A Presentation by:

Kedar Gharat 20 Manoj Gupta 21Pramod Jadhav 24

Ashish Lalpuria 34Arun Pacheco 38Nilesh Raut 49Anand Singh 60Sachin D’souza 63

Foreign Foreign Exchange Exchange Management Management ActAct

Foreign Foreign Exchange Exchange Management Management ActAct

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Forex Management– Shift in focus

1991 – Downward correction of exchange rate (Devaluation)

1992 – LERMS (Liberalised Exchange Rate Management System)

1993 – Modified LERMS

1994 – Current Account Convertibility - declared

1998 – FEMA Bill was introduced in Lok Sabha in Aug 1998

2000 – FEMA 1999 replaced FERA 1973 w.e.f.1.6.2000

IMF loans repaid

2003 – Money Laundering Act, 1999 passed

- IMF designates India as Creditor under its Financial

Transaction Plan (FTP)

2004 – Reserves exceed external debt

2006 – Capital Account Convertibility– further steps

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FERA to FEMA – a paradigm shift

Reason for developing FEMA FERA was introduced at a time when foreign exchange

reserves of the country were low and forex was scarce.

FERA proceeded on the presumption that all foreign exchange earned by Indian residents rightfully belonged to the GOI and had to be collected & surrendered to RBI.

FERA primarily prohibited all transactions, except to the extent permitted by general or specific permission by RBI.

It created a flourishing black market in foreign exchange, with side-effects such as ‘Hawala’.

FERA also became a tool of oppression in the hands of politicians for punishing people who refused to toe their line; for eg. the case of the eminent industrialist, S.L.Kirloskar, being proceeded against under FERA for having the princely amount of $82

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What is new in FEMA regime ?

Restrictions on current account transactions were removed

Capital account transactions are deregulated Definition of NRI changed from purpose to residence Offences under FEMA are not regarded as criminal

offences and only invite penalties, not prosecution and imprisonment.

Compounding powers to RBI Less stringent & more business friendly

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RBI has a very important role. Rules, regulations and norms pertainining to several sections of the Act are laid down by RBI, in consultation with Central Government.

GoI has established the Directorate of Enforcement (ED) for investigating and enforcing the provisions of the Act. The ED is under administrative control of Ministry of Finance.

This Act extends to the whole of India and will also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India.

FEMA: Administration & Jurisdiction

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SECTION 3 - Prohibits dealings in foreign exchange except through an authorised person I.e an authorised dealer, money changer, off shore banking unit or any other person being authorized to deal in foreign exchange or foreign securities.

SECTION 4 - restrains any person resident in India from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property situated outside India except as specifically provided in the Act.

SECTION 6 - deals with capital account transactions.

SECTION 7 - deals with export of goods and services

Broad Scheme of FEMA

SECTIONS 13 and 15 - of the Act with penalties and enforcement of the orders of Adjudicating Authority

SECTION 36 to 37 - pertains to the establishment of Directorate of Enforcement and the powers to investigate the violation of any provisions of Act

Invisibles

TourTravelRemittanceGiftProfit/Div/int

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Current Account Capital Account

Trade

Exports Imports

FDI Portfolio

Foreign IndianSource Source(FII) (GDR/ADR)

Loan

(Govt/Pvt(ECB)

Fcy A/CRI & NRI

FOREIGN EXCHANGE TRANSACTIONS

Capital Account TransactionsCapital Account Transactions

Current Account TransactionsCurrent Account Transactions

Capital Account Transactions (By a person resident in Capital Account Transactions (By a person resident in

India)India)

1. Investment in foreign securities2. Loan raised in foreign currency in India or abroad3. Acquisition or transfer of immovable property

outside India.4. Guarantees issued in favour of a person resident

outside India5. Export, import or holding of currency or currency

notes6. Loans and overdrafts from a person resident

outside India;7. Maintenance of foreign currency accounts in India

and outside India8. Insurance policy from an insurance company outside

India9. Remittance of capital assets outside India10. Sale and purchase of foreign exchange derivatives

in India and abroad and commodity derivatives abroad

Two types of prohibitions

General ProhibitionsGeneral Prohibitions

A person shall not buy / sell foreign exchange to an authorised person for any capital account transactions.

