Deposit and Remittances Foreign Exchange Management Act, 1999

Transcription

1 Deposit and Remittances Foreign Exchange Management Act, 1999 Ghaziabad Branch CIRC Institute of Chartered Accountants of India 03 rd June 2016 Presentation by: CA. Sudha G. Bhushan Associate Director Taxpert Professionals

2 FEW BASIC CONCEPTS Current and capital Account transaction Residential Status Authorities under FEMA Balance Sheet and FEMA Various Entities under FEMA

3 Accounts under FEMA Account By Person resident in India Foreign Currency account in India Account maintained outside India By Resident Individuals By other BY Resident Individuals By Others Foreign Exchange Management (Foreign currency accounts by a person resident in India By Person resident outside India By NRI/PIOs By others Foreign Exchange Management (Deposit) Regulations, 2016

4 Account By Person resident outside India Account By person resident in India Foreign Currency account in India Account maintained outside India By Resident Individuals By other BY Resident Individuals By Others Foreign Exchange Management (Foreign currency accounts by a person resident in India By Person resident outside India By NRI/PIOs By others Foreign Exchange Management (Deposit) Regulations, 2016

5 Foreign Exchange Management (Deposit) Regulations, 2016 FCNR(B) account NRE account NRO account By Person resident outside India 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

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

7 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

8 PERMISSIBLE DEBITS/CREDITS Credits Inward remittance to India in permitted currency proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment 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 the NRE/FCNR(B) account of the holder, certain types of refunds, etc. Debit 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.

9 NON RESIDENT (ORDINARY) RUPEE ACCOUNT NRIs and PIOs Rupee Denominated Savings, Current or Fixed Deposit Can be opened jointly with residents NON Repatriable* *repatriable subject to conditions Interest lying to the credit of NRO accounts is taxable

10 PERMISSIBLE DEBITS/CREDITS Credits 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 Debit 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

11 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. Repatriable Risk of foreign exchange fluctuations borne by Bank

12 PERMISSIBLE DEBITS/CREDITS FCNR (B) A/C Credits Inward remittance to India in permitted currency proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment 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 the NRE/FCNR(B) account of the holder, certain types of refunds, etc. Debit 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.

13 Special Non-Resident Rupee Account - SNRR account Any person resident outside India having business interest in India Non Interest Bearing Debits and credits specific to the business NEW Schedule 4 Repatriable Transactions subject to Taxes

14 ESCROW 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)

15 LOAN AGAINST THE DEPOSIT

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

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

18 LOAN AGAINST DEPOSIT IN NRO A/C To the account Holder Permitted subject to extant Rules In INR To third party Permitted subject to conditions In India To the account holder Not Permitted In Foreign Currency loan To third party Not Permitted To the account holder Not permitted Outside India To third party Not Permitted

19 PURPOSE OF LOAN IN CASE OF NRE A/C AND FCNR (B) A/C To the Account holder 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 Third Party Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. Abroad Fund based and / or non-fund based facilities for bonafide purposes. *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.

20 PURPOSE OF LOAN NRO ACCOUNT To the account holder To third party Personal requirement and / or business purpose.* Personal requirement and / or business purpose* * 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. 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;

21 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

22 Bank Accounts by Residents

23 REGULATION 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]

24 Accounts By Resident in India Account By person resident in India Foreign Currency account in India Account maintained outside India By Resident Individuals By other BY Resident Individuals By Others Foreign Exchange Management (Foreign currency accounts by a person resident in India By Person resident outside India By NRI/PIOs By others Foreign Exchange Management (Deposit) Regulations, 2016

25 Foreign Exchange Management (Foreign currency accounts by a person resident in India 2016 Exchange Earners Foreign Currency (EEFC) Account By Resident Individuals Resident Foreign Currency Account Resident Foreign Currency (Domestic) Account Foreign Currency account in India A Unit in a Special Economic Zone (SEZ) By other Diamond Dollar Accounts (DDAs) Exporters Indian agent of a shipping or an airline company incorporated outside India ship-manning/ crew managing agencies Other cases Project Offices Indian company receiving foreign investment organisers of international seminars etc

26 Foreign Exchange Management (Foreign currency accounts by a person resident in India 2016 office/ branch/ representative outside India Exporters External Commercial Borrowings (ECB) Others For making Overseas Direct Investment shipping or airline company incorporated in India Foreign Currency Account outside India Life Insurance Corporation of India or General Insurance Corporation of India Exhibition/ Trade fair On a visit to a foreign country Resident Individual Abroad for studies LRS Salary

27 Type of Accounts EXCHANGE EARNERS FOREIGN CURRENCY ACCOUNTS RFRESIDENT FOREIGN CURRENCY ACCOUNT RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT

28 EXCHANGE EARNERS FOREIGN CURRENCY 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

29 PERMISSIBLE CREDITS 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.

30 Permissible debits 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.

31 RFC Account 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

32 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

33 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.

34 RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT 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

35 RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT Permissible Credits The 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.

36 REMITTANCES

37 Remittance For Current Account Transactions Liberalised Remittance Scheme Prohibited Schedule I approval from the GOI Schedule II USD 250,000 per F.Y Subsumes limits under CAT Schedule III Permissible capital Account transactions Permissible current a/c transactions Approval from RBI For Capital Account Transactions Schedule I Person resident In India Schedule II Person resident outside India by CA. Sudha G. Bhushan

38 REMITTANCES Non Resident Indian From the funds in NRE account From the funds in NRO account Freely repatriable on request Under Certificate from CA Form 15CA/15CB Transfer from NRO account or Current Income subject to applicable Taxes Remittance limited to USD 1 million per financial year RESIDENT In General Under Liberalised remittance scheme As per FEM (Current Account Transactions) Rules,2000 USD 2,50,000* per financial Year (April March) Schedule III of CA Rules specifies the limits of remittance LRS facility subsumes limits specified in Sche III of CA Rules Foreign National From the funds in NRO account Retiring from employment/inheritance Remittance limited to USD 1 million per financial year

39 THANK YOU Please feel free to call/mail me for further clarification. CA.Sudha G. Bhushan Taxpert Professionals Private Limited Tel: sudha@taxpertpro.com Visit us at: Taxpert Professionals Private Limited Mumbai New Delhi Kolkata Bangalore Bhubaneswar