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  • Fema

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