Special ProhibitionsSpecial Prohibitions

A non resident person shall not make investment in India which is engaged in,

- the business of chit funds- as nidhi company- in agricultural or plantation activities- in real estate business or construction of

farm houses- in trading in Transferable Development

Rights (TDRs)

On capital account transactions

Current Account TransactionsCurrent Account Transactions

A transaction other than a capital account transaction also includes,1. payments due in connection with

- foreign trade- other current business or services, - Short term banking and credit facilities in ordinary course of business.

2. payments due as- interest on loans- Net income from investments- remittances for living expenses of parents, spouse and children residing abroad- expenses in connection with foreign travel, education and medical care of parents, spouse and children

Foreign Exchange Management (current account Foreign Exchange Management (current account transactions) rules, 2000transactions) rules, 2000

The Classification of current account transactions which are,

- Totally prohibited

- Permitted, subject to prior approval of Govt.

- Permitted, subject to prior approval of RBI

Exhaustive List- Authorised dealers are free to release

foreign exchange upon the satisfaction that the transactions will not involve / designed for violation of the act.

On current account transactions

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Schedule I - Expressly ProhibitedSchedule I - Expressly Prohibited Remittance out of lottery winnings

Remittance of income from racing/riding or any hobby Remittance for purchase of banned products

Payment of commission on exports made towards investment in JV / WOS abroad of Indian companies

Payment related to callback services of telephones

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 tobaco.

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Schedule II -By ADs on approval from GoISchedule II -By ADs on approval from GoIRemittances which need prior approval

from the dealing ministry / department of GOI and permitted up to the amounts as mentioned in the approval letter –

Cultural toursAdvertisement in foreign print media , Freight of vessel charted by a PSU , Payment for import by a Govt, dept. 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.

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Schedule III-RBI approval if limits exceed Schedule III-RBI approval if limits exceed

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

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LiLimits upto which ADs can release Foreign Exchange mits upto which ADs can release Foreign Exchange

Sl Sl nono TransactionTransaction Limit in US $Limit in US $

11 Private visitPrivate visit USD 10,000 USD 10,000 per financial yearper financial year

22 Business Business travel, travel, Conference, Conference, TrainingTraining

USD 25,000 USD 25,000 per tripper trip

33 Medical Medical treatmenttreatment

USD 100,000 USD 100,000 or its equivalent on self or its equivalent on self declaration basis declaration basis

44 Higher Higher studiesstudies

USD 1,00,000USD 1,00,000 per academic year per academic year

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Sl.Sl.nono..

TransactionTransaction LimitLimit

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EmploymentEmployment Upto Upto USD 1,00,000USD 1,00,000

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EmigrationEmigration Upto Upto USD 1,00,000 USD 1,00,000

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Gift/donationGift/donation USD 5,000 USD 5,000 per remitter/donor p.a. per remitter/donor p.a.

88 Maintenance of Maintenance of close relatives close relatives abroad abroad

USD 1,00,000 USD 1,00,000 per recipient per recipient

99 Cultural Cultural as sanctioned by GoIas sanctioned by GoI

1010 LRSLRS USD 2,00,000USD 2,00,000 per financial year per financial year

LiLimits upto which ADs can release Foreign Exchange mits upto which ADs can release Foreign Exchange

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Release of Foreign Currency - RestrictionsRelease 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 $2,000.

Balance amount in the form of traveller’s cheque or banker’s draft.

Exceptions:

Travellers proceeding to Iraq and Libya - not exceeding $5,000 or its equivalent and travellers proceeding to the Iran, Russia and other Republics of Commonwealth of Independent States.

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Liberalised Remittance Scheme of $200,000Liberalised Remittance Scheme of $200,000

Facility extended to all resident individuals freely remit upto $200,000 p.a. for any permissible current or capital

account transaction or a combination of both. Not available for purposes specifically prohibited (Sch I) or GOI (Sch 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. 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 (website site www.fatf-gafi.org).

