNR (B) Dollar Funds & its salient features 23) Master Circular on Miscellaneous Remittances from India – Facilities for Residents 24) RBI allows NRIs to transfer funds from NRO to NRE account 2 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  3. 3. 1) Differentials in tax treatment between Residents and Non-Residents The Non-resident Indians are not treated in at par with the Resident Indians when it comes to taxation in India. The following are some of the differentials in tax treatment between Residents and Non-Residents. Resident Indian Basic Tax Exemption Non Resident Indian Resident senior citizens (above 60 years) and super senior citizens (above 80 years) have a basic tax exemption of Rs 2.5 lakh and Rs 5 lakh, respectively. For senior citizens and super senior NRIs, this limit is much lower at Rs 2 lakh only. Additional tax rebate of Rs. 2,000 u/s 87A of the IT Act is also not available for NRIs (announced in 2013 budget). Adjustment of capital gains Taxable Resident Indians can adjust NRIs cannot adjust the his taxable capital gains taxable capital gains against basic exemption against the basic exemption limit. limit. If an NRI earns Rs 2 lakh capital gains and no other income, the full amount is taxed at the applicable rate. The facility of adjusting any taxable capital gain against the room left over in the basic exemption limit is available only to resident Indians. This facility has not been extended to NRIs and hence, at all times, the full amount of capital gain 3 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  4. 4. (taxable) would be subject to tax and not only the portion over and above the basic exemption limit Income Tax Deductions Equity Investments Deduction under Section 80CCG (Rajiv Gandhi Equity Saving Scheme) for first-time investors in equity can be availed of only by resident Indians. NRI’s are not eligible to invest in RGESS and hence denied the benefit of investing in the Rajiv Gandhi Equity Saving Scheme. Disability - Section 80U Under Section 80U, a NRIs are not eligible to get resident Indian can claim any tax benefit under section 80U and 80DD. deduction of up to Rs 50,000 if he suffers from a disability. The deduction is Rs 1 lakh if the disability is severe. Under Section 80DD, resident taxpayers can claim a deduction of Rs 50,000 for the treatment of a disabled dependent Again, the deduction is higher at Rs 1 lakh in case of severe disability. Medical treatment - Section Under Section 80DDB, NRI’s don’t get any tax 80DDB benefit under section resident taxpayers can 80DDB. claim a deduction of up to Rs 40,000 for the treatment of dependents with specified diseases. The deduction is higher at Rs 60,000 in case of senior 4 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  5. 5. citizens. Tax Deducted at Source (TDS) Buy/Sale of Real Estate When a resident Indian such as land, building etc purchases a property valued at over Rs 50 lakh, he has to deduct 1% TDS and deposit it with the government. If the property belongs to an NRI, the TDS is 20% even if the property is worth less than Rs 50 lakh. This 20% TDS is applicable upfront for long term capital gain and 30% for short term capital gains (this is an existing clause - Section 195) when NRIs sell any immoveable property. This clause is applicable even if the sale consideration is less than Rs. 50 lakh An NRI selling property in India can apply to his assessing officer for a certificate of non-deduction or lower tax deduction that is for deducting tax only on the capital gain amount. The new section 194-IA is related to the tax needs to be deducted when someone sells any immovable property (other than agricultural land) to a resident transferor of the consideration exceeds Rs. 50 lakh the buyer needs to deduct 1% tax from such amount and remitted to the Govt. (Budget 2013) Bank Interest 5 Resident Indians can avoid NRIs are not permitted to the TDS on bank interest by submit Form 15G for their submitting the Form 15G or NRO deposits in banks, and TDS is mandatory. The Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  6. 6. 15H. TDS rate for NRO deposits is 30.9% compared with 10.3% for fixed deposits for resident Indians. The TDS is applicable for a resident Indian if the interest exceeds Rs 10,000 in a year per bank branch. As mentioned earlier interest on Savings Bank depostis upto Rs. 10,000 is exempted from tax However, this threshold limit does not apply to NRO deposits. Even Re 1 is subjected to TDS at the rate of 30.9%. The interest earned on all other investments, such as corporate deposits and bonds, is subject to a 20.6% TDS, whereas the rate for resident Indians is only 10.3% NRIs are not permitted to submit Form 15G and 15H. Income earned on NRE/FCNR deposit is fully exempted from tax, more over the NRIs can submit the required forms and get lower tax deduction as per the DTAA agreement between India and other countries. For eg. those NRIs from Saudi Arabia, if they submit the required forms the banks will deduct only 10.3% tax instead of 30.09% for the interest earned on NRO deposits From AY 2013-14 onwards deduction up to Rs. 10,000 for interest from savings bank accounts is available for all resident Indians as per Section 80TTA of the Income Tax Act. Benefits under this section are not 6 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  7. 7. available for accounts. Capital gains on shares and No TDS is applicable on mutual funds short-term or long-term capital gains earned by resident Indians when they sell mutual funds or stocks. NRO SB However, for NRIs, there is a 15% TDS (plus 3% cess) on short-term capital gains from shares and mutual funds if the securities transaction tax (STT) has been paid. If no STT has been paid, the TDS rate is higher at 30.9%. They are even subjected to a 10% TDS on long-term gains from shares and mutual funds (unlisted) Long term capital gains from debt mutual funds and corporate debentures when sold in the secondary market will be subject to TDS @ 10% (plus 3% cess) for NRIs (u/s 115E/112 of the IT Act unlisted non-equity oriented mutual fund schemes). Also, TDS is applicable for selling unlisted shares even if it is long term capital gains. The long term capital gain for Equity Mutual Funds and listed shares are totally exempted from tax for both residents and nonresidents, then there is no question of deduction of tax at source. Also note that exemption is for those cases of redemption of units where STT is payable on redemption (u/s 10(38) capital gains Short Term capital gain on 7 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  8. 8. equity mutual funds/shares is subject to TDS Rental and other income Resident Indians are liable to pay TDS at the rate of 10% on rental income obtained from land and buildings. TDS rate is higher at 30%, along with a cess of 3%, for the non-resident Indians. All other taxable incomes of an NRI are also subject to a 30% TDS, besides the cess. NRIs are also not eligible to invest in Post Office Monthly Income Schemes, NSC, Senior Citizens Schemes etc, Chitty etc. If NRIs wanted to buy agricultural land/estate/Planantation property/ Farm house etc, they need to take special permission from RBI. Why people are worried about the tax deduction, they can file their tax returns and get the refund from the IT Dept. Now filing of tax return is very simple, that they can do within 30 minutes time ( Quick Return Filing). The IT Dept. will return the money with eligible interest. We should encourage the NRIs to file their tax returns regularly even if they don’t have any taxable income. It is very pity to note that, lot of NRIs still doesn’t have NRE accounts and they do the financial transactions totally against the existing rules/regulations. The people should understand one thing that, the basic idea of higher tax deduction from NRIs/Foreign National should be secured at the earliest point of time so that there is no difficulty in collection of tax subsequently at the time of regular assessment. This will eliminate chasing such NRIs/Foreign nationals for recovery of their tax dues subsequently, due to jurisdictional and other operational difficulties. Some of the NRIs/Foreign Nationals are likely to have nil or at meager assets in India which may be totally inadequate to recover the tax dues. But lot of poor NRIs suffering due to the applicability of this clause, As mentioned earlier the NRIs can get exemption from the TDS provided they obtain a non-deduction certificate from the concerned Assessing Officer or they can get refund from the Income Tax authorities by way of filing proper tax returns. 8 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  9. 9. 4) Custom Duty on Flat Panel (LCD/LED/Plasma) Television Baggage NOTIFICATION No. 84 /2013-Customs (N.T.) New Delhi, the 19th August, 2013 G.S.R. (E). – In exercise of the powers conferred by section 79 of the Customs Act, 1962 (52 of 1962), the Central Government hereby makes the following rules to further amend the Baggage Rules, 1998, namely:1. (1) These rules may be called the Baggage (Second Amendment) Rules, 2013. (2) They shall come in to force on the 26th day of August, 2013. 2. In the Baggage Rules, 1998, in Annex I, after item 5 relating to Gold or silver, in any form, other than ornaments, the following item shall be inserted, namely:“6. Flat Panel (LCD/LED/Plasma) Television.”. [F.No.354/112/2013-TRU] [Raj Kumar Digvijay] Under Secretary to the Government of India Note. – The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 30/98-Customs (N.T.), dated the 2nd June, 1998 [GSR 296 (E), dated the 2nd June, 1998] and last amended vide notification No.25/2013-Customs (N.T.), dated the 1st March, 2013 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)vide number G.S.R. 139 (E), dated the 1st March, 2013 9 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  10. 10. 5) Customs Duty Free Allowance Limit & Duty rate for Pasasngers [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) New Delhi, the 10th September, 2013 Corrigendum G.S.R. – In the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 90/2013 – Customs (N.T.), dated the 29th August, 2013, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 584 (E) dated the 30th August, 2013, (i) in Form I, for “Please report to Customs Officer at the Red Channel counter in case answer to any of the above question is ‘Yes’. Signature of Passenger …………………………” read “Please report to Customs Officer at the Red Channel counter in case answer to any of the above question is ‘Yes’. Signature of Passenger ………………………… IMPORTANT INFORMATION Items prohibited for import include: 1. Maps and literature where Indian external boundaries have been shown incorrectly. 