1. FOREIGN EXCHANGE MANAGEMENT ACT,1999
BY CA. DEEPENDER KUMAR

2. Structure of FEMA
Applies to the whole of India and all branches, offices and agencies outside India which are owned or controlled by a person resident in India.
FEMA has 49 sections of which 9 (section 1 to 9) are substantive and the rest are procedural/ administrative.
Section 46 of FEMA grants power to Central Government to make rules to carry out the provision of FEMA.
Section 47 of FEMA grants power to RBI to make regulations to implement its provisions and the rules made there under.
RBI is entrusted with the administration and implementation of FEMA

3. Substantive Provisions
Section
Description 1
Application and Commencement of FEMA 2
Definitions
3 to 9
Provisions relating to Regulations and Management of Foreign Exchange
10 to 12
Provisions relating to Authorized Person
13 to 15
Provisions relating to Contraventions and Penalties
16 to 38
Provisions relating to Adjudication, Appeal and Directorate of Enforcement
39 to 49
Miscellaneous Provisions

4. References
Provisions of FEMA cannot be found at one place but are spread over at different places. The FEMA contains only basic legal framework. The practical aspects are covered in Rules made by Central government and regulations made by RBI.
References :
Foreign Exchange Management Act,1999
Rules made by Central government
Regulations/notification made by RBI
Consolidated FDI policies issued by DIPP (Annually)
Press note /press release issued by DIPP (Annually)
AP (DIR Series) circular issued by RBI
Master circulars issued by RBI (Annually)
Website:

5. A.P. (Dir Series) Circulars
Directions issued by RBI u/s. 10(4) and 11(1) of FEMA to Authorized Persons (AP)
These directions are called – A.P. (Dir Series) Circulars
APs are Authorized Dealers, Money Changers and banks who are authorized to deal in Foreign Exchange
These Circulars are operational instructions to AP by RBI.
Legal validity of these Circulars have been upheld in the case of Prof. Krishnaraj Goswami v. RBI, [2007 (6) Bom. CR 565]
Court upheld the power of RBI to issue such Circulars based on powers conferred to RBI u/s. 10(4) & 11(1) & negated the contention that RBI has no jurisdiction to issue such Circulars

6. Notifications under FEMA
and Master Circulars
Notifications are issued by the Central Government in the Official Gazette.
Section 47 of FEMA grants power to RBI to make regulations.
Master Circulars issued by RBI every year on 1st July to subsumes the position as on date and consolidates all the existing circulars (subject wise).

7. Some of the important definitions
Authorized Person
Capital Account Transaction
Current Account Transaction
Export
Foreign Exchange
Person
Person Resident in India
Person resident outside India
Repatriate to India
Security
Transfer

8. Residential Status under FEMA
PERSON RESIDENT IN INDIA [Sec. 2(v)(i) of FEMA]:
Residing in India for more than 182 days during the course of preceding F.Y. but doesn’t include
a person going out of India or staying outside India, in either case
For or on taking up employment outside India, or
for carrying business or vocation outside India, or
for any other purpose, in such circumstances as would indicate his intention to stay outside India for uncertain period;
a person coming to India or staying outside India otherwise than
for or on taking up employment in India,or
for carrying business or vocation in India , or
for any other purpose in such circumstances as would indicate his intention to stay in India for uncertain period:
Cont…..
Residential Status under FEMA

9. Residential Status under FEMA
(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.
PERSON RESIDENT OUTSIDE INDIA[Sec. 2(w) of FEMA]: a person who is not resident in India.
Person: Person Includes:
(i) An Individual, (ii) a Hindu Undivided family (iii) a company (iv) a firm (v) an association of person or 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.
Residential Status under FEMA

10. Capital Account Transactions
Definition U/s 2(e)
"capital account transaction" means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6 of FEMA;
Capital Account transactions are prohibited unless generally permitted - they are regulated by RBI.
Cont…….

