presentation by ca. sudha g. bhushan, taxpert professionals
TRANSCRIPT
Deposit and Remittances Foreign Exchange Management Act, 1999
Ghaziabad Branch || CIRC
Institute of Chartered Accountants of India
03rd June 2016
Presentation by: CA. Sudha G. Bhushan
Associate Director – Taxpert Professionals
09769033172 || 07738892291
– Current and capital Account transaction
– Residential Status
– Authorities under FEMA
– Balance Sheet and FEMA
– Various Entities under FEMA
FEW BASIC CONCEPTS
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
Accounts under FEMA
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Foreign Exchange Management
(Deposit) Regulations, 2016
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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
Account By Person resident outside India
Foreign Exchange Management
(Deposit) Regulations, 2016
By Person resident outside India
FCNR(B) account
NRE account
NRO account
Special Non-Resident Rupee Account (SNRR account)
Escrow Account
Deposits by companies
Other
Unincorporated joint ventures (UJV)
shipping or airline company incorporated outside India
For Adjustment in export and import value
Foreign Exchange Management
(Deposit) Regulations, 2016
• Regulations – FEMA 5/2000-RB on Foreign
Exchange Management (Deposit) Regulations,
2000 amended from time to time.
REGULATORY FRAMEWORK
NRE A/C
SCHEDULE 1
FCNR - B A/c
SCHEDULE 2
NRO A/c
SCHEDULE 3
SNRR A/c Schedule 4
Escrow A/c
NON-RESIDENT (EXTERNAL) ACCOUNT
SCHEME (‘NRE ACCOUNT’)
NRIs and PIOs -eligible to open
Rupee Denominated
Savings, Current or fixed deposit
Can be opened by remittance of funds in free
foreign exchange.
Principal and interest both -
Repatriable
Interest lying to the credit of NRE
accounts - exempt from tax
Credits Debit
Inward remittance to India in permitted currency proceeds of account payee cheques, demand
drafts / bankers' cheques, issued againstencashment of foreign currency
transfers from other NRE / FCNR accounts sale proceeds of FDI investments interest accruing on the funds held in such
accounts interest on Government securities/dividends on
units of mutual funds purchased by debit to theNRE/FCNR(B) account of the holder, certain typesof refunds, etc.
local disbursements transfer to other NRE / FCNR accounts of person
eligible to open such accounts, remittance outside India, investments in shares / securities/commercial
paper of an Indian company, etc.
PERMISSIBLE DEBITS/CREDITS
NON RESIDENT (ORDINARY) RUPEE
ACCOUNT
NRIs and PIOsRupee
DenominatedSavings, Current or
Fixed Deposit
Can be opened jointly with residents
NON –Repatriable*
Interest lying to the credit of NRO
accounts is taxable *repatriable subject to conditions
Credits Debit
Proceeds of remittances from outside India through normal banking channels received in any permitted currency.
Any foreign currency, which is freely convertible, tendered by the account holder during his temporary visit to India.
Transfers from rupee accounts of non-resident banks. Legitimate dues in India of the account holder. This
includes current income like rent, dividend, pension, interest, etc.
Sale proceeds of assets including immovable property acquired out of rupee / foreign currency funds or by way of legacy /inheritance.
Resident individual may make a rupee gift to a NRI/PIO who is a close relative of the resident individual [close relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer. The amount shall be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c.
All local payments in rupees including payments for investments in India subject to compliance with the relevant regulations made by the Reserve Bank.
Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder.
Remittance up to USD one million, per financial year (April- March), for all bona fide purposes, to the satisfaction of the Authorised Dealer bank.
Transfer to NRE account of NRI within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable
PERMISSIBLE DEBITS/CREDITS
FOREIGN CURRENCY NON RESIDENT
(BANKS) ACCOUNT
NRIs and PIOs are eligible to open
Denominated in Foreign Currency
Only in the form of term deposit
Accounts can be opened by remittance
of funds in free foreign exchange.
RepatriableRisk of foreign
exchange fluctuations borne by Bank
Credits Debit
Inward remittance to India in permitted currency proceeds of account payee cheques, demand
drafts / bankers' cheques, issued againstencashment of foreign currency
transfers from other NRE / FCNR accounts sale proceeds of FDI investments interest accruing on the funds held in such
accounts interest on Government securities/dividends on
units of mutual funds purchased by debit to theNRE/FCNR(B) account of the holder, certain typesof refunds, etc.
local disbursements transfer to other NRE / FCNR accounts of person
eligible to open such accounts, remittance outside India, investments in shares / securities/commercial
paper of an Indian company, etc.