2. Narcotic Drugs and Psychotropic Substances. 3. Goods violating any of the legally enforceable intellectual property rights. 10 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  11. 11. 4. Wild life products. 5. Counterfeit Currency notes/coin or fake Currency notes. 6. Specified Live Birds and animals. Customs Duty Free Allowance Eligible Passenger Origin Country Nepal, Passengers of Indian origin Bhutan, and foreigners of over 10 years of age residing in India Myanmar, Duty Free Allowance Rs. 6,000 China Other than Nepal, Passengers of Indian origin Bhutan, and foreigners of over 10 years of age residing in India Myanmar, Rs. 35,000 China Tourists of foreign origin Anywhere Indian passenger who has been residing abroad for over Anywhere one year Anywhere All passengers Anywhere Passenger of 18 years and above Anywhere Gifts and souvenirs worth Rs. 8,000 Gold jewellery: Gentleman – Rs. 50,000 Lady – Rs. 1,00,000 Alcohol liquor or wine: 2 litres Cigarettes: 200 numbers or Cigars upto 50 or Tobacco 250 grams One laptop computer (note book computer) Customs duty is leviable @ 36.05% (Basic Customs duty @ 35% + Education Cess @3%) on the value of dutiable goods that is in excess of the Duty Free Allowance. Indian Customs is responsible for protecting the nation against the illegal import of prohibited items. Indian Customs officers have the authority to question you and to examine you and your personal property. If you are one of the passengers selected for 11 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  12. 12. questioning / examination, you will be treated in a courteous, professional and dignified manner. If your baggage is mishandled / lost on arrival, please obtain endorsement of free allowance, if any, from Customs Officer at Mishandled Baggage Counter. For updated information on items prohibited/restricted for import or in case of any difficulty or complaint, please contact the Customs PRO. INDIAN CUSTOMS WELCOMES YOU TO INDIA [F. No. 520/13/2013-Cus.VI] (S.C.Ganger) Under Secretary to the Government of India 12 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  13. 13. 6) The Limit of carrying Rupees while travelling to India is limited to Rs. 7,500.00 RBI Clarification on Export and Import of Currency RBI/2013-14/233 A.P. (DIR Series) Circular No. 39 September 6, 2013 To All Category – I Authorised Dealer Banks Madam/ Sir, Export and Import of Currency Attention of Authorised Persons is invited to Regulation (2) of Foreign Exchange Management (Export and Import of Currency) (Amendment) Regulations, 2009, notified vide Notification No. FEMA 195/RB-2009 dated July 7, 2009, in terms of which, any person resident in India may take outside India or having gone out of India on a temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.7,500 per person. 2. As part of providing greater flexibility to the resident individuals travelling abroad, the existing limit, mentioned above, has been enhanced to Rs. 10,000 per person. 3. Accordingly, any person resident in India: i) may take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.10,000 (Rupees ten thousand only) per person; and ii) who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.10,000 (Rupees ten thousand only) per person. 4. Authorised Persons may bring the contents of this circular to the notice of their constituents, customers and foreign counter parties concerned. 5. Reserve Bank of India has since amended the relevant Regulations vide Notification No.FEMA.258/2013-RB dated February 15, 2013, notified vide G.S.R.No.480(E) dated July 12, 2013 13 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  14. 14. 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager-in-Charge RBI enhances limit of Indian Currency for Resident individual travelling abroad from Rs. 7,500 to Rs. 10,000 The amount has been enhanced to Rs 10,000 a person compared with Rs 7,500 earlier In a bid to provide greater flexibility to resident individuals travelling abroad and to attract more foreign exchange inflows in India, the Reserve Bank of India (RBI) on Friday enhanced the limit of Indian rupees any person residing in India can take outside the country or a person who has gone out of India on a temporary visit can bring into India. The amount has been enhanced to Rs 10,000 a person compared with Rs 7,500 earlier. “Any person resident in India might take outside India (other than to Nepal and Bhutan) currency notes of government and RBI notes up to an amount not exceeding Rs 10,000 a person and who had gone out of India on a temporary visit, might bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of government and RBI notes up to an amount not exceeding Rs 10,000 a person,” said RBI in a notification on Friday. 14 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  15. 15. 7) Export and Import of Currency Indian Currency limit for Resident individuals travelling abroad RBI/2013-14/233 A.P. (DIR Series) Circular No. 39 September 6, 2013 To All Category – I Authorised Dealer Banks Madam/ Sir, Attention of Authorised Persons is invited to Regulation (2) of Foreign Exchange Management (Export and Import of Currency) (Amendment) Regulations, 2009, notified vide Notification No. FEMA 195/RB-2009 dated July 7, 2009, in terms of which, any person resident in India may take outside India or having gone out of India on a temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.7,500 per person. 2. As part of providing greater flexibility to the resident individuals travelling abroad, the existing limit, mentioned above, has been enhanced to Rs. 10,000 per person. 3. Accordingly, any person resident in India: i) may take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.10,000 (Rupees ten thousand only) per person; and ii) who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.10,000 (Rupees ten thousand only) per person. 4. Authorised Persons may bring the contents of this circular to the notice of their constituents, customers and foreign counter parties concerned. 5. Reserve Bank of India has since amended the relevant Regulations vide Notification No.FEMA.258/2013-RB dated February 15, 2013, notified vide G.S.R.No.480(E) dated July 12, 2013 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager-in-Charge 15 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  16. 16. 8) Liberalized Remittance Scheme – Clarifications RBI/2013-14/222 A.P. (DIR Series) Circular No.32 September 04, 2013 To All Authorised Dealer Category-I Banks Madam / Sir, Liberalized Remittance Scheme – Clarifications Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 24 dated August 14, 2013. In this connection, Reserve Bank has been receiving queries from the various stakeholders and Authorised Dealer banks. All such queries have been collated and are given at the annex together with the answers/ clarifications. 2. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 3. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (C. D. Srinivasan) Chief General Manager [Annex to A.P.(DIR Series) Circular No.32 of 04.09.2013] Clarifications on Liberalized Remittance Scheme (LRS) S. No. 1 Query Answer / Clarification Whether LRS can be used for acquisition of both unlisted and listed shares of an overseas company? In terms of the extant FEMA provisions LRS can be used to acquire both listed and unlisted shares of an overseas company. The Master Circular dated July 1, 2013 has been suitably modified. 16 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  17. 17. 2 Can a resident individual use the other limits under Schedule III to FEM CAT Rules 2000, as amended from time to time, such as remittances for education, health / medical expenses over and above the LRS limit? 17 As per the current guidelines of LRS, only gift and donation (from the list of items under Schedule III to FEM CAT Rules, 2000), by a resident individualhave been subsumed under the LRS limit. For all other purposes such as educational and medical expenses the limits of LRS and Schedule III to FEM CAT Rules 2000 are separate, distinct, mutually exclusive and over and above each other respectively. In this context, it may be noted that under the extant guidelines under FEMA the following remittances can be made over and above the annual limit of USD 75000 permissible under LRS: 1. A resident individual can make remittances for meeting expenses for medical treatment abroad up to the estimate from a doctor in India or hospital/ doctor abroad under general permission (without any RBI approval – Para 9 of Schedule III to FEM CAT Rules, 2000, as amended from time to time). 2. A resident individual can make remittances up to USD 25,000 for maintenance expenses of a patient going abroad for medical treatmentor check-up abroad or for accompanying as attendant to a patient going abroad for medical treatment/ check-up (without any RBI approval – Para 8 of Schedule III to FEM CAT Rules, 2000, as amended from time to time). 3. A resident individual can make remittances for studies up to the estimates from the institutions abroad or USD 100,000, whichever is higher (without any RBI approval – Para 10 of Schedule III to FEM CAT Rules, 2000, as amended from time to time). This is over and above the remittance limit of USD 75,000 which can be made under the LRS route for the same. 4. A resident individual can also make all other remittances (other than donation and gifts) as stipulated under Schedules III to FEM CAT Rules, 2000, as amended from time to time. 5. A resident individual can also carry out other permissible current account transactions (transactions which are not explicitly prohibited under Schedule I, or restricted under Schedules II and III, to FEM CAT Rules, 2000, as amended from time to time) without any limits through an Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  18. 18. AD Bank in India subject to the AD bank verifying the bonafides of the transaction (para 6 to Annex 1 of ADMA CircularNo.11 dated May 16, 2000). Therefore notwithstanding the revised guidelines and reduction in the LRS limit these guidelines do not affect genuine transactions. 