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Case Studies

Mr. Aarush goes abroad to take up employment.  Mr. Aarush, a tourist comes to India with a definite plan for returning after two years. 

Mr. Aarush comes to India for family marriage etc. Then some other cause prevents him from returning & continues to stay in India for more than 6 months.

Resident definition - SimplifiedResident definition - SimplifiedOn the first day itself he becomes a non-resident. Non-resident . 

If he has no employment and no business in India; and he has substantial employment or business abroad plus house / office etc. abroad; he will be able to establish that he is still, a non-resident.

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Resident Going Abroad- Indian CurrencyResident 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 `. 5,000/ - per person.

They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

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Utilisation of forexUtilisation 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 $2000 in currency notes/TCs.

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.

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Residents coming to India from broadResidents coming to India from broad

regarding Indian Currency - can bring in with him(a) up to `. 5,000 from any country other than Nepal or

Bhutan, and (b) any amount in denomination not exceeding Rs.100

from Nepal or Bhutan.

Foreign Exchange- can bring without any limit. 1. If the aggregate value of the foreign exchange in the

form of currency notes, bank notes or TCs brought in exceeds $ 10,000/- or its equivalent and/or

2. the value of foreign currency exceeds $5,000/- or its equivalent,

3. To be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

FACILITIES FOR NON-RESIDENT INDIANS(NRI)/

PERSON OF INDIAN ORIGIN(PIO)

DefinitionDefinition Non-Resident Indian (NRI):

is a person  resident outside India who is a citizen of India or is a person of Indian origin .

(defined in Regulation 2 of FEMA Notification No.5 dated May 3, 2000)

Person of Indian Origin (PIO) :

(defined in Regulation 2 of FEMA)

is a citizen of any country other than Bangladesh or Pakistan, if

(a) he at any time held Indian passport; or

(b) he or either of his parents or any of his grand-parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 or

(c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b) above.

Accounts and Deposits-NRIAccounts and Deposits-NRI

Non-Resident (External) Rupee (NRE) Accounts

Foreign Currency (Non-Resident) Account (Banks) Scheme FCNR(B) Account

NRO Accounts NRO/NRE/FCNR accounts can be maintained

with ADs. Also certain co-operative banks and RRBs have

been authorised.

Non Resident AccountsNon Resident Accounts

• NRE /NRO A/c.- Indian Rupee

type: Savings, Current & Recurring, Fixed deposits

FCNR (B) A/c. – Foreign currency In designated currencies-

USD, Pound Sterling, Euro, JY, AD, CDType: Only Term Deposit

Restriction Individuals / entities of Bangladesh / Pakistan

nationality / ownership require prior approval of RBI.

Non Resident AccountsNon Resident Accounts

NRO A/c:- ◦ Any person resident outside India other than

those resident in Nepal/Bhutan can open an NRO a/c. with an AD for the purpose of putting through bonafide transcations in Rupees.

◦ POA cannot open any a/c. on behalf of the Non-resident.

◦ Individuals / entities of Bangladesh / Pakistan nationality / ownership require prior approval of RBI.

Remittance Facilities for NRI/PIORemittance Facilities for NRI/PIO

Remittance of Rent, Dividend, Pension, Interest etc.

of NRI/PIO (even those who do not maintain an NRO account) is freely allowed on the basis of

◦ appropriate certification by a CA that the amount proposed to be remitted is eligible for remittance

◦ and that applicable taxes have been paid/provided for.

NRI/PIO have the option to credit the current income to their NRE (rupee) account provided

◦ the AD is satisfied that the credit represents current income of the Non resident account holder and income tax thereon has been deducted / provided for.

