Certificate course on FEMA_Presentation by Sudha G. Bhushan _ 14th May 2023.pdf

ComprehensiveCourseon
ForeignExchangeManagement,1999
InstituteofCompanySecretariesofIndia
14th May2023
Faculty:CA.SudhaG.Bhushan
Sudha@taxpertpro.com||09769033172||

FEMA,1999
AnunexploredOpportunity
Certification and Valuation
Concurrent Audit
Structuring
Compounding Application
Advisory

If it was easy, everyone will do it
Its tough that’s why there is an
opportunity
3

Contentfortheday
• FEMA and Residential Status
• FEMA for NRIs
Ø Facilities and Obligations
Ø Buying Immovable Property in India
Ø Remittance facilities for NRIs
• FEMA for RIs –
Ø Liberalised Remittance Scheme
Ø Buying Immovable Properties Outside India
Ø Foreign Currency Accounts in India and Outside India
Ø Acquisition of foreign security
Ø Facilities for returning Indians.
Ø Facilities for Person Resident but Not Ordinarily Resident.
4

01.ContraventionunderFEMA,1999||ED
• Directorate of Enforcement, Kolkata has seized
movable & immovable properties worth Rs.177.8
Crore in respect of M/s. Shree Ganesh Jewellery
House (I) Ltd. and its Directors and promoters under
section 37A of Foreign Exchange Management Act,
1999.
• M/s Shree Ganesh Jewellery House (I) Ltd and its
directors exported jewellery items to M/s Al Marhaba
Trading FZE, UAE, M/s Sparkle Jewellery LLC, UAE and
M/s Astha Jewellery LLC, UAE which were their
associate companies / companies under their control.
• The export proceeds amounting to Rs. 7297 Crore
were deliberately not realized and intentionally not
repatriated from the said companies abroad and
were parked outside India by M/s. Shree Ganesh
Jewellery House (I) Ltd. and its Directors and
promoters in contravention of provisions of FEMA,
1999. The seizure of equal amount of Assets in
• India has been made in exercise of power conferred
by Section 37A of FEMA, 1999.
Export of
Jwellery
Items UAE
India
+
Directors
Associates
Entities
&
Under Control
Export
proceeds
Export proceeds
parked outside
India
Shree Ganesh Jewellery
House (I) Ltd.
Al Marhaba
Trading FZE
Sparkle
Jewellery LLC
Astha Jewellery
LLC

• Dated: 31.03.2022
• SAIPL is found to have siphoned off Indian Funds of Rs 216.40
Crores aboard under the garb of Overseas Direct Investments
[ODI] by way of False Declarations to its AD Bank as well as by
way of structuring transactions in a manner so as to send
outward remittances without any bonafides and with sole
objective to remove funds from India in the name of ODI
without there being any genuine business reasons for the
Indian company SAIPL.
• Such funds have been diverted outside Indian under the garb
of ODI with an intention to escape the clutches of Indian laws.
• By this way, the company siphoned off around 85% of its entire
net worth abroad.
• ED issued a notice to AD bank and upon receiving the notice
the AD bank conducted an Internal Investigation in the matter
and based on the findings, recommended the case to be
concluded as ‘Fraud’.
Outside India
India
Southern Agrifurane Industries Pvt
Ltd
85%
networth
Different
Entities

WhatisFEMA?
• It is Gate for every transaction involving Foreign
Exchnage
7

Compoundingorder
Netherlands Sale of products/services
India
Payment
Global Collect B.V.,
Overseas
Merchants
Global Collect India
Private Limited

ResidentialStatus
Need to
understand
Determination
Difference
between Income
Tax Act and FEMA
Types
Entities Others
10

ResidentialStatusunderFEMA-Section2(v)
11
Individual
Incorporated
Body
corporate
Office,
branch or
agency
• In India
• Outside India
CA. Sudha G. Bhushan || 9769033172

Section2(v)
(i)
•a person
residing in India
• for more than
one hundred
and eighty-two
days during the
course of the
preceding
financial year
(ii)
•any person or
body corporate
• registered or
incorporated in
India,
(iii)
•an office,
branch or
agency in India
•owned or
controlled by a
person resident
outside India,
(iv)
• an office,
branch or
agency outside
India
• owned or
controlled by a
person resident
in India;
Comprehensive course on FEMA || CA. Sudha G. Bhushan || 9769033172
"person resident in India" means—

Ownershipandcontrol
Outside India
India
Branch office, Italy
ABC India Limited
• Ownership and control
• Not defined in the Act
As per FDI Policy:
• An entity is considered as “owned” by resident
Indian citizens if more than 50% of the capital in it
is beneficially owned by resident Indian citizens
and/or Indian companies, which are owned and
controlled ultimately by resident Indian citizens; and
• ‘Control’ shall include the right to appoint a
majority of the directors or to control the
management or policy decisions including by virtue
of their shareholding or management rights or
shareholders agreements or voting agreements."