11. Capital Account Transactions
Capital account transactions are governed by Foreign Exchange Management (Permissible Capital Account Transaction) Regulations, 2000.
Capital account transactions are classified into 2 schedules :-
Schedule I – Classes of capital account transactions of persons resident in India
Schedule II – Classes of capital account transactions of persons resident outside India
Cont……

12. Capital Account Transactions
Schedule I:
(Classes of capital account transaction of person resident in India)
Investment by a person resident in India in foreign securities.
Foreign currency loans raised in India and abroad by a person resident in India.
Transfer of immovable property outside India by a person resident in India.
Guarantees issued by a person resident in India in favour of a person resident outside India.
Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India.
Cont……

13. Capital Account Transactions
6. Maintenance of foreign currency account inn India and outside India by a person resident in India.
Taking out of insurance policy by a person resident in India from an insurance company outside India.
Loans and overdrafts by a person resident in India to a person resident outside India.
Remittance outside India of capital assets of a person resident in India.
Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad by a person resident in India.
Cont……

14. Capital Account Transactions
Schedule II:
(Classes of capital account transaction of person resident outside India)
Investment in India by a person resident outside India, that is to say :
(i) issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and
(ii) investment by way of contribution by a person resident outside India to a capital of a firm or a proprietorship concern or an association of person in India.
2. Acquisition and transfer of immovable property in India by a person resident outside India.
3. Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India.
Cont…..

15. Capital Account Transactions
4. Import and export of currency/currency notes into/from India by a person resident outside India.
5. Deposits between a person resident in India and a person resident outside India.
6. Foreign currency account in India of a person resident outside India.
7. Remittance outside India of capital assets in India of a person resident outside India.

16. Current Account Transactions
Definition U/s 2(j) of FEMA
"current account transaction" means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,-
payments due in connection with foreign trade, other current business, services, and short term banking and credit facilities in the ordinary course of business,
payments due as interest on loans and as net income from investments,
remittances for living expenses of parents, spouse and children residing abroad, and
expenses in connection with foreign travel, education and medical care of parents, spouse and children;
Cont…..

17. Current Account Transactions
Current account transactions are governed by Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Current account transactions are divided into 3 schedules in Current Account Transactions Rules:-
Schedule I – Prohibited Transactions
Schedule II – Transactions requiring prior approval of Government of India
Schedule III – Transactions requiring prior approval of RBI
Cont……

18. Current Account Transactions
Schedule I :
Remittance out of lottery winnings
Remittance of income from racing/riding etc., or any other hobby
Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes etc.
Payment of commission on exports made towards equity investment in Joint Ventures/Wholly Owned Subsidiaries abroad of Indian companies.
Remittance of dividend by any company to which the requirement of dividend balancing is applicable.
Payment related to “Call Back Services” of telephones.
Remittance of interest income on funds held in Non-resident Special Rupee Scheme a/c.
Cont……

19. Current Account Transactions
Schedule I I:
Cultural Tours – Approval from Ministry of Human Resources Development (Department of Education and Culture)
Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding US$ 10,000) by a State Government and its Public Sector Undertakings.- Approval from Ministry of Finance, Department of Economic Affairs]
Remittance of freight of vessel charted by a PSU-Approval from Ministry of Surface Transport (Chartering Wing)
Remittance of hiring charges of transponders by (a) TV Channels (b) Internet service provider- Approval from (a) Ministry of Information and Broadcasting and/or (b) Ministry of Communication and Information Technology]
Cont……

20. Current Account Transactions
Schedule I I:
Remittance of container detention charges Ministry of Surface Transport (Director exceeding the rate prescribed by Director General of Shipping) – Approval from General of Shipping
Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding US$ 10,000) by a State Government and its Public Sector Undertakings.- Approval from Ministry of Finance, Department of Economic Affairs]
Remittance of prize money/sponsorship of sports activity abroad by a person other than International/National/State Level sports bodies, if the amount involved exceeds US $
100,000 – Approval from Ministry of Human Resource Development (Department of Youth Affairs and Sports)
Remittance for membership of P & I Club- Approval from Ministry of Finance (Insurance Division)
Cont……