Remittance of assets by NRI/PIORemittance of assets by NRI/PIO

remit an amount upto USD 1 million per financial year, out of the balances held in his NRO account/sale proceeds of assets (inclusive of assets acquired by way of inheritance or settlement) for all bona fide purposes, to the satisfaction of the AD bank, ◦ on production of an undertaking by the remitter◦ certificate by CA in the formats prescribed by CBDT

vide circular No.10/2002 dated October 09, 2002.◦ remit sale proceeds immovable property purchased by

him out of Rupee funds ( as a person in India) without any lock in period subject to-

◦ submit documentary evidence in support of inheritance or legacy of assets

◦ An undertaking by the remitter◦ Certificate by CA in the prescribed format

Restriction on Remittance FacilityRestriction on Remittance Facility

The remittance facility in respect of sale proceeds of immovable property is not available to citizens of -◦ Pakistan, Bangladesh, Sri Lanka, China,

Afghanistan, Iran, Nepal and BhutanThe facility of remittance of sale proceeds of

other financial assets is not available to citizens of ◦ Pakistan, Bangladesh, Nepal and Bhutan

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Exemptions from Declaration under Regulation 4Exemptions from Declaration under Regulation 4

13 items exempted under regulation 4 of FEMA 23.

A few such cases are as under;

Trade samples of goods and publicity material supplied free of payment

Personal effects of travellers , whether accompanied or unaccompanied;

Goods or software accompanied by a declaration by the exporter that they are not more than USD 25000 in value

By way of gift of goods accompanied by a declaration by the exporter that they are not more than five lakh rupees in value etc

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GR Approval for Trade Fair/Exhibitions abroadGR Approval for Trade Fair/Exhibitions abroad

Firms / Companies and other organisations take/export goods for exhibition outside India without the prior approval of the RBI.

Unsold exhibit items may be sold outside the exhibition/trade fair in the same country or in a third country.

Such sales at discounted value are also permissible.

It would also be permissible to `gift' unsold goods up to the value of $5,000 per exporter, per exhibition/trade fair.

AD Banks may approve GR Form of export items for display or display-cum-sale in trade fairs/exhibitions outside India subject to conditions

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EXPORT

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Grant of GR waiver Grant of GR waiver

AD banks may consider request from exporters for granting GR waiver as per below for export promotion:

◦ Upto 2% of average annual exports of applicant during preceding three financial years subject to ceiling of Rs. 5 lakhs.

◦ For Status Holder Exporter present limit is 2% of average annual exports realization of applicant during preceding three licensing years or Rs. 10 lakhs whichever is higher.

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GR approval for Export of Goods for re-imports GR approval for Export of Goods for re-imports

AD banks may consider request from exporters for granting GR approval in cases where goods are being exported for re-import after repairs / maintenance / testing / calibration etc. subject to the condition that the exporter shall;

◦ produce relative Bill of Entry within one month of re-import of the exported item from India.

◦ Where the goods being exported for testing are destroyed during testing, AD banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing, in lieu of Bill of Entry for import.

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Reduction in export Value – Damages etc. Reduction in export Value – Damages etc. ADs can allow reduction in value subject to the

following conditions:

a. The reduction does not exceed 25% of invoice value

b. It does not relate to export of commodities subject to floor price stipulations

b. The exporter is not on the exporters’ caution list of Reserve Bank, and

c. The exporter is advised to surrender proportionate export incentives availed of, if any.

d. In the case of exporters who have been in the export business for more than 3 Yrs, no such ceiling subject to the above conditions as also subject to their track record being satisfactory, i.e., the export outstandings do not exceed 5% of the average annual export realisation during the preceding 3 financial years.

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Extension of time & Self write off exportersExtension of time & Self write off exporters

All exporters have been allowed to self write off (including reduction in invoice value) outstanding export dues and extend the period of realisation, provided;

The aggregate value of such export bills written-off does not exceed 10% of the export proceeds due during the financial year.

Such export bills are not a subject of investigation by Enforcement Directorate / CBI.

Exporters dealing with more than one AD Banks can avail of this facility.

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Extension of Time by AD Bank Extension of Time by AD Bank

Reserve Bank of India has permitted the AD Banks to extend the period of realisation of export proceeds beyond the prescribed period from the date of export, up to a period of 6 months.