• Hello Doctors Private Limited got incorporated in Mumbai with the registered office
at Goregaon.
• What is residential status of Smith India Private limited a company registered in India
under the Companies Act, 2013
ResidentialStatusunderFEMA||YourThoughts

• uchi Operations GMBH is a company incorporated under the laws of Germany.
• In 2019, it planned to open a subsidiary in India.
• In 2020 it could open a subsidiary in India.
• Subsidiary was opened with the name uchi India operations.
• Registered office of uchi India operations is Delhi.
• What is the residential status of uchi Operations GMBH?
• What is the residential status of uchi India operations?

Swiss teller is a company incorporated in India. The management via Board resolution
dated 31st Dec 2020 decided to extend its operations overseas. After much deliberation
they decided that they should open a subsidiary outside India in the market where they
have existing customers I,e. Houstan, USA. On 1 June 2021 they opened a subsidiary in
Houstan with the name Swiss no teller PLC.
• What is the residential status of Swiss teller , India
• What is the residential status of Swiss no teller, USA

Swiss teller is a company incorporated in India. The management via Board resolution
dated 31st Dec 2020 decided to extend its operations overseas. After much deliberation
they decided that they should open a subsidiary outside India in the market where they
have existing customers I,e. Houstan, USA. On 1 June 2021 they opened a subsidairy in
Houstan with the name Swiss no teller PLC.
• What is the residential status of Swiss teller
• What is the residential status of Swiss no teller
Will your answer change if instead of Subsidiary the company chooses to open a branch
office outside India ?
PersonResidentInIndia||Example

Example
• Tooo Ltd. is a Japanese company having several business units all over the world.
• It has a Branch office in Mumbai
• What would be the residential status of Branch office in Mumbai
18
PersonResidentInIndia||Example

Example
• Tooo Ltd. is a Japanese company having several business units all over the world. It has a robotic unit with its
head quarter in Mumbai and has a branch in Singapore. Headquarter at Mumbai controls the branch of robotic
unit. What would be the residential status of robotic unit in Mumbai and that of the Singapore branch?
• Answer:
• To000 Ltd. being a Japanese company would be a person resident outside India. (Section 2(w)]
• Section 2(u) defines 'person’.
(u) "Person" includes-
(i) An individual,
(ii) A Hindu undivided family,
(iii) A company,
(iv) A firm,
(v) An association of persons or a body of individuals, whether incorporated or not,
(vi) Every artificial juridical person, not falling within any of the preceding sub-clauses, and
(vii) Any agency, office or branch owned or controlled by such person;
19
PersonResidentInIndia||Sec.2(v)(i)||Example

Example
• Answer:
• Section 2(v) defines 'person resident in India’.
• Under clause (iii) thereof person resident in India' would include an office, branch or agency in India owned or
controlled by a person resident outside India. Robotic unit is in Mumbai is owned or controlled by a person
'resident outside India'. Hence, it would be 'person resident in India'.
• However, robotic unit in Mumbai, though not owned controls Singapore branch, which is a person resident in
India. Hence prima facie, it may be possible to hold a view that the Singapore branch is person resident in India.
20

Example
• Answer:
• Section 2(u) defines 'person’. Under clause (viii) thereof person would include any agency, office or branch owned
or controlled by such person'. The term such person' appears to refer to a person who is included in clauses (i) to
(vi).
• Accordingly, robotic unit in Mumbai, being a branch of a company, would be a person'.
• Section 2(v) defines 'person resident in India’.
• Under clause (iii) thereof person resident in India' would include an office, branch or agency in India owned or
controlled by a person resident outside India. Robotic unit is in Mumbai is owned or controlled by a person
'resident outside India'. Hence, it would be 'person resident in India'.
• However, robotic unit in Mumbai, though not owned controls Singapore branch, which is a person resident in
India. Hence prima facie, it may be possible to hold a view that the Singapore branch is person resident in India.
21

PersonResidentInIndia|| Individual ||Sec.2(v)(i)
PERSON RESIDENTIN INDIA Sec. 2(v)(i) of FEMA:
Residing in India for more than 182 days during the course of preceding F.Y.
22
More than
182 days
Preceding
Financial Year

PERSON RESIDENTIN INDIA Sec. 2(v)(i) of FEMA:
Residing in India for more than 182 days during the course of preceding F.Y.
23
More than
182 days
Preceding
Financial Year
But does not
include