3 4 As per para 2 (iii) of AP (Dir Series)Circular No.24 dated August 14, 2013Notification FEMA 263/2013-RB is dated August 5, 2013 but the said Notification as available on the website is dated March 5, 2013? What is the correct date of this Notification? The said Notification is dated March 5, 2013 but gazetted on August 5, 2013. As per Regulation 1(ii) of thisNotification, this Notification shall come into force from the date of publication in Official Gazette, accordingly the effective date of thisnotification is August 5, 2013 (while the date of the notification is March 5, 2013). Can resident individuals make remittances under LRS for investments in immovable properties abroad which were acquired under instalment basis? Resident individuals are permitted to make remittances for acquiring immovable property within the annual limit of USD 75000 for already contracted cases, i.e. only for those contracts which were entered into on or before the date of the circular, i.e., August 14, 2013, subject to satisfaction of the genuineness of the transactions by the AD bank. Such cases should be immediately reported post facto to the Reserve Bank of India by the A D banks. 18 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  19. 19. 9) RBI grants banks freedom to offer interest rates on NRE deposits with maturity of 3 years RBI/2013-14/215 UBD.BPD.(PCB) CIR No.8/13.01.000/2013-14 The Chief Executive All Primary (Urban) Co-operative Banks September 3, 2013 Officers Dear Sir/Madam, Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits Please refer to our circular UBD.BPD.(PCB) CIR No.16/13.01.000/2011-12 dated December 28, 2011 on Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non- Resident (NRO) Accounts. 2. In terms of paragraph 2 ibid, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits. However, in order to pass on the benefit of exemption provided on incremental NRE deposits with maturity of 3 years and above from CRR/ SLR requirements, it has been decided to give banks the freedom to offer interest rates on such deposits without any ceiling. The extant ceiling on NRO Accounts will continue. 3. All other instructions in this regard, as amended from time to time, will remain unchanged. 4. These instructions will be valid up to November 30, 2013, subject to review. 5. An amending directive UBD.BPD.DIR No.3/13.01.000/2013-14 dated August 30, 2013 is enclosed. Yours faithfully, (A.K.Bera) Principal Chief General Manager UBD.BPD.DIR No. 3 /13.01.000/2013-14 August 30, 2013 Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits In exercise of the powers conferred by Section 35A, read with Section 56 of the Banking RegulationAct, 1949, and in modification of the directive UBD.BPD.DIR No. 5/13.01.000/2011-12 dated December 28, 2011 on Deregulation of Interest Rates on Non-Resident (External) (NRE) Depositsand Ordinary Non-Resident (NRO) Accounts, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that banks are free to offer interest rates without any 19 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  20. 20. ceiling on NRE deposits with maturity of 3 years and above. The extant ceiling on NRO Accounts will continue. These instructions will be valid up to November 30, 2013, subject to review. (S. Karuppasamy) Executive Director 10) NRI can pay RTI fees online now Department of Posts, Ministry of Communications & IT, today in association with Department of Personnel and Training launched Electronic Indian Postal Order (eIPO) to enable Indian citizens abroad to pay RTI fee online. This is a facility to purchase an Indian Postal Order electronically by paying a fee on-line through e-Post Office Portal i.e. https://www.epostoffice.gov.in. It can also be accessed through India Post website www.indiapost.gov.in. At present, this facility is available only for Indian Citizens abroad across the globe to facilitate them to seek information under the RTI Act, 2005. Both Debit and Credit of any Bank powered by Visa/Master can be used for this purpose. All the requirements for filling an RTI application as well as other provisions regarding eligibility, time limit, exemptions etc; as provided in the RTI Act, 2005 will continue to apply. The applicant needs to register on the website to create his/her profile for the first time. He has to select the Ministry/Department from whom he desires to seek information under the RTI Act and theeIPO so generated can be used to seek information from that Ministry/Department only. A printout of the eIPO is to be attached with the RTI application sent in hard copy. In case RTI application is filed electronically, eIPO is required to be attached as an attachment. 20 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  21. 21. 11) RBI relaxes norms for non-resident investors Allows them to take FDI route, buy shares directly on stock exchanges In yet another step to attract foreign money, the Reserve Bank of India (RBI) allowed non-resident investors to acquire shares of listed Indian companies through stock exchanges under the foreign direct investment (FDI) scheme. The central bank has said such investment will be allowed only if the non-resident investor has already “acquired and continues to hold control” according to the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations. At present, foreign institutional investors (FIIs), qualified foreign institutions and nonresident Indians (NRIs) are eligible to acquire shares on stock exchanges in compliance with FEMA regulations, but they are not permitted to acquire shares on bourses under the FDI scheme. According to experts, the new regulation will pave the way for foreigners to be treated on a par with FIIs, as they can buy shares in the company they control (in line with the SEBI takeover code regulations) through on-market deals. Earlier, they were allowed to do so only through off-market deals. “This will also have tax implications, as stock market transactions don’t attract capital gains. Also, the move to allow such acquisitions to be funded through dividend paid to NRIs is significant. Such transaction should happen through a registered broker, RBI said in a notification. Earlier, a non-resident wasn’t permitted to acquire shares on stock exchange. Some experts were of the view that the move was a step towards fuller convertibility of the rupee. “This is a step towards full convertibility of the rupee. Right now, we allow repatriation of capital to a select class of investor and in select assets. Now, this window has been opened to even foreign individuals and NRIs. This makes India a more attractive investment destination,” said Sivarama Krishnan, executive director, risk advisory services of consultant firm PwC. The central bank has also laid out certain conditions for the sources of funds for purchase of shares. The amount should be paid by way of inward remittance through normal banking channels, the RBI said. It further said the amount can be paid by way of debit to the NRE/FCNR account of the person concerned or paid by debit to a noninterest-bearing escrow account (in rupees) maintained in India. Further, the consideration amount can be paid out of the dividend paid by Indian 21 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  22. 22. investee company, in which the said non-resident holds control. Such dividends, however, should have been credited to specially designated non-interest bearing rupee account for acquisition of shares on the floor of stock exchange. RBI has also said that the original and resultant investments have to be in line with the extant FDI policy and FEMA regulations in respect of sectoral cap, entry route, reporting requirement, and documentation. LURING FOREIGN FUNDS * NRIs qualify only if they have “acquired and continue to hold control” under Sebi norms * Foreigners could be treated on a par with FIIs as they get on-market-deal window * Deals can only happen through a registered broker * Some experts say step a precursor to fuller convertibility of the rupee * Share purchase should be paid by inward remittance through banking channels * Amount can be paid via debit to NRE/FCNR accounts or via debit to non-interest bearing escrow account Source : Economic Times 22 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  23. 23. 12) RBI clarifies its recently revised Overseas Direct Investment Guidelines The Reserve Bank of India has today issued certain clarifications with respect to the applicability of the revised guidelines in respect of overseas direct investment notified on August 14, 2013 to facilitate genuine outward investment requirements of the Indian companies. The clarifications/answers to the queries raised by different stakeholders are contained in its AP (Dir) Circular No. 30 dated September 04, 2013. Among others, it has been clarified that in respect of funding of overseas direct investments by way of External Commercial Borrowings, instead of limit of 100 per cent of the net worth, the earlier limit of 400 per cent of the net worth will continue to apply. It may be noted that the Reserve Bank of India had announced the revised guidelines for overseas direct investment by Indian parties on August 14, 2013. This measure had been taken in the context of current macro-economic situation. It was not the intention of the Reserve Bank of India to restrict bona-fide and genuine overseas direct investment transactions by Indian companies. Alpana Killawala Principal Chief General Manager Press Release : 2013-2014/483 13) FCNR(B)NRE deposits exemption from maintenance of CRR/SLR RBI/2013-14/190 RPCD.CO.RRB/RCB.BC.No. 20 /03.05.33/2013-14 August 19, 2013 All Regional Rural Banks/ Scheduled State Cooperative Banks Dear Sir, Section 42(1) of the Reserve Bank of Inida Act, 1934 and Section 24 of the Banking Regulation Act, 1949 – FCNR(B)/NRE deposits – exemption from maintenance of CRR/SLR At present, banks are required to include all Foreign Currency Non-Resident Bank [FCNR (B)] and Non-Resident (External) Rupee (NRE) deposit liabilities for computation of Net Demand and Time Liabilities (NDTL) and for maintenance of CRR and SLR. 2. Banks are advised that with effect from fortnight beginning August 24, 2013, incremental FCNR (B) deposits as also NRE deposits with referance base date of July 23 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  24. 24. 26, 2013, and having maturity of three years and above, mobilised by banks will be exempt from maintenance of CRR and SLR. To amplify, if a bank had a total FCNR (B) deposit base of say USD 100 as on the base date, and mobilises an incremental deposit of say USD 20, that portion of USD 20 which has a maturity of 3 years and above will not be part of NDTL and will qualify for CRR and SLR exemption. The same principle will apply for calculation of NRE deposits for exemption from maintenance of CRR/SLR requirements. However, any transfer from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for such exemptions. 