While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed $1Mn or 10% of the average export realisations during the preceding 3 financial years, whichever is higher

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Methods of PaymentMethods of Payment

payment must be received through the medium of an authorised dealer

export proceeds - in the form of bank draft, pay order, banker's cheque, personal cheque, foreign currency notes, foreign currency travellers' cheques, etc.

Payment made by Credit card – decleration for receipt of foreign exchange

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IMPORT

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Advance RemittanceAdvance Remittance

If the amount of advance remittance exceeds USD 100,000 or its equivalent

An unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank of repute situated outside India

If the importer unable to obtain bank guarantee from overseas suppliers and the Authorised Dealer is satisfied about the track record and bonafides of the importer the requirement of the bank guarantee/ standby Letter of Credit may not be insisted upon for advance remittances upto USD 5,000,000

Authorised Dealers may frame their own internal guidelines to as per a suitable policy framed by the bank's Board of Directors.

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Non Physical Imports Non Physical Imports

Where imports are made in non-physical form, ◦ i.e., software or data through internet /

datacom channels and drawings and designs through e-mail/fax,

a certificate from a Chartered Accountant that the software / data / drawing/ design has been received by the importer, may be obtained.

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Receipt of import documents by the importer Receipt of import documents by the importer directly from overseas suppliersdirectly from overseas suppliers

1. Import documents should be received from the banker of the supplier by the banker of the importer in India.

2. AD bank should not make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases:

i. Where the value of import bill does not exceed $300,000.

ii. Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.

iii. Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy.

iv. Import bills received by all limited companies.

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Authority

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Directorate of Enforcement (ED) Directorate of Enforcement (ED)

ED may invstigate following transaction to prevent leakage of foreign exchange

1) Remittances of Indians abroad otherwise than

through normal banking channels.2) Acquisition of foreign currency illegally by person in India.3) Non-repatriation of export proceeds.4) Unauthorised maintenance of accounts in foreign countries.5) Under-invoicing and over-invoicing.6)  Siphoning off of foreign exchange against fictitious and

bogus imports land by.7) Illegal acquisition of foreign exchange through Hawala.

PENALTIES:

If any person contravenes any provision of this Act he shall be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to Rs. 200, 000 where the amount is not quantifiable & where such contravention is a continuing one, further penalty of Rs. 5,000 per day.

Fails to make full payment of the penalty within a period of 90 days, he shall be liable to civil imprisonment

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Hawala Hawala TransactionsTransactions

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3(d)(FEMA) of FEMA is difficult to interpret and understand. Following 3(d)(FEMA) of FEMA is difficult to interpret and understand. Following example will explain one of the several forms of hawala transactions and example will explain one of the several forms of hawala transactions and make it easier to understand Sec 3(d).make it easier to understand Sec 3(d).

Mr. LNRI employed in London.

HDL Hawala dealer operating in London.

   

Mr. FFather of Mr. L Staying in India.

HCBritish Hawala dealer’s counter part in India.

Assume that Mr. F is an Indian resident, settled in India. His son Mr. L has gone to London for employment.

He has become a non-resident of India (NRI). Mr. L wants to send a regular monthly remittance to his father in India.

If he sends pounds 100 through the banking channel, his father will get Rs. 7,000 in India.

If he sends pounds 100 through the hawala channel, his father will get Rs. 7,700. Hawala premium is assumed @ 10%.

 

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What transactions actually take place !What transactions actually take place ! •Mr. L. will pay pounds 100 to Mr. HDL in London.

•As a compensatory payment, on the instructions of Mr. HDL;

•Mr. HC in India will pay ` 7,700 to Mr. F.

•The clearing between HDL & HC is compensated by transactions with the smugglers.

 •These facts reduced to legal language would mean - i. HC, an Indian resident, makes a payment of Indian rupee, within

India, to Mr. F, an Indian resident.

ii. in compensation of ;

iii. Payment in U.K., by Mr. L a British resident; of British pounds to Mr. HDL another British resident.

Transactions under clauses (i) and (iii) above are independently, perfectly legal transactions. No one can prohibit them.

 The fact that they are compensatory payments makes them illegal. This is the essence of S.3(d) of FEMA.