Residing in India for > 182 days during the course of preceding F.Y. but
doesn't include
(A) going out of India or staying outside India
• for taking up employment
• for carrying business or vocation
• for any other purpose in such circumstances as would indicate his intention to stay outside India
for uncertain period
(B) coming to India or staying in India otherwise than
• for taking up employment
• for carrying business or vocation
• for any other purpose in such circumstances as would indicate his intention to stay outside India
for uncertain period
24

ResidentialStatusunderFEMA||Individual||Sec.2(v)(i)
Residing in India
For more than 182 days
during the course of
preceding Financial Year
but doesn't include
Exceptions - A and B
25

ResidentialStatusunderFEMA||PersonResidentInIndia||Sec.2(v)(i)
First Limb
•More than 182 days in
the preceding year
Second Limb -Leaving
India
•Taking employment
•Doing any business
•Stay for uncertain
period
Third Limb – Coming
to India except for
period
26
Exceptions to period of stay
Period of Stay

First Limb
•More than 182 days in
the preceding year
Second Limb -Leaving
India
period
Third Limb – Coming
to India except for
period
27
Exceptions to period of stay
Non resident even when
he has stayed in India for
more than 182 days in
preceding F.Y
Resident even when he
has not stayed in India for
more than 182 days in
preceding F.Y
Period of Stay
FEMA Principal – Intention
must be supported by the facts

28
✓ Mr. Rakesh, a person resident in India and an Indian citizen takes up employment with
a Company in US and migrates to New York

29
✓ Mr. Rakesh is a Non-Resident from the day of he migrates to USA for employment.

30
➢Mr. Rakesh, an Indian national takes up employment with a Company in US and
migrates to New York.
➢Mrs. Rekha Rakesh shifts to New York to stay with her husband.

31
✓ Mr. Rakesh, an Indian national takes up employment with a Company in US and
migrates to New York
✓ Mrs. Rekha Rakesh shifts to New York to stay with her husband.
✓ On retirement of Mr. Rakesh, both Mr. and Mrs. Rakesh return to India for
permanent settlement.

32
✓Mr. Vijay, a Development Manager with a company in Mumbai
goes for six months to USA on export promotion tour.

33
✓Mr. Vijay joins a company in New York as a partner and
shifts his residence.

Example
• Shahin khan had resided in India during the financial year 2015-2016 for
less than 182 days.
• What would be his residential status during the financial year 2015 -16 and
2016-2017?
34

Example
• Mr. henalal had resided in India during the financial year 2015-2016 for less than 182 days. He had come
to India on April 1, 2016 for business. He intends to leave the business on April 30, 2017 and leave India
on June 30, 2017. What would be his residential status during the financial year 2016-2017 and during
2017-2018 up to the date of his departure?
35
2014-15 2015-16 2016-17 2017-18

Example
Miss Ann is an airhostess with the British Airways. She flies for 12 days in a month and thereafter takes a break for
18 days. During the break, she is accommodated in 'base', which is normally the city where the airways are
headquartered. However, for security considerations, she was based on Mumbai.
During the financial year, she was accommodated at Mumbai for more than 182 days. What would be her residential
status under FEMA?
36

➢ Foreigner national deputed to India for employment: Does be become Resident in India? if so can he buy
immovable property in India?
Press Release of Ministry of Finance dated 1st February 2009 - Government advice on acquiring land by persons
resident outside India.
In case of foreign nationals, physicals condition to stay for more than 182 days is mandatory for buying of Immovable
Property.
Along with period of stay intention also needs to be established.
Travel related documents and nature of Visa can establish intention of a person.
37
Query

38
Intention only
•In a case when a non-resident individual comes
for employment in India, RBI may ignore
arithmetic requirement of 182 days stay in India
during the preceding financial year and treat
such person a ‘person resident in India’ – Refer
Para 4.9 of the Master Direction on “Deposits
and Accounts” issued by RBI, dated January 1,
2016 which is reproduced as follows-
•Para 4.9
•“NRE accounts should be designated as resident
accounts or the funds held in these accounts may
be transferred to the RFC accounts, at the option
of the account holder,
•i) immediately upon the return of the account
holder to India for taking up employment or
•ii) on change in the residential status.”
Intention along with period of stay
•However, when it comes to
determination of residential status
for Acquisition of Immovable
Property in India, RBI strictly follows
arithmetic condition which requires
stay of more than 182 days in India
during the preceding financial year.
Person Resident in India || Intention as well as period of stay

39
RBI does not determine
the residential status
It is determined by
operation of the law
The onus is on the
individual to prove his
residential status, if it is so
questioned by any
authority
Person Resident in India || Intention as well as period of stay

Section 2(w) -
Person resident
outside India
(PROI)
• Person resident outside India means a person who is not resident in
India.
ResidentialStatusunderFEMA
40

Types
Resident
Person Resident but not
permanently resident in
India
Non resident