3. Please acknowledge receipt to our Regional Office concerned. Yours faithfully, (Madhavi Sharma) Chief General Manager 14) Circular on KYC requirements for Eligible Foreign Investors investing through PIS route SEBI has vide its circular dated September 12, 2013 detailed KYC requirements of Eligible Foreign Investors investing through PIS route. The requirements are based on the recommendations of “Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments” under the Chairmanship of Shri K. M. Chandrasekhar. a) The Eligible Foreign Investors have been divided into three categories. Category I includes government or government related entities. Category II entities are regulated entities in other jurisdictions. Category III are non regulated entities. b) The circular provides for minimum documentation requirements. c) The requirements for obtaining photo identities, address proofs or any other documentary requirements of the beneficial owner, senior management personnel, authorized signatories have been done away with for the Category I and II eligible foreign investors. Attention is also drawn to Rule 9(2) of the PML (Maintenance of Records) Rules, 2005 (Government of India, Ministry of Finance, Department of Revenue, Notification dated August 27, 2013) which provides that a reporting entity may rely on third party client due diligence subject to conditions mentioned therein. The simplification in the rules should lead to smoother on-boarding of eligible foreign investors and result in higher inflows into the country. 24 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  25. 25. 15) Compounding of Contraventions under FEMA, 1999 – Master Circular No. 9/2012-13 COMPOUNDING OF CONTRAVENTIONS UNDER FEMA, 1999 MASTER CIRCULAR NO. 9/2012-13, Dated 2-7-2012 The compounding of contraventions under Foreign Exchange Management Act (FEMA), 1999 is a voluntary process by which an applicant can seek compounding of an admitted contravention of any provision of FEMA, 1999 under Section 13(1) of the FEMA, 1999. 2. This Master Circular consolidates the existing instructions on the subject of “Compounding of Contraventions under FEMA, 1999” at one place. The list of underlying circulars /notifications, consolidated in this Master Circular, is furnished in the Appendix. 3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2013 and be replaced by an updated Master Circular on the subject. 1. General 1.1 In terms of Section 13(1), Chapter IV of FEMA 1999, if any person contravenes any provision of FEMA, 1999, or any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where the amount is quantifiable or up to Rupees Two lakh, where the amount is not quantifiable and where the contravention is a continuing one, further penalty which may extend to Rupees Five thousand for every day after the first day during which the contravention continues. The provisions of Section 15 of FEMA, 1999 permit compounding of contraventions and empower the Compounding Authority to compound any contravention as defined under Section 13 of the ACT on an application made by the person committing such contravention. In terms of rule 4 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, the powers to compound the contraventions have been prescribed for compounding authorities with regard to the sum involved in such contravention and no contravention shall be compounded unless the amount involved in the contravention is quantifiable. 1.2 The Government of India has, in consultation with the Reserve Bank placed the responsibility of administering compounding of contraventions with the Reserve Bank, except contraventions under Section 3(a) of FEMA, 1999. Accordingly, Foreign Exchange (Compounding Proceedings) Rules, 2000 have been framed by the Government of India empowering the Reserve Bank to compound contraventions under FEMA, 1999 with a view to provide comfort to individuals and corporate community by 25 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  26. 26. minimizing transaction costs, while taking severe view of willful, malafide and fraudulent transactions. 2. Compounding Powers 2.1 The compounding powers of the Reserve Bank and the Directorate of Enforcement (DoE), respectively, are as under: (a) Reserve Bank has been empowered to compound the contraventions of all the Sections of FEMA, 1999, except clause (a) of Section 3 of the Act, ibid. (b) Directorate of Enforcement would exercise powers of compounding under clause (a) of Section 3 of FEMA, 1999 (dealing essentially with Hawala transactions). 2.2 For effective implementation of compounding process under FEMA, 1999, the Government of India has framed the procedure for compounding of contraventions. Once a contravention has been compounded by the Compounding Authority, no proceeding or further proceeding will be initiated or continued, as the case may be, against the contravener. 3. Delegation of Powers 3.1 As a measure of customer service and in order to facilitate the operational convenience, compounding powers were delegated to the Regional Offices of the Reserve Bank of India mentioned below to compound the contraventions of FEMA involving (i) delay in reporting of inward remittance, (ii) delay in filing of form FC-GPR after allotment of shares and (iii) delay in issue of shares beyond 180 days (viz. paragraphs 9(1)(A), 9(1)(B) and 8, respectively, of the Schedule I to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated 3rd May 2000 and as amended from time to time: (a) Paragraphs 9 (1) (A) and 9 (1) (B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Kochi, Patna and Panaji for amount of contravention below Rupees One hundred lakh only (Rs. 1,00,00,000 /-). (b) Paragraphs 9 (1) (A), 9 (1) (B) and 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi for amount of contravention without any limit. 4. Process of Compounding 26 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  27. 27. 4.1 An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under FEMA, 1999, either through a memorandum or suo moto on being made or on becoming aware of the contravention. The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000 (Annex-I). 4.2 Along with the application in the prescribed format, the applicant may also furnish the details as per the enclosed Annexes (Annex-II) relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. in order to complete the compounding process within the time frame. 4.3 All applications for compounding whether on the advice of the Regional Office concerned or suo-moto, relating to the contraventions mentioned at paragraph 3.1 (a) and (b) above and up to the amount of contravention stated therein, may be submitted by the companies/individuals falling under the jurisdiction of the aforesaid Regional Offices directly to the Regional Office concerned, together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the concerned Regional Office. Applications for compounding of all other contraventions together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at Mumbai may be submitted to: The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai400001. 4.4 On receipt of the application for compounding, the proceedings would be concluded and an order issued by the CA within 180 days from the date of the receipt of the application for compounding. The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank. 4.5 The CA may call for any additional information, record or any other document relevant to the compounding proceedings. Such additional information/ documents are required to be submitted within the period as may be specified by the CA and the application may be rejected if such information/documents are not submitted within the prescribed time. 4.6 The application will be examined in terms of sub rule (1) of rule (4) of the Foreign Exchange (Compounding Proceedings) Rules, 2000 to assess whether the contravention is compoundable and the amount of contravention is accordingly quantified. 4.7 The nature of contravention is ascertained keeping in view, inter alia, the following indicative points : 27 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  28. 28. a. whether the contravention is technical and / or minor in nature and needs only an administrative cautionary advice; b. whether the contravention is serious in nature and warrants compounding of the contravention; and c. whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringement of the regulatory framework. However, the Reserve Bank reserves the right to classify the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo moto. 4.8 The disposal of the compounding application is made by issue of a Compounding Order specifying the provisions of FEMA,1999 or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999, in respect of which contravention has taken place. 4.9 Where there is sufficient cause for further investigation, the Reserve Bank may refer the matter to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999, or to the Anti- Money Laundering Authority instituted under the Prevention of Money Laundering Act (PMLA), 2002 or to any other agencies, as deemed fit. Such applications will be disposed of by returning the application to the applicant. 5. Scope and Manner of Compounding 5.1 The CA will exercise jurisdiction in respect of the contraventions admitted to have been committed in relation to any of the provisions of the FEMA, 1999, or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999. 5.2 The application for compounding will be disposed of on merits, upon consideration of the records and submissions and at the absolute discretion of the CA. The following factors, which are only indicative, may be taken into consideration for the purpose of passing the Compounding Order and for arriving at the quantum of sum on payment of which contravention shall be compounded: (i) the amount of gain of unfair advantage, wherever quantifiable, made as a result of the contravention; (ii) the amount of loss caused to any authority / agency / exchequer as a result of the contravention; (iii) economic benefits accruing to the contravener from delayed compliance or compliance avoided; 28 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  29. 29. (iv) the repetitive nature of the contravention, the track record and / or history of noncompliance of the contravener; (v) contravener’s conduct in undertaking the transaction and disclosure of full facts in the application and submissions made during the personal hearing; and (vi) any other factor considered relevant and appropriate. 6. Issue of the Compounding Order 6.1 An opportunity for personal hearing is given to the applicant for further submission of documents in person in support of the application within a specified period. The contravener or its authorized representative can choose not to appear in person or make any submissions before the CA for personal hearing The CA will proceed with the processing of the compounding application on the basis of information and documents available in the application for compounding. 