21. Current Account Transactions
Schedule III: (Approval from RBI)
Individuals can avail of foreign exchange facility for the following purposes within the limit of USD 2,50,000 only. Any additional remittance in excess of the said limit for the following purposes shall require prior approval of the Reserve Bank of India.
(i) Private visits to any country (except Nepal and Bhutan).
(ii) Gift or donation.
(iii) Going abroad for employment.
(iv) Emigration*
(v) Maintenance of close relatives abroad.
(vi) Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up.
(vii) Expenses in connection with medical treatment abroad*
(viii) Studies abroad*
(ix) Any other current account transaction
* Note the Individual may avail of exchange facility for an amount in excess of the limit prescribed under the LRS Scheme if it is so required by a country of emigration, medical institute offering treatment or the university, respectively

22. Current Account Transactions
Schedule III: (Approval from RBI)
Other Than Individuals
The following remittances by persons other than individuals shall require prior approval of the Reserve Bank of India.
Donations exceeding one per cent of their foreign exchange earnings during the previous three financial years or USD 5,000,000, whichever is less, for
creation of Chairs in reputed educational institutes;
contribution to funds (not being an investment fund) promoted by educational institutes;
contribution to a technical institution or body or association in the field of activity of the donor Company.
(ii) Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or five per cent of the inward remittance whichever is more.
(iii) Remittances exceeding USD 10,000,000 per project for any consultancy services in respect of infrastructure projects and USD 1,000,000 per project, for other consultancy services procured from outside India.
(iv) Remittances exceeding five per cent of investment brought into India or USD 100,000 whichever is higher, by an entity in India by way of reimbursement of pre-incorporation expenses.

23. FOREIGN
INVESTMENT
IN INDIA

24. Significance of Foreign Investment
Through foreign investment corporations extend their business activity into foreign countries.
The main object of Foreign investment is to acquire or retain control over markets and/or productive resources.

25. Relevant FEMA Regulations
Consolidated FDI Policy, DIPP, Commerce Ministry
AP Dir Circulars – RBI’s Changes
FEMA Regulations – Mode of Investment

26. Types of Foreign Investments
Foreign Direct Investments
Automatic Route
Govt. Route
Persons Resident outside India
Foreign Portfolio Investments
FIIs
NRIs, PIO, QFIs
Foreign Venture Capital Investments
SEBI regd. FVCI
VCF, IVCUs
Other Investments
Investments on non-repatriatable basis
NRIs, PIOs

27. Forms of Foreign Investments
Foreign Direct Investment
Foreign Investments under Portfolio Investment Scheme (PIS)
Foreign Venture Capital Investments
Other Foreign Investments
Immovable Properties in India

28. ENTRY ROUTE of FDI AUTOMATIC ROUTE GOVT. ROUTE BAN ROUTE
The foreign investor or the Indian company should obtain prior approval of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB)/ SIA for the investment. Some are:
Tea sector including tea plantation (100%)
Defence Industry
Print Media
Broadcasting
The foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. Some are:
E-commerce activities
Wholesale trading
Industrial Parks
Construction: Townships, Housing, Built-up infrastructure
Coal and Lignite
Automatic Route depends on sector, sectoral cap and capitalisation norms and other eligible activities.
Business of Chit Fund
Nidhi Company
Agriculturalor Plantation activities
Real Estate business* or construction of farm house
Tradingin Transferable Development Rights (TDRs)
LotteryBusiness, Gambling and betting
Manufacture of cigars, cigarettes or tobacco, etc
(limited extent as defined by regulations)

29. Eligibility of FDI in India
A person resident outside India or an entity incorporated outside India subject to FDI policy issued by DIPP.
Bangladesh’s Citizen/Entity can invest after taking FIPB approval can invest under FDI Scheme in allowed sectors.
Pakistan’s Citizen/Entity can invest after taking FIPB approval can invest under FDI Scheme in allowed sectors (except defence, space and atomic energy and sectors/ activities prohibited for foreign investment).
NRIs, resident and citizens of Nepal or Bhutan are permitted to invest in shares/ convertible debentures of Indian Company.