Not permanently resident in India
Current Account Rules under FEMA, also refer to ‘Person Resident but not permanently resident in India’
Explanation to Schedule III of Current A/c Rules
……, a person resident in India on account of his employment or deputation of a specified duration (irrespective of
length thereof) or for a specific job or assignment, the duration of which does not exceed 3 years, is considered to be a
person resident but not permanently resident in India.
42
Resident
Non
Resident

Not permanently resident in India
As per Regulation 5 of FOREIGN EXCHANGE MANAGEMENT (REMITTANCE OF ASSETS) REGULATIONS
Not permanently resident means a person resident in India for employment of a specified duration (irrespective of
length) or for a specific job duration which does not exceed three years.
Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015
'not permanently resident' means a person resident in India for employment of a specified duration (irrespective of
length thereof) or for a specific job or assignment, the duration of which does not exceed three years.
43
Resident
Non
Resident

• Possession of foreign currency
• A person resident in India but not permanently resident therein may possess without limit foreign currency in the form of
currency notes, bank notes and travellers cheques, if such foreign currency was acquired, held or owned by him when he was
resident outside India and, has been brought into India in accordance with the regulations made under the Act.
• Remittance of salary
• A person who is resident but not permanently resident in India and
• a. is a citizen of a foreign State other than Pakistan; or b. is a citizen of India, who is on deputation to the office or
branch of a foreign company or subsidiary or joint venture in India of such foreign company,
• may make remittance up to his net salary (after deduction of taxes, contribution to provident fund and other
deductions).
• Explanation: For the purpose of this item, a person resident in India on account of his employment or deputation
of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which
does not exceed three years, is a resident but not permanently resident.
44

Accounts||Accounts||Accounts
ByResidentsandNonresidents

Foreign
Exchange
Management
(Foreign
currency
accounts
by
a
person
resident
in
India
Account
By person
resident in India
Foreign
Currency
account in India
By Resident
Individuals
By other
Account
maintained
outside India
BY Resident
Individuals
By Others
By Person
resident outside
India
By NRI/PIOs
By others
Foreign Exchange Management
(Deposit) Regulations, 2016
AccountsbyPersonresidentoutsideIndia
CA. Sudha G. Bhushan || Sudha@taxpertpro.com || 9769033172

47
Foreign currency
account in India
By resident
individuals
RFC Account
RFC (Domestic)
Account
By other
EEFC Account
SEZ
DDAs
Exporters
Other Cases
Indian agent of a shipping or an airline
company
Project offices
Indian company receiving foreign
investment
Organisers of international seminars, etc
Ship-manning/crew managing agencies

By Person resident outside India
NRE account Schedule 1
FCNR(B) account Schedule 2
NRO account Schedule 3
Special Non-Resident Rupee Account
(SNRR account)
Schedule 4
Escrow Account
Deposits by companies
Other
Unincorporated joint ventures (UJV)
shipping or airline company incorporated
outside India
For Adjustment in export and import
value
ForeignExchangeManagement(Deposit)Regulations,2016

• Regulations – FEMA 5/2000-RB on Foreign Exchange Management (Deposit) Regulations, 2016 amended from
time to time.
NRE A/C
SCHEDULE 1
FCNR - B A/c
SCHEDULE 2
NRO A/c
SCHEDULE 3
SNRR A/c Schedule
4
ForeignExchangeManagement(Deposit)Regulations,2016

50
NRE Account vs. FCNR(B) Account vs. NRO Account
Particulars NRE Account FCNR(B) Account NRO Account
Who can open an
account
• NRIs and PIOs
(Individual of Pakistan & Bangladesh
require prior approval of RBI)
• NRIs and PIOs
(Individual of Pakistan & Bangladesh
• Any person resident outside India (including
NRI/PIO)
(Individual/Entities of Pakistan & Bangladesh
Who is authorized
to open
• Authorised Dealer
• Authorised Banks (including co-op bank
other than AD)
• Authorised Banks (including co-op
bank)
• Regional Rural Bank
• Authorised Banks (including co-op bank other
than AD)
Currency • INR • Forex (Any foreign currency
which is freely convertible)
• INR
Type of Account • Savings
• Current
• Recurring/Fixed Deposit
• Term Deposit only • Savings
• Current
• Recurring/Fixed Deposit
Period for fixed
deposits
• From 1 to 3 years
(However, banks are allowed to accept
NRE deposits > 3 years from their AL point
of view)
• Between 1 to 5 years • As applicable to resident accounts (eg: even 6
months)
Rate of Interest • As per guidelines issued by the Department of Banking Regulations