PERMISSIBLE DEBITS/CREDITS – FCNR
(B) A/C
Any person resident outside India having business interest in
India
Non Interest Bearing
Debits and credits specific to the
business
NEW Schedule 4 RepatriableTransactions subject
to Taxes
Special Non-Resident Rupee Account -
SNRR account
Non resident or Resident together with non resident
Foreign Inward remittance through
Normal Banking channel
Operational for 6 months
NEW Schedule 5 Non interest bearing
Repatriable
(exchange risk to be born by Non
resident)
ESCROW ACCOUNT
LOAN AGAINST THE DEPOSIT
LOAN AGAINST DEPOSIT IN NRE A/C
loan
In India
In INR
To the account Holder
permitted
To third party Permitted
In Foreign Currency
To the account holder
Permitted
To third party Permitted
Outside India
To the account holder
Permitted
To third party Permitted
LOAN AGAINST DEPOSIT IN FCNR(B)
loan
In India
In INR
To the account Holder permitted
To third party Permitted
In Foreign Currency
To the account holder Permitted
To third party Permitted
Outside India
To the account holder Permitted
To third party Permitted
LOAN AGAINST DEPOSIT IN NRO A/C
loan
In India
In INR
To the account HolderPermitted subject
to extant Rules
To third partyPermitted 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
• 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;
PURPOSE OF LOAN – NRO ACCOUNT
* 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.
A Comparison
NRE Account is meant for foreign exchange earned outside India and transferred to India
NRO Account are meant to keep the money earned in India before or after becoming an NRI
Bank Accounts by Residents
• Save as otherwise provided in the Act or rules or regulations made
thereunder, no person resident in India shall open or hold or maintain a
Foreign Currency Account:
• Provided that a Foreign Currency Account held or maintained before the
commencement of these Regulations by a person resident in India with
special or general permission of the Reserve Bank, shall be deemed to be
held or maintained under these Regulations
• Provided further that the Reserve Bank, may on an application made to it,
permit a person resident in India to open or hold or maintain a Foreign
Currency Account, subject to such terms and conditions as may be
considered necessary. [RBI Notification No.FEMA 10 /2000-RB dated
3rd May 2000]
REGULATION
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
By Resident in India
Foreign Exchange Management
(Deposit) Regulations, 2016
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Accounts
Foreign Exchange Management (Foreign currency accounts
by a person resident in India 2016
Foreign Currency account in India
By Resident Individuals
Exchange Earners’ Foreign Currency (EEFC) Account
Resident Foreign Currency Account
Resident Foreign Currency (Domestic) Account
By other
A Unit in a Special Economic Zone (SEZ)
Diamond Dollar Accounts (DDAs)
Exporters
Other cases
Indian agent of a shipping or an airline company incorporated
outside India
ship-manning/ crew managing agencies
Project Offices
Indian company receiving foreign investment
organisers of international seminars etc
Foreign Currency Account outside India
Others
office/ branch/ representative outside India
Exporters
External Commercial Borrowings (ECB)
For making Overseas Direct Investment
shipping or airline company incorporated in India
Life Insurance Corporation of India or General Insurance Corporation of India
Exhibition/ Trade fair
Resident Individual
On a visit to a foreign country
Abroad for studies
LRS
Salary
Foreign Exchange Management (Foreign currency accounts by a
person resident in India 2016
RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT
RFRESIDENT FOREIGN
CURRENCY ACCOUNT
EXCHANGE EARNERS FOREIGN
CURRENCY ACCOUNTS
Type of Accounts
All categories of resident foreign exchange earners
can credit up to 100 per cent of their foreign exchange earnings to their EEFC Account with an
Authorised Dealer in India.
Funds held in EEFC account can be utilised for all permissible current account transactions and also for approved capital
account transactions
The account is maintained in the form of a non-interest bearing current account
EXCHANGE EARNERS FOREIGN
CURRENCY ACCOUNTS
Inward remittance through normal banking channels, other than remittances received on
account of foreign currency loan or investment received from abroad or received for meeting
specific obligations by the account holder;
Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in(a) Export Processing Zone or
(b) Software Technology Park or
(c) Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area;
Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods
to a unit in the Special Economic Zone (SEZ);
Payment received by an exporter from an account maintained with an authorised dealer for the
purpose of counter trade.
Advance remittance received by an exporter towards export of goods or services;
Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and
similar other earnings received by a professional by rendering services in his individual
capacity;
Re-credit of unutilised foreign currency earlier withdrawn from the account;
Amount representing repayment by the account holder's importer customer, of loan/advances
granted, to the exporter holding such account etc.