30. Instruments of FDI Equity Shares
Compulsorily Convertible Debentures/Preference shares into equity shares and warrants
Prior to December 30, 2013, issue of other types of preference shares such as nonconvertible, optionally convertible or partially convertible, were to be in accordance with the guidelines applicable for External Commercial Borrowings (ECBs). On and from December 30, 2013 it has been decided that optionality clauses may henceforth be allowed in equity shares and compulsorily and mandatorily convertible preference shares/debentures to be issued to a person resident outside India under the Foreign Direct Investment (FDI) Scheme. The optionality clause will oblige the buy-back of securities from the investor at the price prevailing/value determined at the time of exercise of the optionality so as to enable the investor to exit without any assured return.

31. Pricing Guidelines- Listed company
Instrument
Pricing Guidelines
Fresh Issue to Public
At price determined by SEBI Guidelines.
Preferential Allotment
Atleast at the Price determined as per SEBI guidelines by SEBI registered Merchant Banker or Chartered Accountant as per internationally accepted method of valuation on arms length basis,
Transfer of Existing shares from Resident to Non-Resident
Atleast at the Price determined as per SEBI guidelines by SEBI registered Merchant Banker or Chartered Accountant as per internationally accepted method of valuation on arms length basis
Rights Shares
At a price determined by the company
Amalgamation/Merger
Shares can be issued of New Company to Foreign Investors satisfying allowed sector and sectoral cap.
Buy Back of Shares/Reduction of Capital
Fall under General Permission for transfer of shares from Non-Resident to Indian Company, price shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident 

32. Pricing Guidelines – Unlisted company
Instruments
Pricing Guidelines
Subscriber to Memorandum Shares
Issue at Face Value
Other New Allotment
Chartered Accountant as per as per internationally accepted method of valuation accepted method of valuation on arms length basis,
Transfer of Existing shares from Resident to Non-Resident
Chartered Accountant as per as per internationally accepted method of valuation accepted method of valuation on arms length basis
Rights Shares
At a price which is not less than the price at which the offer on right basis is made to the resident shareholders

33. Pricing Guidelines - Unlisted company
Instruments
Pricing Guidelines
Convertible Instrument:
Price to be determined based on the conversion formula, price at the time of conversion >= Fair Market Value at the time of issuance of instrument.
Amalgamation/Merger
Shares can be issued of New Company to Foreign Investors satisfying allowed sector and sectoral cap.
Buy Back of Shares/Reduction of Capital
Fall under General Permission for transfer of shares from Non-Resident to Indian Company, price shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident 

34. Pricing guidelines
The pricing of the partly paid equity shares shall be determined upfront and 25% of the total consideration amount (including share premium, if any), shall also be received upfront; The balance consideration towards fully paid equity shares shall be received within a period of 12 months.
The time period for receipt of the balance consideration within 12 months shall not be insisted upon where the issue size exceeds rupees five hundred crore and the issuer complies with Regulation 17 of the SEBI (Issue of Capital and Disclosure Requirements(ICDR)) Regulations regarding monitoring agency. Similarly, in case of an unlisted Indian company, the balance consideration amount can be received after 12 months where the issue size exceeds rupees five hundred crores. However, the investee company shall appoint a monitoring agency on the same lines as required in case of a listed Indian company under the SEBI (ICDR) Regulations. Such monitoring agency (AD Category -1 bank) shall report to the investee company as prescribed by the SEBI regulations, ibid, for the listed companies.
The pricing of the warrants and price/ conversion formula shall be determined upfront and 25% of the consideration amount shall also be received upfront. The balance consideration towards fully paid up equity shares shall be received within a period of 18 months

35. MODE of Payment Inward remittance through normal banking channels.
Debit to NRE / FCNR (B) account of a person concerned maintained with an AD category I bank.
Conversion of royalty / lump sum / technical knowhow fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares.
Conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB.
Debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.