51
❖ NRE & FCNR (B) account
• Permitted Credits
a)Inward remittances from o/s India through banking channels
b)Personal cheques of FCA outside India / travellers cheques / bank drafts deposited by the account holder in person during
temporary visit to India
c)Tender of foreign currency / bank notes during temporary visit to India
d)Transfers from other NRE/ FCNR(B) accounts
e)Interest accruing on the funds held in the account
f)Current income in India due to the account holder, subject to payment of applicable taxes in India (like rent, dividend, pension,
interest)
g)Maturity or sale proceeds of any permissible investment in India which was originally made from NRE/FCNR(B) a/c or out of
inward remittances from o/s India thru banking channels
(FEMA Notf. 21/2000 - Sale of immovable property in India: Credit to NRE a/c restricted to 2 properties during lifetime and
also restricted to the amount of investment made from NRE a/c)
a)Refund of share/ debenture subscriptions to new issues of Indian companies or portion thereof, if subscription amount was paid
from NRE/ FCNR(B) a/c of the account holder or out of inward remittances from o/s India thru banking channels
b)Refund of application / earnest money / purchase consideration made by the house building agencies / seller on account of non-
allotment of flat / plot / cancellation of bookings / deals for purchase of residential / commercial property, together with interest,
if any (net of income tax payable thereon), was paid from NRE / FCNR(B) a/c of the account holder or out of inward
remittances from o/s India thru banking channels and AD is satisfied about the genuineness of the transaction

52
❖ NRE & FCNR (B) account
•Permitted Debits
a) Local disbursements
b) Remittances outside India
c) Transfer to NRE/ FCNR(B) accounts of the account holder or any other person eligible to maintain such account
d) Investment in shares/ securities/ commercial paper of an Indian company or for purchase of immovable property in
India provided such investment/ purchase is covered by the regulations made, or the general/ special permission
granted by RBI
•FCNR(B): If inward remittance is in currency other than designated currency, currency conversion costs for conversion into
designated currency to be borne by remitter. Fully covered swap is permitted in such cases.

53
❖NRO account
•Permitted Credits
a) Inward remittances from o/s India thru banking channels
b) Tender of any permitted currency during his temporary visit to India
c) Legitimate dues in India of the account holder
d) Transfers from other NRO accounts
e) Rupee gift / loan made by a resident to a NRI / PIO relative within the limits prescribed under LRS
•Permitted Debits
a) All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by RBI
b) Remittance outside India of current income in India of the account holder net of applicable taxes
c) Transfers to other NRO accounts
d) Remittances abroad/ Transfer to NRE Account under USD 1 Million Scheme, subject to conditions
e) Settlement of charges on International Credit Cards issued by AD in India to NRIs or PIOs, up to USD 1 Million per financial year

54
Repatriability • Repatriable • Repatriable • Not repatriable except for all
current income.
• Individual: Balances in an NRO
account of NRIs/ PIOs are
remittable up to USD 1 (one) million
per financial year (April-March)
along with their other eligible
assets.
• Entities: RBI permission
Taxability • Exempt • Exempt • Taxable
Joint account • Jointly with two or more NRIs/ PIOs
• Jointly with resident relative on ‘former or survivor’ basis (relative as defined in Companies
Act, 2013)
• The resident relative can operate the account as a Power of Attorney holder during the life-
time of the NRI/ PIO account holder.

55
Operations by
resident POA
holder
Permitted
• Withdrawal for local payments
• Make investments in India
• Remittance to account holder himself thru banking
channels
Prohibited
• Remittance outside India to other than account holder
himself
• Make payment by gift to resident
Permitted
• Withdrawal for local payments
• Make investments in India
• Remittance outside India of current
income, net of taxes
Prohibited
• Remittance outside India to other
than account holder himself
• Make payment by gift to resident
Loans outside
India (Secured)
• AD may allow their branches/ correspondents o/s India to
grant loans to NRI/PIO or to Third Parties for bona fide
purpose against the security of funds held in the NRE/
FCNR (B) accounts in India, subject to usual margin
requirements.
• The term “loan” shall include all types of fund based / non-
fund-based facilities
• Not permitted

56
Change in
residential
status from Non-
resident to
resident
• NRE accounts should be
re-designated as resident
accounts
or
• Funds held in these
accounts may be
transferred to the RFC
accounts
immediately upon change of
residential status
• FCNR (B) deposits allowed
to continue till maturity at
the contracted rate of
interest
• AD should convert the
FCNR(B) deposits on
maturity into resident rupee
deposit accounts or RFC
account
• Change in status from PROI
to PRI: Immediately
designated as resident
accounts
• Change in Status from PRI to
PROI: Immediately
designated as NRO account

Change in Residential Status

58
Case Study 1- Change in Residential Status
• Mr. XG is an Indian Resident.
• In April 2019 he takes up employment in USA
• As on date, he maintains the following Bank Accounts / Deposits in Bank of Baroda
• The account is held jointly with his close relatives:
• Kindly advise Mr. XG about action required by him upon change in his residential status
Nature of Deposit Type of Holding Amount
Fixed Deposit First Name Rs. 20,00,000
Current Account First Name Rs. 50,00,000
Resident Foreign Currency
Account – RFC(D)
First Name US $ 150,000
Savings Account Second Name Rs. 45,00,000