PERMISSIBLE CREDITS
Payment outside India towards a permissible current account transaction [in
accordance to the provisions of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000]
Permissible capital account transaction [in accordance to the Foreign Exchange
Management (Permissible Capital Account Transactions) Regulations, 2000].
Payment in foreign exchange towards cost of goods purchased from a 100 percent
Export Oriented Unit or a Unit in(a) Export Processing Zone or
(b) Software Technology Park or
(c) Electronic Hardware Technology Park
Payment of customs duty in accordance with the provisions of the Foreign Trade Policy
of the Central Government for the time being in force.
Trade related loans/advances, extended by an exporter holding such account to his
importer customer outside India, subject to compliance with the Foreign Exchange
Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.
Permissible debits
Current or Savings or Term deposit accounts
A person resident in India
Free from all restrictions regarding utilisation of foreign
currency
opened to keep foreign currency assets which
were held outside India at the time of return
RFC Account
Permissible credits :
The foreign exchange received as:
pension of any other superannuation or other monetary benefits from the
employer outside India;
realised on conversion of the assets acquired, held or owned by such
person when he was resident in India or inherited from a person who was
resident in India
received or acquired as gift or inheritance from a person who was resident
outside India
RFC ACCOUNT
Permissible debits to the RFC account
The funds in RFC account are free from all restrictions regarding
utilization of foreign currency balances including any restriction on
investment outside India.
Foreign securities can also be acquired from RFC account.
The restriction of taking prior approval of government or prior
approval of RBI is not applicable to transactions undertaken out of
RFC account *
*However, the prohibited transactions as specified in Rule 3 of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 cannot be undertaken at all.
Regulations 5A of Foreign Exchange Management
(Foreign Currency Accounts by a Person Resident in India) Regulations, 2000
Resident Individual may open, hold and maintain
Current account
Does not bear any interest
No ceiling on the balances in the account
RESIDENT FOREIGN CURRENCY
(DOMESTIC) ACCOUNT
Permissible CreditsThe account can be opened out of foreign exchange acquired in the form of currency notes, Bank
notes and travellers cheques, from any of the sources like:
payment for services rendered abroad;
as honorarium, gift, services rendered;
in settlement of any lawful obligation from any person not resident in India;
proceeds of export of goods and/or services, royalty, honorarium, etc.;
gifts received from close relatives (as defined in the Companies Act);
disinvestment proceeds received by resident on conversion of shares to ADRs/GDRs
proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency
from an insurance company in India permitted to undertake life insurance business by the
Insurance Regulatory and Development Authority; may also be credited to this account.
Permissible Debits• The account may be debited for payments made towards permissible current and capital account
transactions. At the request of account holder, on change of his status of resident to non resident
the balance in his account can be credited to NRE/FCNR (B) account.
RESIDENT FOREIGN CURRENCY
(DOMESTIC) ACCOUNT
REMITTANCES
Remittance
For Capital Account Transactions
Schedule I
Person resident In India
Schedule II
Person resident outside India
For Current Account Transactions
Schedule I
Prohibited
Schedule II
approval from the GOI
Schedule III
Approval from RBI
Liberalised Remittance Scheme
USD 250,000 per F.Y
Subsumes limits under CAT
Permissible capital Account transactions
Permissible current a/c
transactions
by CA. Sudha G. Bhushan
REM
ITTA
NC
ES
Non Resident Indian
From the funds in NRE account
Freely repatriable on request
Transfer from NRO account or Current Income subject
to applicable Taxes
From the funds in NRO account
Under Certificate from CA
Form 15CA/15CB
Remittance limited to USD 1 million per financial year
RESIDENT
In GeneralAs per FEM (Current
Account Transactions) Rules,2000
Schedule III of CA Rules specifies the limits of
remittance
Under Liberalisedremittance scheme
USD 2,50,000* per financial Year (April – March)
LRS facility subsumes limits specified in Sche III of CA
Rules
Foreign NationalFrom the funds in NRO
accountRetiring from
employment/inheritanceRemittance limited to USD 1
million per financial year
Taxpert Professionals Private Limited – Mumbai | New Delhi| Kolkata | Bangalore| Bhubaneswar
THANK YOU
Please feel free to call/mail me for further clarification.
CA.Sudha G. Bhushan
Taxpert Professionals Private Limited
Tel: +91 9769033172 || 07738892291
E-mail : [email protected]
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