6.2 The Compounding Authority will pass a compounding order on the basis of the averments made in the application as well as other documents and submissions made in this context by the contravener during the personal hearings, if any. 6.3 Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the compounding order made under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 will be provided to the applicant (the contravener) and also to the Adjudicating Authority. 7. Post-compounding procedure 7.1 The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 is payable by way of a demand draft in favour of the “Reserve Bank of India” within fifteen days from the date of the order of compounding of such contravention. The demand draft has to be deposited in the manner as directed in the compounding order. 7.2 On realization of the demand draft for the sum for which contravention is compounded, a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order. 7.3 The provisions of the Rules do not confer any right on the contravener, after a compounding order is passed, to seek to withdraw the order or to hold the compounding order as void or request a review of the order passed by the CA. 7.4 In case of failure to pay the sum compounded within the time specified in the compounding order, it shall be deemed in terms of Rule 10 of the Foreign Exchange 29 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  30. 30. (Compounding Proceedings) Rules, 2000, that the contravener had never made an application for compounding of any contravention under these Rules. 7.5 In respect of the contraventions of FEMA, 1999 (as defined in section 13 of the FEMA, 1999), which are not compounded by the Compounding Authority, other relevant provisions of FEMA, 1999, including reference to the Directorate of Enforcement shall apply. 8. Pre-requisites for compounding process 8.1 In respect of a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under the Compounding Rules, such contraventions would not be compounded. Such contravention would be dealt with under relevant provisions of the FEMA, 1999 for contravention. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. 8.2 Contraventions relating to any transaction where proper approvals or permission from the Government or statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the authorities concerned. 8.3 Cases of contravention, such as, those having a money laundering angle, national security concern and / or involving serious infringements of the regulatory framework or where the contravener fails to pay the sum for which contravention was compounded within the specified period in terms of the compounding order, shall be referred to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999 or to the authority instituted for implementation of the Prevention of Money Laundering Act 2002, (PMLA) or to any other agencies, for necessary action, as deemed fit. 8.4 The Reserve Bank generally advises the persons concerned of their choice and option to make an application for compounding as and when such contraventions come to its notice. The facts constituting such contraventions will be brought to the notice of the Directorate of Enforcement in case no application for compounding is made within the time indicated by the Reserve Bank. ANNEX-I FOREIGN EXCHANGE (COMPOUNDING PROCEEDINGS) RULES, 2000 NOTIFICATION NO. G.S.R.383(E) DATED 3RD MAY 2000 As amended vide 30 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  31. 31. G.S.R.443(E) dated November 2, 2002 G.S.R. 609 (E) dated September 13, 2004 and G.S.R. 613 (E) dated August 27, 2008 In exercise of the powers conferred by section 46 read with sub-section (1) of section 15 of the Foreign Exchange Management Act, 1999 (42 of 1999) the Central Government hereby makes the following rules relating to compounding contraventions under chapter IV of the said Act, namely:1. Short title and commencement (1) These rules may be called the Foreign Exchange (Compounding Proceedings) Rules 2000. (2) They shall come into force on the 1st day of June, 2000. 2. Definitions - In these rules, unless the context otherwise requires (a) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999); (b) ‘authorised officer’ means an officer authorised under sub-rule (1) of rule 3; (c) ‘applicant’ means a person who makes an application under section 15 (1) of the Act to the compounding authority; (d) ‘Compounding Order’ means an order issued under sub-section (1) of Section 15 of the Act; (e) ‘Form’ means a form appended to these rules; (f) ‘section’ means a section of the Act; (g) all other words and expressions used in these rules and not defined but defined in the Act, shall have the meaning respectively assigned to them in the Act. 3. (1) ‘Compounding Authority’ means the persons authorised by the Central Government under sub-section (1) of section 15 of the Act, namely; (a) an officer of the Enforcement Directorate not below the rank of Deputy Director or Deputy Legal Adviser (DLA). (b) An officer of the Reserve Bank of India not below the rank of the Assistant General Manager. 31 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  32. 32. 4. Power of Reserve Bank to compound contravention 1 [(1) If any Person contravenes any provisions of Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of the Act.] (a) in case where the sum involved in such contravention is ten lakhs rupees or below, by the Assistant General Manager of the Reserve Bank of India; (b) in case where the sum involved in such contravention is more than rupees ten lakhs but less than rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India; (c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than rupees hundred lakhs by the General Manager of Reserve Bank of India; (d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the Chief General Manager of the Reserve Bank of India; Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India. (4) Every application for compounding any contravention under this rule shall be made in Form to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along with a fee of Rs. 5000/- by Demand Draft in favour of compounding authority. 5. The Power of Enforcement Directorate to compound contraventions 2 [(1) If any Person contravenes provisions of Section 3(a) of Foreign Exchange Management Act.] (a) in case where the sum involved in such contravention is five lakhs rupees or below, by the Deputy Director of the Directorate of Enforcement; 32 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  33. 33. (b) in case where the sum involved in such contravention is more than rupees five lakhs but less than rupees ten lakhs, by the Additional Director of the Directorate of Enforcement; (c) in case where the sum involved in the contravention is rupees ten lakhs or more but less than fifty lakhs rupees by the Special Director of the Directorate of Enforcement; (d) in case where the sum involved in the contravention is rupees fifty lakhs or more but less than one crore rupees by Special Director with Deputy Legal Adviser of the Directorate of Enforcement; (e) in case the sum involved in such contravention is one crore rupees or more, by the Director of Enforcement with Special Director of the Enforcement Directorate. Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer of the Directorate of Enforcement specified under sub-rule (1) of this rule shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Director of Enforcement. (4) Every application for compounding any contravention under this rule shall be made in Form to the Director, Directorate of Enforcement, New Delhi, along with a fee of Rs.5000 by DD in favour of the Compounding Authority. 6. Where any contravention is compounded before the adjudication of any contravention under section 16, no inquiry shall be held for adjudication of such contravention in relation to such contravention against the person in relation to whom the contravention is so compounded. 7. Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16, such compounding shall be brought by the authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of the compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be discharged. 8. Procedure for Compounding - 33 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  34. 34. (1) The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. (2) The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of application. 9. Payment of amount compounded 3 The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of rule 8, shall be paid by demand draft in favour of the Compounding Authority within fifteen days from the date of the order of compounding of such contravention. 10. In case a person fails to pay the sum compounded in accordance with the rule 9 within the time specified in that rule, he shall be deemed to have never made an application for compounding of any contravention under these rules and the provisions of the Act for contravention shall apply to him. 11. No contravention shall be compounded if an appeal has been filed under section 17 or section 19 of the Act. 12. Contents of the order of the Compounding Authority (1) Every order shall specify the provisions of the Act or of the rules, directions, requisitions or orders made there under in respect of which contravention has taken place along with details of the alleged contravention. (2) Every such order shall be dated and signed by the Compounding Authority under his seal. 13. Copy of the order - One copy of the order made under rule 8(2) shall be supplied to the applicant and the Adjudicating Authority as the case may be. Format of Application FORM (See Rule 4 or 5) (To be filled in duplicate and shall be accompanied by certified copy of the Memorandum issued) 1. Name of the applicant (in BLOCK LETTERS) 2. Full address of the applicant (including Phone and Fax Number and email id) 34 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  35. 35. 3. Whether the applicant is resident in India or resident outside India [Please refer to Section 2(v) of the Act] 4. Name of the Adjudicating Authority before whom the case is pending 5. Nature of the contravention [according to sub-section (1) of Section 13] 6. Brief facts of the case 7. Details of fee for application of compounding 8. Any other information relevant to the case I/We declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are willing to accept any direction/order of the Compounding Authority in connection with compounding of my/our case. Dated : (Signature of the Applicant) Name ANNEX-II- FDI DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING OF CONTRAVENTION RELATING TO FOREIGN DIRECT INVESTMENT IN INDIA ♦ Name of the applicant ♦ Date of incorporation ♦ Nature of activities under taken ♦ Brief particulars about the foreign investor ♦ Details of foreign inward remittances received by Applicant Company from date of incorporation till date TABLE A Sl. No. Name of Remitter Total Amount (INR) Date of Receipt Reported to RBI on* Total 35 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com Delay if any