59
Nature of Deposit Type of Holding Action Remarks
Fixed Deposit First Name Designate as NRO Joint name with relative resident
on ‘former or survivor basis
permissible’
Current Account First Name Designate as NRO Joint name with relative resident
permissible’
Resident Foreign
Currency Account –
RFC(D)
First Name Can be credited to
NRE/FCNR(B)
Joint name with resident relative
permissible’
Savings Account Second Name As second holder, Joint names on
‘either or survivor basis
permissible’ - Notification No.
FEMA 5(R)/2016-RB dated April
01, 2016,

60
• Mr. XG served in USA for 10 years
• Now he wants to return to India permanently.
• He currently operates following Bank Accounts / Deposits jointly with close relatives:
• Kindly advise Mr. XG about the actions required by him upon change in his residential status
Nature of Deposit Amount
FCNR (B) US $. 30,00,000
NRE Fixed Deposit Rs. 280,00,000
NRO Savings Account Rs. 35,00,000

61
• Mr. XG can take following actions
Nature of Deposit Amount Action
FCNR (B) US $. 30,00,000 Can continue the deposit up to
maturity.
NRE Fixed Deposit Rs. 280,00,000 Convert into Ordinary Account/
RFC Account immediately
NRO Savings Account Rs. 35,00,000 Close immediately/Convert in to
Resident Account

62
Returning/EmigratingIndians

• 4. Holding of foreign exchange, etc.—Save as otherwise provided in this Act, no person resident in
India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any
immovable property situated outside India.
63
Section 4 of FEMA, 1999

Dated: 01.04.2022
• M/s GI Retail Pvt Ltd sold its subsidiary company
Herms I Ticket India Pvt Ltd to one fund in Mauritius
namely EMIF 1A, mainly controlled by one Henry
O’Sullivan for a consideration of Rs. 275 Crore in the
year 2015.
• The said EMIF 1A in turn immediately sold the shares
of Herms I Tickets Pvt Ltd to M/s Wirecard AG,
Germany at an exorbitant price of Euro 320 Million.
• The investigation from the perspective of FEMA, 1999
was initiated and it is found that the beneficial
owners of GI Retail Pvt Ltd received payment of Rs
195.36 Crore over and above the actual sale
consideration of Rs 275 Crore from EMIF 1A and
Wirecard AG in the accounts of fictitious entities
associated with them and located in United Arab
Emirates
shares of Germany
195.36 Cr
Mauritius
sold
India
Subsidiary
GI Retail Pvt Ltd Herms I Ticket India Pvt Ltd
Beneficial
Owner
Herms I Ticket
India Pvt Ltd
Consideration:
Rs. 275 Crore
EMIF 1A
Wirecard AG
Herms I Ticket India Pvt Ltd
Euro
320 Mn

65
Returning Indians
❖Assets abroad: Sec 6(4)
A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable
property situated outside India if such currency, security or property was acquired, held or owned by such person
when he was resident outside India or inherited from a person who was resident outside India.

66
Returning Indians
property situated outside India if such currency, security or property was acquired, held or owned by such person when
he was resident outside India or inherited from a person who was resident outside India.
Bank Accounts
•Re-designation of
NRO/NRE/FCNR a/c
•Continuation of
Foreign bank accounts
covered under Sec 6(4)
•Can take benefit of RFC
a/c
Shares and Securities
abroad– Covered u/s
6(4)-
•Can continue to
hold/transfer
Immovable property
abroad– Covered u/s
6(4)-
•Can continue to
hold/transfer
Partner in firm or
proprietor of concern-
•Can continue

67
Returning Indians
property situated outside India if such currency, security or property was acquired, held or owned by such person when
he was resident outside India or inherited from a person who was resident outside India.
❖Insurance policy
✓ Can continue to hold life/general insurance policy o/s India.
✓ No permission required for payment of premium.
✓ However, maturity proceeds to be repatriated within 7 days.
Bank Accounts
•Re-designation of
NRO/NRE/FCNR a/c
•Continuation of Foreign
bank accounts covered
under Sec 6(4)
•Can take benefit of RFC a/c
abroad– Covered u/s 6(4)-
•Can continue to
hold/transfer
Immovable property abroad–
Covered u/s 6(4)-
•Can continue to
hold/transfer
Partner in firm or proprietor
of concern-
•Can continue

68
Emigrating Indians
❖Assets in India: Sec 6(5)
A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable
property situated in India if such currency, security or property was acquired, held or owned by such person when
he was resident in India or inherited from a person who was resident in India.