36. Procedural Aspect - FRESH ALLOTMENT
Intimations of Receipt of Share Application Money submitted to RBI through Authorised Dealer Category- I Bank (AD) within 30 days of receipt of remittance.
Foreign Inward Remittance Certificate (FIRC) obtain from AD, with proper indication of purpose of remittance
In case Investor and Remitter are different, then No Objection Certificate (NOC) should obtained from Remitter in favour of Investor
Know Your Customer should be obtained for Investor and Remitter, as the case may be.
Unique Identification Number (UIN) will be provided by RBI for every remittance.
Intimation
Allotment should be made with 180 days of receipt of funds
Pricing Guidelines issued by RBI to be followed.
Refund of excess share application money through Normal Banking Channel, if not allotted within 180 days otherwise approval to be taken from RBI.
Allotment of Shares/CCDs/CCPS

37. www.deepanilassociates.com . FC-GPR
Submitted to RBI through AD Bank within 30 days of allotment.
Along with Share Valuation from Chartered Accountant.
Compliance Certificate from Company Secretary.
Board Resolution
Copy of Letter of UIN allotted of RBI.
Brief of CCD/CCPS agreement, in case CCD/CCPS are issued.
MOA & AOA in case of Subscriber to Memorandum Shares.
Registration Number will be provided by RBI on allotment.
Annual Reporting by Indian Company
Annual Return on Foreign Liabilities and Assets to be filed by 15 July, every year.
It is to be filed by , .

38. RBI reporting through-e biz platform
With a view to promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled the filing of the following returns with the Reserve Bank of India viz.
Advance Remittance Form (ARF) - used by the companies to report the foreign direct investment (FDI) inflow to RBI; and
FCGPR Form - which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow.
(A.P (DIR Series) Circular No.77 dated February 12, 2015)

39. Procedural Aspect – Acquisition/ transfer of existing shares (FC-TRS)
Sale by Resident to Non-Resident
FC-TRS Submitted to RBI through AD Bank by Resident in Quadruplicate within 60 days of receipt of Sale Consideration
Consent letter of buyer and seller
Shareholding Pattern of Investee Company (before and after)
Share Valuation Certificate from Chartered Accountant
Copy of Brokers’ Note, if Stock exchange Sale
Undertaking from buyer for his eligibility of accruing shares as per Sectoral limit and pricing guidelines.
Undertaking form FIIs, not breached SEBI guidelines
Sale by Non-Resident to Resident
FC-TRS Submitted to RBI through AD Bank by Resident in Quadruplicate within 60 days of payment of Sale Consideration
NRIs- Consideration from NRE/NRO account
No Objection/Tax Clearance from Income Tax authority/Chartered Accountant
Undertaking from buyer for his eligibility of accruing shares pricing guidelines.

40. Another Indian Company
DOWN STREAM FDI
Foreign Company
Direct FDI
Indian Company
Indirect FDI
Another Indian Company

41. Condition for Indirect FDI
FDI via Indian Cos
Owned & Controlled by Resident Indian Citizens = Domestic Investment not counted as FDI
Owned or Controlled by NRs = Indirect FDI
Ownership
>50% of Capital (Eq / CCDs / CCPS)
Control
Right to appoint a majority of Directors or to control management or policy decisions including by virtue of their Shareholding or Management Rights or Share Holders Agareement or Voting Agreements

42. A SEBI registered Foreign Venture capital Investor (FVCI)
 Foreign Venture Capital Investments
A SEBI registered Foreign Venture capital Investor (FVCI)
with specific approval from the Reserve Bank
invest in IVCU or VCF or in a scheme floated by such VCFs
subject to the condition that the domestic VCF is registered with SEBI.
FVCIs can purchase equity / equity linked instruments / debt / debt instruments, debentures of an IVCU or of a VCF or in units of schemes / funds. 

43. FDI IN LLP
Limited Liability Partnership (LLP) formed and registered under the Limited Liability Partnership Act, 2008 shall be eligible to accept Foreign Direct Investment (FDI) under Government approval route.