  36. 36. * date of reporting to RBI and not AD TABLE B Name of Investor Date of allotment of shares Number of shares allotted Amount for which shares allotted Date of reporting to RBI* Delay if any Total TABLE C In case there is excess share application money Sl. Name of No. Remitter Total Amount (INR) Date of Receipt Excess share application money Date of refund of share application money Amount in forex RBI approval letter and date Total TABLE D Authorised Capital Sl. No. Date Authorised Capital With effect from Date of Board meeting Date of filing with ROC A= B+C Please give supporting documents Table A- Copies of FIRC with date stamp of receipt at RBI Table B- Copies of FCGPR with date stamp of receipt at RBI Table C – letter seeking refund/ allotment of shares- approval letter from RBI A2 form ♦ Copies of Balance Sheet during the period of receipt of share application money and allotment of shares ♦ Nature of contravention and reasons for the contravention ♦ A declaration that they are not under investigation of any agency such as DoE, CBI, etc 36 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  37. 37. ANNEX II- ECB DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING OF CONTRAVENTION RELATING TO EXTERNAL COMMERCIAL BORROWING ♦ Name of the applicant ♦ Date of incorporation ♦ Nature of activities under taken ♦ Brief particulars about the foreign lender ♦ Is the applicant an eligible borrower? ♦ Is the lender eligible lender? ♦ Is the lender an equity holder? ♦ What is the level of his holding at the time of loan agreement? Details of ECB ♦ Date of Loan agreement ♦ Amount in Foreign Currency and Indian Rupee ♦ Rate of interest ♦ Period of loan ♦ Repayment particulars ♦ Details of draw down Date of draw down Amount in Foreign Currency Amount in INR ♦ Details of LRN Number- application and receipt ♦ Details of ECB 2 returns submitted; Period of return: Date of submission ♦ Details of Utilization of ECB in Foreign Currency and Indian Rupee ♦ Nature of contravention and reasons for the contravention ♦ All supporting documents may be submitted ♦ A declaration that they are not under investigation of any agency such as DoE, CBI, etc 37 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  38. 38. ANNEX-II- ODI DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING OF CONTRAVENTION RELATING TO OVERSEAS INVESTMENT ♦ Name of the applicant ♦ Date of incorporation ♦ Nature of activities under taken ♦ Name of Overseas entity ♦ Date of incorporation of overseas entity ♦ Nature of activities under taken by overseas entity ♦ Nature of entity- WOS/JV ♦ Details of remittance sent- Date of remittance; Amount in FCY and in INR ♦ Details of other financial Commitment ♦ Details of UIN applied and received ♦ Date of receipt of share certificate ♦ Approval of other regulators if required ♦ Details of APRs submitted: For the period ended; date of submission ♦ Nature of contravention and reasons for the contravention ♦ All supporting documents may be submitted ♦ A declaration that they are not under investigation of any agency such as DoE, CBI, etc ANNEX II- BRANCH OFFICE / LIAISON OFFICE DETAILS TO BE FURNISHED ALONG WITH APPLICATION FOR COMPOUNDING OF CONTRAVENTION RELATING TO BRANCH/LIAISON OFFICE IN INDIA ♦ Name of the applicant ♦ Date of incorporation 38 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  39. 39. ♦ Date of approval for opening of Liaison Office/ Branch Office ♦ Validity period of the approval ♦ Nature of activities under taken ♦ income and expenditure of the LO/BO ♦ Dates of submission of Annual activity Certificates ♦ Nature of contravention and reasons for the contravention ♦ All supporting documents may be submitted ♦ A declaration that they are not under investigation of any agency such as DoE, CBI, etc APPENDIX LIST OF RULES/ A.P. (DIR SERIES) CIRCULARS CONSOLIDATED IN THE MASTER CIRCULAR COMPOUNDING OF CONTRAVENTIONS OF FEMA, 1999 Rules Sl No Rules No. Date 1 Foreign Exchange (Compounding Proceedings) Rules, 2000 May 3, 2000 2 Foreign Exchange (Compounding Proceedings) Rules, 2002 (Amendment) November 2, 2002 3 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) September 13, 2004 4 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) August 27, 2008 A.P.(DIR Series) Circular No. 56 dated June 28, 2010. A.P.(DIR Series) Circular No. 57 dated December 13, 2011. ____________ 1. GSR 613(E) dated August 27, 2008 39 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  40. 40. 2. GSR 609 (E) dated September 13, 2004 3. GSR 443(E) dated November 2, 2002 16) Amendment in Agreement For Avoidance Of Double Taxation And Prevention Of Fiscal Evasion With Sweden NOTIFICATION NO. 63/2013, DATED 14-8-2013 S.O.2459(E) - Whereas a Protocol (hereinafter referred to as the said Protocol) amending the convention between the Government of the Republic of India and the Government of the Kingdom of Sweden for the avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on Income and on Capital, which was signed at New Delhi on the 24th June, 1997, was signed on the 7th February, 2013 in Stockholm ; And whereas, the date of entry into force of the said Protocol is the 16th day of August, 2013, being the thirtieth day after the receipt of the later of the notifications of the completion of the procedures required by the respective laws for the entry into force of this Protocol, in accordance with Paragraph 2 of Article 3 of the said Protocol; And whereas, Paragraph 2 of Article 3 of the said Protocol provides that the Amending Protocol shall enter into force on the thirtieth day after the receipt of the later of the notifications and shall thereupon have effect forthwith ; Now, therefore, in exercise of the powers conferred by section 90 of the Income- tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said Protocol, as set out in the Annexure hereto, shall be given effect to in the Union of India with effect from the 16th August, 2013. Protocol Amending the Convention between the Government of the Republic of India and The Government of The Kingdom of Sweden for The Avoidance of Double Taxation and The Prevention of fiscal evasion with respect to taxes on income and on capital, which was Signed at New Delhi on 24th June, 1997. The Government of the Republic of India and the Government of the Kingdom of Sweden; Desiring to conclude a Protocol (hereinafter referred to as “Amending Protocol”) to amend the Convention between the Government of the Republic of India and the Government of the Kingdom of Sweden for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on Income and on Capital, which was signed at New Delhi on 24th June, 1997 and which entered into force on 25th December, 1997 (hereinafter referred to as “the Convention”). 40 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  41. 41. Have agreed as follows: ARTICLE 1 Article 27 (Exchange of Information) of the Convention shall be deleted and replaced by the following Article: “ARTICLE27 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political sub-divisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use. 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligations: (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public). 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the 41 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  42. 42. requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.” ARTICLE 2 The following new paragraph shall be added to the Protocol to the Convention after the paragraph titled ” With reference to Article 25:” “With reference to Article 27: 1. A Contracting State may allow representatives of the competent authority of the other Contracting State to enter the territory of the first-mentioned Contracting State to interview individuals and examine records with the written consent of the persons concerned. The competent authority of the second-mentioned Contracting State shall notify the competent authority of the first-mentioned Contracting State of the time and place of the meeting with the individuals concerned. 2. At the request of the competent authority of one Contracting State, the competent authority of the other Contracting State may allow representatives of the competent authority of the first-mentioned Contracting State to be present at the appropriate part of a tax examination in the second-mentioned Contracting State. 3. If the request referred to in paragraph 2 is acceded to, the competent authority of the Contracting State conducting the examination shall, as soon as possible, notify the competent authority of the other Contracting State about the time and place of the examination, the authority or official designated to carry out the examination and the procedures and conditions required by the first-mentioned Contracting State for the conduct of the examination. All decisions with respect to the conduct of the tax examination shall be made by the Contracting State conducting the examination.” ARTICLE 3 1. Each of the Contracting States shall notify the other, in writing, of the completion of the procedures required by its law for the entry into force of this Amending Protocol. 2. This Amending Protocol shall enter into force on the thirtieth day after the receipt of the later of these notifications and thereupon have effect forthwith. 42 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  43. 43. 