69
Emigrating Indians
❖Assets in India: Sec 6(5)
A person resident outside India may hold, own, transfer or invest in Indian currency, security or any
immovable property situated in India if such currency, security or property was acquired, held or owned by
such person when he was resident in India or inherited from a person who was resident in India.
❖Insurance policy
•Can continue to hold life/general insurance policy in India.
•No permission required for payment of premium
Bank Accounts
• Convert Resident
a/c into NRO a/c
• Immediately
intimate company,
registrar, broker,
depository of
change in
residential status.
Borrowings and
lending
• Continue till
maturity
Immovable property
–
• Covered u/s 6(5) –
Can continue to
hold
Partner in firm or
proprietor of concern
• Can continue to
remain
partner/proprietor.

Current
income
classified as current
account transactions
are freely allowed to be
repatriated outside India
if the amount is credited to
NRO account
the same can be remitted out
if India (net of taxes) on
production of a CA certificate
direct remittance outside
India
or credit to NRE account of
the non-resident
on production of a CA
certificate
71
Remittance of Current Income || likerent,dividend,pension,etc.

Person who is Resident but not
Permanently Resident in India
•and who is on deputation to an
office or a branch of a foreign
company or subsidiary or joint
venture in India of such foreign
company, is allowed to remit net
salary (after deduction of taxes,
contribution to provident fund
and other statutory deductions)
Foreign nationals
• who came to India for
employment and became
resident are permitted to re-
designate their existing resident
account as NRO account on
leaving the country after their
employment to receive their
legitimate dues in India subject
to certain conditions.
72
Remittance of Current Income || salary and other

• Repatriation of sale proceeds of residential property purchased by NRIs / PIO out of foreign exchange
‒ Permitted for immovable property acquired in foreign currency remitted from abroad and received through
normal banking channels or out of funds raised by them by way of loans from authorized dealer banks / housing
finance institutions to the extent such loan/s are repaid by them out of foreign inward remittances or from their
NRE / FCNR(B) accounts
‒ The repatriation facility in respective foreign currency is restricted to not more than two house properties.
▪ Repatriation of amount paid for booking of flat upon cancellation of flat allowed
Remittance of Assets
CA. Sudha G. Bhushan || Sudha@taxpertpro.com || 9769033172 73

Remittance of Assets – Notification No. 13(R)
Remittance under$ 1 Million perFinancialYear
$ 1 million per year
•balances in NRO
•sale proceeds of assets held in India in
accordance with the provisions of FEMA
•assets acquired in India by way of inheritance/
legacy; or a deed of settlement made by either
of his/ her parents or a relative as defined in
Companies Act, 2013 to be effected on death
of the settler;
- in respect of assets acquired under a deed of settlement
made by either of his / her parents or a relative as
defined in Companies Act, 2013- The settlement should
take effect after death of the settler
NRI/PIO to provide declaration to
the AD Bank confirming that -
• Remittance is out of balances held in NRO
account arising from his / her legitimate
receivables in India
•Remittance is not out of borrowing from any
other person
•Remittance is not out of funds transferred from
NRO account of any other person

76
▪Non-resident Indian (NRI) is not defined under the FEMA Act.
▪Under Notification 5(R)- Deposits – Regulation 2(vi) – NRI is defined as under-
o vi) 'Non-Resident Indian (NRI)' means a Person resident outside India who is a citizen of India.
o Old definition - “An NRI is a Person resident outside India who is a citizen of India or is a Person of Indian
Origin”.
▪Under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 - Regulation 2(aj), the term is defined
as under-
o (aj) ‘NRI’ or ‘Non-Resident Indian means an individual resident outside India who is a citizen of India;
▪Therefore, now there is uniform definition of NRI under FEMA Notifications, all of which exclude PIO or Overseas
Citizen Of India (OCI).
▪Therefore the nomenclature NRI should be used only for a Citizen of India who is a resident abroad.
Non-Resident Indian

77
▪Person of Indian Origin “PIO” is not defined under the FEMA Act.
▪However, Notification- 5 (R)- Deposits – issued by RBI vide Regulation 2 (x) defines the term PIO as under-
▪A PIO is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such
other country as may be specified by the Central Government, satisfying the following conditions:
a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act,1955 (57 of 1955); or
b) Who belonged to a territory that became part of India after the 15th day of August 1947; or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or
(b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause
(a) or (b) or (c)
Explanation: For this regulation, PIO includes an ‘Overseas Citizen of India’ cardholder within the meaning of
Section 7(A) of the Citizenship Act, 1955.
PIO concept is gradually being replaced by the concept of OCI. Therefore, PIOs should be advised to obtain OCI Cards at
the earliest to avoid operational difficulties.
Person of Indian Origin (PIO)

