- All current account transactions are now free and capital account transactions have been deregulated under the new FEMA regime. The definition of NRI has changed from purpose to residence. Punishment for violations is now civil instead of criminal with no imprisonment. RBI has been given powers for compounding violations. - Current account transactions do not affect the assets/liabilities of an entity while capital account transactions do through activities like borrowing, lending, investment etc. RBI regulates India's foreign exchange market with transactions involving exports, imports and other forex activities. - Schedules I-III specify transactions that are prohibited, permitted with government approval, and requiring RBI approval respectively if exchange limits are exceeded. Liberalized remitt

1. Foreign Exchange Management - an overview of Current account Transactions

2. What is new in FEMA regime ? Preamble itself is changed All current account transactions are free Capital account transactions are deregulated Definition of NRI changed from purpose to residence From Criminal law to Civil Law Less punishment – No Imprisonment Compounding powers to RBI Less stringent & more business friendly All colored text is relevant for examination

3. Foreign Exchange Market in India Regulator: Reserve Bank of India Regulation: Foreign Exchange Management Act, 1999 Authorised Dealers, Money changers Buyers and sellers: exporters, importers, individuals, Corporates, FIIs, Non-Residents, NRIs etc. Tier-I Tier - II Tier-III

4. Forex Activities in India – Facilitators Ministry of Finance Ministry of Commerce , DGFT Directorate of Enforcement Customs Export Promotion Councils – FIEO Export Inspection Units Authorised Persons FEDAI EXIM Bank ECGC RBI

5. Current Account Capital Account Trade Invisibles Exports Imports Tour Travel Remittance Gift Profit/Div/int FDI Portfolio Foreign Indian Source Source (FII) (GDR/ADR) Loan (Govt/ Pvt(ECB) Foreign currency A/C RI & NRI FOREIGN EXCHANGE TRANSACTIONS

6. Forex – the Concept ( contd. ) – Current & Capital Account Current account transaction – All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. affects cash position of an entity – Trade-related remittances & miscellaneous remittances fully convertible - fully delegated to ADs Capital account transaction – affects asset & liability position of an entity - borrowing, lending & investment – FDI , FII, ECBs , NRI deposits , Overseas Investments – expanding convertibility

7. General In terms of the Rules - Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Annex I)- drawal of exchange for certain categories of transactions as listed in Schedule I - expressly prohibited Schedule II - permitted by the ADs if approval from the Ministry/Dept of GoI is secured Schedule III- prior approval of the RBI required for remittance exceeding limits .

8. Schedule I Remittance out of lottery winnings Remittance of income from racing/riding or any other hobby etc Remittance for purchase of lottery tickets, banned/ prescribed magazines , football pools, sweepstakes etc Payment of commission on exports made towards investment in JV / WOS abroad of Indian companies. Payment related to callback services of telephones

9. Schedule I (contd…) Remittance of dividend by any company where dividend balancing is applicable Remittance of interest income on funds held in Non – Resident Special Rupee ( Account ) Scheme. Payment of commission on exports under Rupee state credit Route, except commission upto 10% of invoice value of exports of tea and tobacco .

10. Schedule II Remittances which need prior approval from the dealing ministry / department of GoI and permitted up to the amounts as mentioned in the approval letter – Cultural tours , Advertisement in foreign print media , Freight of vessel charted by a PSU , Payment for import by a Govt, dept. or PSU on c.i.f. basis , Multi modal transport operators making remittance to their agents abroad , hiring of transponders by TV channels , ISPs , Remittances under technical collaboration agreements etc.

11. Schedule III Transactions needing RBI approval for amounts exceeding delegated powers of ADs – travel , gift , donation , employment , emigration , maintenance , medical expenses exceeding the estimates , higher studies exceeding the estimates, commission to agents for sale of flats etc. in India , consultancy fees ,pre incorporation expenses.

12. Limits upto which ADs can release foreign Exchange Sl no Transaction Limit in US $ 1 Private visit USD 10,000 per financial year 2 Business travel, Conference, Training USD 25,000 per trip 3 Medical treatment USD 100,000 or its equivalent on self declaration basis 4 Higher studies USD 1,00,000 per academic year

13. Limits upto which ADs can release foreign Exchange Sl.no. Transaction Limit 5 Employment Upto USD 1,00,000 6 Emigration Upto USD 1,00,000 7 Gift/donation USD 5,000 per remitter/donor per annum. 8 Maintenance of close relatives abroad – USD 1,00,000 per recipient 9 Cultural as sanctioned by GoI 10 LRS USD 2,00,000 per financial year

14. Liberalised Remittance Scheme of USD 200000 Facility extended to all resident individuals freely remit upto USD 200,000 per financial year for any permissible current or capital account transaction or a combination of both . Not available for purposes specifically prohibited (Schedule I) or GOI (Schedule II) of FEMA(Current Account Transactions) Rules, 2000. free to acquire and hold immovable property, shares or any other asset outside India without prior approval of RBI using the scheme.

15. Liberalised Remittance Scheme of USD 200000 Free to open, hold and maintain foreign currency accounts with a bank outside India for remittances under the scheme without the prior approval of RBI . Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan. Not available for making remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as ‘non-co-operative Countries or Territories , from time to time.

16. Release of Foreign Currency-restrictions No release of foreign exchange for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan. Travellers allowed to purchase/carry foreign currency notes/coins only up to USD 2000 . Balance amount in the form of traveller’s cheque or banker’s draft.

17. Release of foreign Currency-Restrictions Exceptions to this are (a) travellers proceeding to Iraq and Libya - not exceeding USD 5000 or its equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States - entire foreign exchange released in the form of foreign currency notes or coins.

18. Resident Going Abroad- Indian Currency Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of GOI and RBI notes up to not exceeding Rs. 5,000/ - per person . They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

19. Utilisation of forex The foreign exchange acquired has to be used within 180 days of purchase . If not possible, to be surrendered to an AD within 180 days . Can retain upto USD 2000 in currency notes/travellers cheque . Foreign Exchange purchased for a specific purpose is not utilized for that purpose, it could be utilized for any other eligible purpose permitted under the relevant regulation.

20. Residents coming to India from abroad- regarding Indian Currency - can bring in with him up to Rs. 5,000 from any country other than Nepal or Bhutan, and any amount in denomination not exceeding Rs.100 from Nepal or Bhutan. Foreign Exchange- can bring without any limit. If the aggregate value of the foreign exchange in the form of currency notes, bank notes or TCs brought in exceeds USD 10,000/- or its equivalent and/or the value of foreign currency exceeds USD 5,000/- or its equivalent, To be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

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