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FEMA–A welcome change but with loopholesFEMA–A welcome change but with loopholes

Loophole 1:Loophole 1: Under FEMA, the export proceeds are required to be realised Under FEMA, the export proceeds are required to be realised within 6 months from the date of shipment. But if an exporter is not able to within 6 months from the date of shipment. But if an exporter is not able to the bill within a period of 21 days it becomes overdue and the banks charge an the bill within a period of 21 days it becomes overdue and the banks charge an @ minimum 25% p.a. on overdue bills, the limit of 21 days for realizing the bills @ minimum 25% p.a. on overdue bills, the limit of 21 days for realizing the bills still remains an irritant for the exporters. still remains an irritant for the exporters.

"If the exports are via containers, first it takes seven to ten days to reach the port "If the exports are via containers, first it takes seven to ten days to reach the port and further loading also takes time. and further loading also takes time. The 21 days is too short a periodThe 21 days is too short a period“ “

Loophole 2:Loophole 2: FEMA has another provision, which while giving relief to the FEMA has another provision, which while giving relief to the exporters, leaves much to be desired. RBI has now permitted Authorised Dealers exporters, leaves much to be desired. RBI has now permitted Authorised Dealers and Authorised Persons (APs) to write off up to 10% of export bills case an and Authorised Persons (APs) to write off up to 10% of export bills case an exporter exporter

fails to get full payment. fails to get full payment.

ADs/APs should have the authority to write off export outstandings that are over ADs/APs should have the authority to write off export outstandings that are over 2 years old 2 years old without having to refering to RBIwithout having to refering to RBI and to grant time-extension beyond 6 and to grant time-extension beyond 6 months for the realization of export proceeds.months for the realization of export proceeds.

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FEMA–A welcome change but with loopholesFEMA–A welcome change but with loopholes

Loophole 3: Loophole 3: FEMA FEMA does not allow exporters to take insurancedoes not allow exporters to take insurance from a foreign from a foreign company. This requires prior clearances that are not easily given. company. This requires prior clearances that are not easily given.

Loophole 4: Loophole 4: FEMA FEMA does not recognise a partnershipdoes not recognise a partnership firm for purpose of joint firm for purpose of joint ventures with overseas firms, which they say, is unfortunate, as most of the small ventures with overseas firms, which they say, is unfortunate, as most of the small and medium exporters in India are partnerships. and medium exporters in India are partnerships.

Loophole 5: Loophole 5: FEMA defines a 'resident' as a person residing in India for more FEMA defines a 'resident' as a person residing in India for more 182 days during the course of proceeding financial year. 182 days during the course of proceeding financial year.

The law now gives full freedom to a person residing in India to 'hold or own or The law now gives full freedom to a person residing in India to 'hold or own or transfer any foreign security or immovable property situated outside India and transfer any foreign security or immovable property situated outside India and when he/she was a resident there'. when he/she was a resident there'.

What this means, in effect, is that now any Indian by going in and out of India What this means, in effect, is that now any Indian by going in and out of India even for as short a period as one month can acquire assets there, come back and even for as short a period as one month can acquire assets there, come back and own and deal in those assets. own and deal in those assets.

""This provision could prove to be a serious loophole as now floodgates have been This provision could prove to be a serious loophole as now floodgates have been opened for the wealthy Indians to park their assets abroad”opened for the wealthy Indians to park their assets abroad”

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Case StudiesCase Studies

Case Studies

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Case Studies

The Enforcement Directorate (ED) has found potential foreign exchange law violations, in Jaipur IPL Pvt Ltd (JIPL), the company that owns the Rajasthan Royals. The ED, suspected wrongdoing in incorporation, auction and purchase with regard to the team that's partly owned by London businessman Raj Kundra.

The firm was incorporated long after the auction of team ownership, and its prior dealings were done by another company and had no approval from Foreign Investment Promotion Board (FIPB).

The valuation of shares of JIPL, violates norms laid down in FEMA

Irregularities and suspected contraventions under FEMA have been noticed consequent to investigations conducted so far by the Directorate of Enforcement.