44. OTHER FOREIGN INVESTMENTS
Indian Depository Receipts (IDR)
Purchase of other securities by FIIs
Investment by Multilateral Development Banks (MDBs)
Foreign Investment in Tier I and Tier II instruments issued by banks in India
Qualified Foreign Investors (QFIs) investment in the units of Domestic Mutual funds
Infrastructure Debt Funds (IDF)

45. Other Foreign Investments
Purchase of other securities by NRIs
On non-repatriation basis without any limit
Purchase shares / convertible debentures issued by an Indian company
Government securities, treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds
on-convertible debentures issued by an Indian Company
On repatriation basis without any limit
Government dated securities
Treasury bills or units of domestic mutual funds;
Bonds issued by a public sector undertaking (PSU) in India and
Shares in Public Sector Enterprises being disinvested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.

46. Voluntary Liquidation
Exit Option
Buyback of Shares
Reduction of Capital
Buyout by Promoter
Voluntary Liquidation

47. OVERSEAS DIRECT INVESTMENT

48. Introduction
Investment by an Indian party, either under Automatic or Approval route, by way of contribution to capital or subscription to the MOA of foreign entity or by way of purchase of existing shares of foreign entity either by
Investment through stock exchange; or
Private placement; or
Market purchase; or
Investment in a Joint Venture or Wholly Owned Subsidiary abroad.
But does not include Portfolio Investment.

49. Reference Material FEMA Notification No. 120/RB-2004 dated July7, 2004
Master Circular on Direct Investments by residents
in Joint Venture /Wholly Owned Subsidiary
abroad
FEMA Notification No. 120/RB-2004 dated July7, 2004
Master Circular
Notification
AP (DIR Series ) Circular
Website
AP (DIR) series Circular issued from time to time

50. Promoting global business by Indian entrepreneurs.
Significance of ODI
Promoting global business by Indian entrepreneurs.
Promote economic and business co-operation between India and other countries.
Transfer of technology and skill, share R & D.
Access to global market and promote brand image.
Increase in exports of Plant & Machinery and goods and services
Source of Foreign Exchange Earnings – dividend, royalty, technical know-how and other entitlements.

51. Eligible to make overseas investment/Indian party.
Resident corporate entities
Registered Partnership Firms/LLPs
Individual/ Trust/ Society 

52. Wholly Owned Subsidiary/JV
'Wholly Owned Subsidiary (WOS)' means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party;
'Joint Venture (JV)' means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment

53. Financial Commitment
'Financial commitment' means the amount of direct investment by way of contribution to equity and loan and guarantees issued by an Indian party to or on behalf of its overseas Joint Venture Company or Wholly Owned Subsidiary (with in the 400 per cent of the net worth of the last audited balance sheet of the Indian party)
(In case of individual it will the limit under LRS scheme)
Net worth means – paid up capital and free reserve in the Indian party

54. Prohibitions Real Estate Banking Business
Buying and selling of real estate or trading in TDRs but does not include development of townships, construction of residential/commercial premises, roads or bridges).
Real Estate
However, Indian banks operating in India can set up JV/WOS abroad provided they obtain clearance under the Banking Regulation Act 1949.
Banking Business

55. General Permission
General permission has been granted to persons residents in India for purchase / acquisition of securities in the following manner:
out of the funds held in RFC account;
as bonus shares on existing holding of foreign currency shares; and
when not permanently resident in India, out of their foreign currency resources outside India.
General permission is also available to sell the shares so purchased or acquired.

56. Step down subsidiary (operating) Investment through SPV
Mode of Investment
Investment Mode.
JV /WOS
Step down subsidiary (operating)
Guarantee to JV/WOS/step down subsidiary
Investment through SPV

57. Funding Modes Modes of Funding - ODI
Drawal of foreign exchange from AD bank
Swap of shares
Capitalization of export dues
Proceeds of ECB/FCCB
In exchange of ADR / GDR
Balance in EEFC account
Proceeds raised through ADR/GDR

58. Routes of Investment through ODI
Automatic Route
An Indian Party does not require any prior approval from the Reserve Bank for making overseas direct investments. The Indian Party should approach an Authorized Dealer Category – I bank with an application in Form ODI and the prescribed enclosures / documents for effecting the remittances towards such investments.
Approval Route
Proposals not covered by the conditions under the automatic route require the prior approval of the Reserve Bank for which a specific application in form ODI with the documents prescribed therein is required to be made through the Authorized Dealer Category – I banks.