3. This Amending Protocol shall remain in effect as long as the Convention remains in effect. In witness whereof the undersigned, duly authorised thereto by their respective Governments, have signed this Amending Protocol. Done in duplicate at Stockholm this 7th day of Feb, 2013 in the Hindi, Swedish and English languages, all texts being equally authentic. In case of divergence between the texts, the English text shall be the operative one. [F. NO. 505/02/1981-FTD-I] AKHILESH RANJAN Jt. Secy. 17) India signs DTAA with Latvia An Agreement and Agreed Note Signed Between India and Latvia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (DTAA) The Government of India today signed an Agreement and the Agreed Note for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (DTAA) with the Government of Latvia. The Agreement and the Agreed Note were signed by Shri Salman Khurshid, External Affairs Minister, on behalf of the Government of India and Mr. Edgars Rinkevics, Minister of Foreign Affairs, on behalf of the Government of Latvia here today. Latvia is the third Baltic country with which DTAA has been signed by India. Earlier DTAAs have been signed and have come into force with Lithuania and Estonia. The DTAA provides that business profits will be taxable in the source if the activities of an enterprise constitute a permanent establishment (PE) in the source state. The Agreement provides for fixed place PE, building site, construction or assembly PE, service PE, Off-shore exploration/exploitation PE and agency PE. The Agreement incorporates para 2 in Article concerning Associated Enterprises. This would enhance recourse to Mutual Agreement Procedure to relieve double taxation in cases involving transfer pricing adjustments. Dividends, interest and royalties & fees for technical services income will be taxed both in the country of residence and in the country of source. The low level of withholding rates of taxation for dividend, interest and royalties and fees for technical services 43 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  44. 44. (10%) will promote greater investments, flow of technology and technical services between the two countries. The Agreement further incorporates provisions for effective exchange of information between tax authorities of the two countries in line with latest international standard, including exchange of banking information and supplying of information without recourse to domestic interest. Further, the Agreement provides for sharing of information to other agencies with the consent of supplying state. The Agreement also has an article on assistance in collection of taxes. This article also includes provision for taking measures of conservancy.The Agreement incorporates anti-abuse (limitation of benefits) provisions to ensure that the benefits of the Agreements are availed of by the genuine residents of the two countries. The Agreement will provide tax stability to the residents of India and Latvia and will facilitate mutual economic cooperation between the two countries. It will also stimulate the flow of investment, technology and services between India and Latvia 18) NRI investment norms in real estate eased Among the various investment options available for non-resident Indians (NRIs), real estate plays a dominant role due to its rate of appreciation and the periodical returns on the investment. Whether it is a residential or commercial property investment, NRIs can invest through their representatives in India by giving a power of attorney to act on their behalf. A copy of the power of attorney should be notarised with the Indian consulate in the respective country which will provide authenticity on their behalf for an investment in property in India. The property can be registered in the name of the NRI, and the power of attorney holder can sign on their behalf by producing a copy of the power of attorney to the appropriate authorities . If a NRI decides to acquire a house through a power of attorney , he can still proceed abroad. This is because, for the purposes of income tax and wealth tax, the power of attorney holder accompanied by the actual possession of the property through the agreement to sell is deemed to be the owner of the property for the purposes of Section 27 of the Income Tax Act. A general power of attorney in favour of the NRI’s relatives will enable them to sell the property and arrange to repatriate the sale proceeds through an authorised foreign exchange dealer after payment of the taxes due. They can also rent out the property and credit the proceeds to a NRO account. 44 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  45. 45. Similarly, NRIs can seek home loans through their power of attorney holder and documents can be signed on their behalf while investing in property. They can issue the EMI cheques on behalf of their relatives here as the Reserve Bank of India (RBI) has relaxed the norms of operation of joint accounts considerably recently.A significant development is the proliferation of housing finance companies and banks in countries abroad. In the Gulf, Dubai boasts of many housing finance companies and banks having arrangements with exchange houses. Home loans can be processed through overseas representative offices for NRIs. As a result, the power of attorney enables their relatives to interact directly with developers in India. A number of nationalised banks have remittance arrangements with the exchange houses. The RBI also said that any citizen who was earlier residing in a foreign country can own or transfer property or other assets in that nation if it was acquired during the time of his residence there. A person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any property situated outside India if such currency, security or property was acquired, held or owned when he was resident outside India or inherited from a person who was resident outside India. Similarly, returning NRIs can retain and reinvest the income earned on investments made under the Liberalised Remittance Scheme. There was lack of clarity earlier as to whether the income earned on assets held abroad by NRIs who have returned to India for permanent settlement and assets held outside India through Liberalised Remittance Scheme are required to be realised and repatriated to India. Now, the RBI has clarified that income and sale proceeds of assets held abroad need not be repatriated to India and can be retained and invested outside India. Foreign exchange rules eased The RBI has recently allowed NRIs to hold joint accounts with Indian residents, a move that helps increase remittances. The central bank has also permitted sale proceeds of foreign investments in India to accrue to NRE or FCNR accounts after tax deductions, under the Foreign Exchange Management Act (FEMA). Foreign Currency Non-Resident (FCNR) account and Non-resident External (NRE) account are opened by NRIs with Indian banks. As per the recommendations of the committee constituted to review facilities available under FEMA, the central bank has taken such steps. The RBI has allowed residents of India to include nonresident close relative in their resident bank accounts on ‘former or survivor’ basis. However, such non-resident relative will not be eligible to operate the account during the resident’s lifetime. It also permitted NRIs to open NRE and FCNR accounts with their resident close relatives . In this case, the resident relative can operate the account as a power of attorney holder.Source: Economic Times 45 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  46. 46. 19) Liberalised Remittance Scheme for Resident Individuals – Reporting RBI/2012-13/504 A. P. (DIR Series) Circular No. 106 May 23, 2013 To All Category – I Authorised Dealer Banks Madam / Sir, Liberalised Remittance Scheme for Resident Individuals – Reporting Attention of all Authorised Dealer Category – I (AD Category – I) banks is invited to A. P. (DIR Series) CircularNo.36 dated April 04, 2008, in terms of which, AD Category -I banks were required to furnish information on the number of applications received and the total amount remitted under the Liberalised Remittance Scheme (the Scheme), on a monthly basis, in the prescribed format in both hard copy as well as soft copy in Excel format. All AD banks were also advised to submit themonthly statement before 5th of the succeeding month to the Reserve Bank of India. 2. Since October 2008, AD Banks were required to submit the LRS data through the Online ReturnsFiling System (ORFS) of Reserve Bank, in addition to submitting the same in hard copy. 3. It has now been decided, to collect the data in soft form only and to dispense with the submission of hard copies of the monthly statements by the AD banks. Accordingly, with effect from July 01, 2013, AD Category – I banks are required to upload the data (LRS data of June 2013) in ORFS on or before fifth of the following month. Where there is no data to furnish, AD banks are advised to upload ‘nil’ figures in the ORFS system. 4. AD banks can upload the LRS data by accessing ORFS through the URL https://secweb.rbi.org.in/ORFSMainWeb as hitherto. 5. In case any clarifications are required, AD banks may send their queries through email or contact by phone at 22601000 extn:2676 or 22701232 (direct) 6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of theForeign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager-in-Charge 46 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  47. 47. 20) RBI ups limit on inward remittances Foreign Remittances – RBI ups limit of inward remittance to 30 in a year The Reserve Bank of India (RBI) on Friday raised the limit on the number of foreign remittances an individual can receive from 12 to 30 per calendar year. However, the cap on the amount of each transaction has been kept unchanged at $2,500 per person. This had been a long-standing demand from money transfer agents who had received such requests from customers. According to experts, India is the largest receiver of remittances from other countries. A report released by the World Bank suggested remittances to India would be $64 billion in 2011, marginally higher than those to China. The World Bank had revised the estimates from $58 billion on the basis of the view that a weak rupee and robust economic activities in the Gulf countries would lead to a surge in remittances RBI/2011-12/596 A. P. (DIR Series) Circular No. 132 June 8, 2012 To, All Authorised Persons, who are Indian Agents under Money Transfer Service Scheme. Madam/ Sir, Money Transfer Service Scheme Attention of all Authorised Persons (APs), who are Indian Agents under the Money Transfer Service Scheme (MTSS) is invited to paragraph 5 © of the Notification dated June 4, 2003 on MTSS and the specific permission accorded to them under FEMA, 1999 by the Reserve Bank to undertake inward cross-border money transfer activities in India, through tie-up arrangements with Overseas Principals. 2. It has been decided to increase the number of remittances from 12 to 30 to be received by a single individual beneficiary in a calendar year. 3. All other instructions contained in the said Notification ibid, as amended from time to time remain unchanged. 4. These guidelines would also be applicable mutatis mutandis to all Sub Agents of the Indian Agents under MTSS and it will be the sole responsibility of the APs (Indian Agents) to ensure that their Sub Agents also adhere to these guidelines. 47 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  48. 48. 