ED officials are separately chasing foreign exchange law violations in a maze of transactions linking tax havens and mysterious stakeholders in IPL teams.

JIPL has received foreign remittances in violation of norms.

According to FEMA rules, a person living outside the country can remit money to a company against shares only by the normal banking channel.

JIPL had sought to issue shares to EM Sporting Holding Ltd, a Maritius-based company, against remittances from ND Investments LLP and Manoj Badale of the UK. It had approached the FIPB for permission to give foreign equity to EM Sporting Holding Ltd.

Rajasthan Royals broke forex rules

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Case Studies

Kites, a romantic-thriller starring Hrithik Roshan and Mexican actress Barbara Mori, was shot in Kites, a romantic-thriller starring Hrithik Roshan and Mexican actress Barbara Mori, was shot in Maldives, Mexico and the US. ED is now looking into allegations that Roshan used foreign exchange Maldives, Mexico and the US. ED is now looking into allegations that Roshan used foreign exchange meant for production work to meet personal expenses.meant for production work to meet personal expenses.

The other charge against Roshan is that he carried junk film reels from India for the shoot but used The other charge against Roshan is that he carried junk film reels from India for the shoot but used fresh reels bought in the US. This way, he evaded duty on the new film reels when he returned to fresh reels bought in the US. This way, he evaded duty on the new film reels when he returned to India. According to a senior ED officer, Roshan bought film reels worth Rs 50 lakh in the US.India. According to a senior ED officer, Roshan bought film reels worth Rs 50 lakh in the US.

Roshan was summoned to the ED last week and his statement was recorded. However, when Roshan was summoned to the ED last week and his statement was recorded. However, when Mumbai Mirror contacted Roshan, he denied visiting the ED office. He also said that there was no Mumbai Mirror contacted Roshan, he denied visiting the ED office. He also said that there was no case against him with the ED.case against him with the ED.

According to ED officials, investigations against Roshan began in May this year after a According to ED officials, investigations against Roshan began in May this year after a representative of Spectrum Entertainment, a US-based company, sent a complaint to the agency representative of Spectrum Entertainment, a US-based company, sent a complaint to the agency saying that Roshan had paid them just $ 4.3 million against pending bills of $ 5.9 million. Spectrum saying that Roshan had paid them just $ 4.3 million against pending bills of $ 5.9 million. Spectrum Entertainment was hired by Roshan to manage all outdoor shoots of Kites in the US.Entertainment was hired by Roshan to manage all outdoor shoots of Kites in the US.

Spectrum Entertainment alleged that Roshan drew Rs 9 lakh from production expenses and spent Spectrum Entertainment alleged that Roshan drew Rs 9 lakh from production expenses and spent the money for his personal use. “The complainant has furnished all the challans which clearly the money for his personal use. “The complainant has furnished all the challans which clearly indicate that he (Roshan) withdrew the cash from the production account,” an ED officer, who did indicate that he (Roshan) withdrew the cash from the production account,” an ED officer, who did not wish to be identified, said. All these transactions took place between June 2008 and September not wish to be identified, said. All these transactions took place between June 2008 and September 2008.2008.

When Spectrum Entertainment noticed discrepancies in transfer of funds, it terminated the contract When Spectrum Entertainment noticed discrepancies in transfer of funds, it terminated the contract with Roshan, forcing him to hire the services of Bollywood Hollywood, another entertainment outfit, with Roshan, forcing him to hire the services of Bollywood Hollywood, another entertainment outfit, for the film's outdoor shoots.for the film's outdoor shoots.

According to FEMA, an individual can carry up to $ 10,000 on foreign visits – $ 5000 in cash and the According to FEMA, an individual can carry up to $ 10,000 on foreign visits – $ 5000 in cash and the rest in travel cheques. However, it's possible to get sanction for bigger amounts if one is going rest in travel cheques. However, it's possible to get sanction for bigger amounts if one is going abroad to shoot a film. However, this money cannot be used for any other purpose.abroad to shoot a film. However, this money cannot be used for any other purpose.

FEMA Violations During Kites Shoot

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