59. Compliances
Step 1
Board Resolution/Special Resolution for Investment in overseas entity
Step 2
Valuation of shares only if it is acquisition of existing company
Step 3
Reporting in Form ODI within 30 days from the remittance*
Step 4
RBI will allot UIN for investment in entity. Second remittance to the JV/WOS cannot be made unless UIN for the first remittance is received.
Step 5
Filing of share certificate with AD bank within 6 months
Cont…….

60. Step 9 Filing of APR by 30th June of every year
Post investment changes/setting up step down subsidiary need to be reported within 30 days
Step 7
Filing of APR by 30th June of every year
Step 8
Filing of FLA by 15th July of every year
Step 9
Repatriate to India all dues viz. dividends, royalty, technical fees, etc within 60 days of falling due.

61. ODI Form www.deepanilassociates.com Part I
File within 30 days from the date of ODI Made
Part II
To be filed by AD Bank for Reporting of Remittances
Part III
APR file every year by 30th June as per the audited/unaudited financial statements of JV/WOS abroad
Part IV
File at the time of disinvestment of ODI with 30 days from the date of disinvestment

62. Significance of UIN
UIN can apply Online – Automatic Generated mail for Allotment of UIN (by the AD Bank))
Second Remittance can’t be made without getting UIN
Single UIN allotted for every investment made in a particular JV/WOS abroad by Indian party/resident individual
Mandatory to quote UIN in APR and ODI form at the time of second remittance and other correspondence with AD Bank

63. Setting of JV/WOS BY Resident Individual under ODI Scheme
With effect from August 05, 2013, a resident individual (single or in association with another resident individual or with an ‘Indian Party’ as defined in the Notification) satisfying the criteria as per Schedule V of the Notification, may make overseas direct investment in the equity shares and compulsorily convertible preference shares of a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) outside India. The limit of overseas direct investment by the resident individual shall be within the overall limit prescribed by the Reserve Bank of India under the provisions of Liberalised Remittance Scheme, as prescribed by the Reserve Bank .
Resident individual is prohibited from making direct investment in a JV or WOS abroad which is engaged in the real estate business or banking business or in the business of financial services activity.
The JV or WOS abroad shall be engaged in bonafide business activity.
Resident individual is prohibited from making direct investment in a JV / WOS [set up or acquired abroad individually or in association with other resident individual and / or with an Indian party] located in the countries

64. identified by the Financial Action Task Force (FATF) as "non co-operative countries and territories" as available on FATF website or as notified by the Reserve Bank.
(iv) The resident individual shall not be on the Reserve Bank’s Exporters Caution List or List of defaulters to the banking system or under investigation by any investigation / enforcement agency or regulatory body.
(v) The JV or WOS, to be acquired / set up by a resident individual under this Schedule, shall be an operating entity only and no step down subsidiary is allowed to be acquired or set up by the JV or WOS.
(vi) For the purpose of making investment under this Schedule, the valuation shall be as per Regulation 6(6)(a) of this Notification
(vii) The financial commitment by a resident individual to / on behalf of the JV or WOS, other than the overseas direct investments as defined under Regulation 2(e) read with Regulation 20A of this Notification, is prohibited.
(viii) Resident Individual has to follow all the reporting requirement, post investment changes requirement and disinvestment requirement as an Indian party follow.

65. Writing off Investment
Disinvestment
Liquidation of JV/WOS
Transfer of Shares
Writing off Investment

66. Liberalized Remittance Scheme (LRS)

67. Liberalized Remittance Scheme for Current and Capital A/c Transactions
Limit Raised- USD 125,000 per financial year to USD 250,000 per financial year for both capital and current account transactions
(A.P. (DIR Series) Circular No. 106 dated June 1, 2015)
PERMISSABLE CAPITAL ACCOUNT TRANSACTIONS
opening of foreign currency bank account abroad;
purchase of property abroad;
making investments abroad;
setting up WOS and JV abroad;
extending loans*
*including loans in INR to NRIs who are relatives as defined in Companies Act, 2013.