5. Authorised Persons (Indian Agents) may bring the contents of this circular to the notice of their constituents concerned. 6. The directions contained in this Circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager 21) Swap Window for Attracting FCNR (B) Dollar Funds & its salient features RBI/2013-2014/234 FMD.MOAG. No.84 /01.06.016/2013-14 September 6, 2013 To All Scheduled Banks [excluding Regional Rural Banks (RRBs)] Dear Sir/ Madam, Swap Window for Attracting FCNR (B) Dollar Funds Please refer to the RBI Press Release 2013-2014/494 dated September 04, 2013 on the captioned subject. 2. It has been decided to introduce a US Dollar-Rupee swap window for fresh FCNR (B) dollar funds, mobilised for a minimum tenor of three years and over. 3. The salient features of the new swap facility are as under: (a) The swap facility will be available to the scheduled commercial banks (excluding RRBs) for fresh FCNR(B) deposits mobilized in any permitted currency (as specified in the RBI Master Circular onInterest Rates on FCNR (B) Deposits dated July 1, 2013) for the tenor of minimum three years. However, the swap facility with RBI will be available in US Dollars only. The tenor of the swap will be for three years or more in line with the tenor of the underlying FCNR deposits. (b) The swap window will be operated on a daily basis on all working days in Mumbai (except Saturdays and holidays). However, a particular bank can avail of the swap facility only once in a week. During any particular week, the maximum amount of dollars that banks would be eligible to swap with RBI would be equal to the fresh FCNR(B) deposits for minimum tenor of three years mobilized in equivalent US Dollar terms during the preceding week(s). 48 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  49. 49. (c) Under the swap arrangement, a bank can sell US Dollars in multiples of USD one million to RBI and simultaneously agree to buy the same amount of US Dollars at the end of the swap period. The swap will be undertaken at a fixed rate of 3.5 per cent per annum.In the first leg of the transaction, the bank will sell US Dollars to RBI at RBI Reference Rate or any other rate as may be mutually agreed upon. The settlement of the first leg of the swap will take place on spot basis from the date of transaction. In the reverse leg of the swap transaction, Rupee funds will have to be returned to RBI along with the swap premium to get the US Dollars back. (d) Banks desirous of availing the swap facility will have to furnish a declaration duly signed by their authorised signatories that they have mobilised the fresh FCNR(B) deposits for minimum tenor of three years during the preceding week(s). (e) The swap facility will be operationalised by the Financial Markets Department of RBI at Mumbai. RBI would exercise the right to decide on the day of operation and the number of banks that can avail of the facility on any particular day keeping in view the market conditions and other relevant factors. (f) The underlying deposits will have a minimum lock-in period of one year. However, premature withdrawal of such deposits would be permitted after one year. Accordingly, swaps undertaken with RBI cannot be cancelled before one year. In case of premature withdrawal of deposits after one year, the banks may approach RBI for termination of the swap. Banks desirous of terminating a swap will have to furnish a declaration duly signed by their authorised signatories that they have allowed premature withdrawal of FCNR (B) deposits. In the event of pre-termination of a swap, the swap cost would be re-fixed for the completed period of the swap at 400 bps above the concessional contracted rate of 3.5 per cent offered to the banks plus the prevailing USD/INR swap rate in the market for the residual tenor of the original swap (towards the replacement cost). RBI’s decision regarding the re-pricing of the swap at the time of termination shall be final and no request for any modification or revision to the same would be entertained. (g) The new swap window comes into effect on September 10, 2013 and will remain open up to November 30, 2013. RBI will reserve the right to close the scheme earlier with prior notice. (h) The terms and conditions governing the FCNR (B) mobilized during the period the swap windowremains open shall remain as specified in the RBI Master Circular on Interest Rates on FCNR (B) Deposits dated July 1, 2013 read with Circular DBOD.Dir.BC. 38/13.03.00/2013-14 dated August 14, 2013 issued by our Department of Banking Operations and Development. (i) Eligible banks can approach the Financial Markets Department by e-mail with their request for US Dollar swap facility indicating the amount of US Dollars to be swapped, tenor of the swap along with the declaration as mentioned at (d) above. Yours sincerely (G. Mahalingam) Principal Chief General Manage 49 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  50. 50. 22) 22) Master Circular on Miscellaneous Remittances from India – Facilities for Residents Non- resident including NRI may acquire shares of a listed Indian company on the stock exchange through a registered broker under FDI scheme RBI/2013-14/232 A.P. (DIR Series) Circular No. 38 September 6, 2013 To All Category – I Authorised Dealer Banks Madam/ Sir, Purchase of shares on the recognised stock exchanges in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time. 2. At present, Foreign Institutional Investors, Qualified Foreign Investors and Non Resident Indians are eligible to acquire shares on the recognised stock exchanges in compliance with the conditions under Schedule 3, 4, 5 and 8 of FEMA Notification No. 20. A non-resident is not permitted to acquire shares on stock exchange under FDI scheme under Schedule 1 of FEMA Notification No. 20. 3. The issue of acquisition of shares under the FDI Scheme by a non-resident on a recognised stock exchange has been reviewed and as a further measure of liberalization, it has been decided that a non resident including a Non Resident Indian may acquire shares of a listed Indian companyon the stock exchange through a registered broker under FDI scheme provided that: i. The non-resident investor has already acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations; ii. The amount of consideration for transfer of shares to non-resident consequent to purchase on the stock exchange may be paid as below: 1. by way of inward remittance through normal banking channels, or 2. by way of debit to the NRE/FCNR account of the person concerned maintained with an authorised dealer/bank; 3. by debit to non-interest bearing Escrow account (in Indian Rupees) maintained in India with the AD bank in accordance with Foreign Exchange Management (Deposit) Regulations, 2000; 50 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  51. 51. 4. the consideration amount may also be paid out of the dividend payable by Indian investee company, in which the said non-resident holds control as (i) above, provided the right to receive dividend is established and the dividend amount has been credited to specially designated non –interest bearing rupee account for acquisition of shares on the floor of stock exchange. iii. The pricing for subsequent transfer of shares to non-resident shareholder shall be in accordance with the pricing guidelines under FEMA; iv. The original and resultant investments are in line with the extant FDI policy and FEMA regulations in respect of sectoral cap, entry route, reporting requirement, documentation, etc; 4. AD Category – I banks may bring the contents of the circular to the notice of their customers/constituents concerned. 5. Reserve Bank of India has since amended the relevant Regulations vide Notification No.FEMA.279/2013-RB dated July 10, 2013 notified vide G.S.R.No.591 (E) dated September 4,2013 and Notification No.FEMA.280/2013-RB dated July 10, 2013 notified vide G.S.R.No.531 (E) , dated August 5,2013. 6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of theForeign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully (Rudra Narayan Kar) Chief General Manager In-Charge 23) RBI allows NRIs to transfer funds from NRO to NRE account The Reserve Bank allowed non-resident Indians (NRIs) to transfer funds from nonresident ordinary (NRO) account to Non-Resident External (NRE) account subject to a ceiling of $1 million in a financial year. In May 2012, the Reserve Bank of India allowed, Non Resident Indians (NRIs) to transfer money from non-resident ordinary (NRO) to non- resident external (NRO) accounts. Prior to that the only mechanism to transfer money into NRE accounts was through remittance from abroad or from another NRE account. However, certain conditions now have to be met before freely transferring money from NRO account to NRE account. The conditions are 1. The maximum limit for movement of funds overseas or to NRE accounts is USD 1 51 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  52. 52. Million in a financial year 2. The source of funds in the NRO deposits/accounts should be repatriable 3. Taxes as applicable should be paid on the funds before the transfer, which means the certificates 15 CA and CB will need to be submitted to the bank to initiate the transfer. Always@your Service Your comments, suggestions and criticism please send to Prakash@yourownadviser.com To receive regular update on NRI related matters, register your e-mail address with Prakash@yourownadviser.com Join Kerala Syndicate Social Network Group http://groups.google.com/group/kerala-syndicate/ Follow me on Face book https://www.facebook.com/Yourownadviser Website: www.yourownadviesr.com Disclaimer The information contained in this e-book is intended to assist/educate NRIs regarding various taxes and other important information they should know. The information does not constitute tax or investment advice or an to invest or to provide management services, recommendation to join any plan/scheme or open account with any financial intermediaries/brokers or other institutions or prepare tax returns or deal with Government related matters and is subject to errors, omission, correction, completion and amendment, without notice. It is not my intention to state, indicate or imply in any manner that current or past results/rules/laws are indicative of future results or expectations and which are subject to change. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment or tax related decision , a prospective investor or tax payer should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. 52 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com
  53. 53. 53 Addendum to NRI Guide 2013 Ver 3.00 www.yourownadviser.com

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