Overseas Citizen of India (OCI)
▪Definition provided under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 – Para 2(ak)
Overseas Citizen of India “OCI” means an individual resident outside India who is registered as an Overseas Citizen of
India Cardholder under section 7A of the Citizenship Act, 1955 ( 57 of 1955);
▪Following categories of foreign nationals are eligible for registration as OCI Cardholder:
➢ Who was a citizen of India at the time of, or at any time after the commencement of the Constitution i.e. 26.01.1950; or
➢ who was eligible to become a citizen of India on 26.01.1950; or
➢ who belonged to a territory that became part of India after 15.08.1947; or
➢ who is a child or a grandchild or a great grandchild of such a citizen; or
➢ who is a minor child of such persons mentioned above; or
➢ who is a minor child and whose both parents are citizens of India or one of the parents is a citizen of India; or
➢ spouse of foreign origin of a citizen of India or spouse of foreign origin of an Overseas Citizen of India Cardholder
registered under section 7A of the Citizenship Act, 1955 and whose marriage has been registered and subsisted for a
continuous period of not less than two years immediately preceding the presentation of the application.

Overseas Citizen of India (OCI)
No person, who or either of whose parents or grandparents or great grandparents is or had been a citizen of Pakistan,
Bangladesh or such other country as the Central Government may, by notification in the Official Gazette, specify, shall be
eligible for registration as an Overseas Citizen of India Cardholder.

Citizenship(Amendment)Act,2015
PIO
OCI
OCI
Cardholder

loan
In India
In INR
To the account
Holder
permitted
To third party Permitted
In Foreign
Currency
To the account
holder
Permitted
Outside India
To the account
holder
Permitted
LOAN AGAINST DEPOSIT IN NRE A/C

loan
In India
In INR
To the account
Holder permitted
In Foreign
Currency
To the account
holder Permitted
Outside India
To the account
holder Permitted
LOAN AGAINST DEPOSIT IN FCNR (B) Account

loan
In India
In INR
To the account
Holder
Permitted
subject to
extant
Rules
To third party
Permitted
subject to
conditions
In Foreign
Currency
To the account
holder
Not
Permitted
To third party
Not
Permitted
Outside India
To the account
holder
Not
permitted
To third party
Not
Permitted
•Personal requirement
and / or business
purpose.*
To the
accoun
t
holder
•Personal requirement
and / or business
purpose*
To
third
party
Resident individual to lend to a Non-resident Indian (NRI)/
Person of Indian Origin (PIO) close relative [means relative
as defined in Section 6 of the Companies Act, 1956] by way
of crossed cheque /electronic transfer.
The loan amount should be credited to the NRO a/c of the
NRI /PIO. Credit of such loan amount may be treated as an
eligible credit to NRO a/c;
* The loans
cannot be
utilised for the
purpose of on-
lending or for
carrying on
agriculture or
plantation
activities or for
investment in
real estate
business.
CA. Sudha G. Bhushan || Sudha@taxpertpro.com
LOAN AGAINST DEPOSIT IN NRO A/C

•i) Personal purposes or for carrying on business activities*
•ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies
•iii) Acquisition of flat / house in India for his own residential use.
To the
Account
holder
•Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *.
To Third
Party
•Fund based and / or non-fund based facilities for bonafide purposes.
Abroad
*The loans cannot be utilised for the purpose of on-lending or for carrying on agriculture or plantation activities or for investment in real estate business.
PURPOSE OF LOAN –IN CASE OF NRE A/C AND FCNR (B) A/C

•Personal requirement and / or business
purpose.*
To the
account
holder
•Personal requirement and / or business
purpose*
To third
party
Resident individual to lend to a Non-resident Indian (NRI)/ Person of Indian Origin
(PIO) close relative [means relative as defined in Section 6 of the Companies Act,
1956] by way of crossed cheque /electronic transfer.
The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of
such loan amount may be treated as an eligible credit to NRO a/c;
* The loans cannot be
utilised for the purpose of
on-lending or for carrying
on agriculture or plantation
activities or for investment
in real estate business.
LOAN AGAINST DEPOSIT IN NRO A/C

87
UK
India
Except for the purpose of relending
Carrying on agricultural/ plantation activities
Forinvestment in real estate business
NREAccount Loan against
deposit
Cannot be taken
outside India

88
UK Mr. DS Rao
India
Mr. A
NRE Account Loan against
deposit
no foreign exchange
consideration

89
UK
India
NRE Account Loan against
deposit
Cannot be taken
outside India
Loan
against
the
deposits
held in
India

Thankyou!!
YourQueriesplease
Sudha@taxpertpro.com
+919769033172

Certificate course on FEMA_Presentation by Sudha G. Bhushan _ 14th May 2023.pdf

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