68. Purposes- Individual can avail foreign exchange facility
Private visits to any country (except Nepal and Bhutan)
Gift or donation.
Going abroad for employment
Emigration*
Maintenance of close relatives abroad
Travel for business, or attending a conference or specialized training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up.
Expenses in connection with medical treatment abroad*
Studies abroad*
Any other current account transaction
NOTE- Remittance in excess of the said limit- Prior Approval of RBI
*Individuals may avail of exchange facility for an amount in excess of the overall limit prescribed under the LRS, if it is so required by a country of emigration, medical institute offering treatment or the university respectively.
Cont….

69. For a person who is resident but not permanently resident in India and .
Individual remits any amount under the said LRS in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 by the amount so remitted:
For a person who is resident but not permanently resident in India and
is a citizen of a foreign State other than Pakistan; or
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,
Remittance up to his net salary

70. Facilities for Persons other than individual
Donations for educational institutions;
Commissions to agents abroad for sale of
residential flats/commercial plots in India;
Remittances for consultancy services and
Remittances for reimbursement of pre- incorporation expenses

71. Penal Provisions
Section 13 of FEMA- Any Procedural aspect not followed within time frame allowed will attract penalty (a) maximum to thrice of sum involved in contravention
if not quantifiable then INR 200,000/-
Where such contravention is a continuing one, further penalty of maximum INR 5000/- every day.

72. POWER TO COMPOUND CONTRAVENTION
Section 15- Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director f Enforcement or such other officers of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed.
Compounding of contravention can be done subject to para 7.2 of A.P. (DIR Series) Circular No. 56 Dated June 28, 2010
Para 7.2 Contraventions relating to any transaction where proper approvals or permission from the Government or any 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 concerned authorities.

73. Name of Act/ Regulation
Acts and Regulations to operate and Regularizes of Foreign Exchange transitions :
S. No.
Name of Act/ Regulation 1
Foreign Exchange Management Act,1999 2
Foreign Exchange Management (Export And Import Of Currency) Regulations, 2000 3
Foreign Exchange Management (Acquisition And Transfer Of Immovable Property In India) Regulations, 2000 4
Foreign Exchange Management (Acquisition And Transfer Of Immovable Property Outside India) Regulations, 2000 5
Foreign Exchange Management (Adjudication Proceedings And Appeal) Rules, 2000 6
Foreign Exchange Management (Borrowing And Lending In Rupees) Regulations, 2000 7
Foreign Exchange Management (Borrowing Or Lending In Foreign Exchange) Regulations, 2000

74. Name of Act/ Regulation
S. No.
Name of Act/ Regulation 8
Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000 9
Foreign Exchange Management (Authentication of Documents) Rules, 2000 10
Foreign Exchange Management (Current Account Transactions) Rules, 2000 11
Foreign Exchange (Compounding Proceedings) Rules, 2000 12
Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 13
Foreign Exchange Management (Issue of Security in India by a Branch, Office or Agency of a Person Resident outside India) Regulations, 2000 14
Foreign Exchange Management (Deposit) Regulations, 2000 15
Foreign Exchange Management (Guarantees) Regulations, 2000

75. Name of Act/ Regulation
S. No.
Name of Act/ Regulation 16
Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 17
Foreign Exchange Management ( Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 18
Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 19
Foreign Exchange Management (Insurance) Regulations, 2000 20
Foreign Exchange Management (Remittance of Assets) Regulations, 2000 21
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 22
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 23
Foreign Exchange Management (Establishment in India of Branch or Office or other place of business) Regulations, 2000

76. Name of Act/ Regulation
S. No.
Name of Act/ Regulation 24
Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 25
Foreign Exchange Management (Investment in Firm or Proprietary Concern in India) Regulations, 2000 26
Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 27
Currency Futures (Reserve Bank) Directions, 2008 28
Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 29
Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002 30
Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003 31
Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014

77. CA Deepender Kumar DEEPENDER ANIL & ASSOCIATES
Head Office 101, E-36, Jawahar park, Laxmi Nagar, Delhi Branch Office Plot-5A, IInd Floor, Sector-3A, Rachna, Vaishali, Ghaziabad (UP) Mob No: