FORGEIN

EXCHANGE
MANAGEMENT
ACT, 1999 -
INTRODUCTION
2
 Bare Act
 Object of the Act
 Reason for Replacement of FERA, 1973
 Comparison of FERA and FEMA
 Structure of FEMA
 Authorities Under FEMA
 Definitions
 Advance Your Knowledge
 Self Test Questions

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21 Arbitration and Conciliation

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 – From Bare Act… –

23 FEMA Act, 1999 - Introduction

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 FOREIGN EXCHANGE MANAGEMENT
ACT, 1999 - INTRODUCTION

The Foreign Exchange Management Act, 1999 (FEMA) has been introduced as a replacement for earlier
Foreign Exchange Regulation Act, 1973 (FERA). FEMA became an ACT on the 1stday of June, 2000.

APPLICABLITY
FEMA is applicable to all parts of India.
The act is also applicable to all branches, offices and agencies outside India owned or controlled by a
person who is a resident of India.

OBJECT OF THE ACT

The main objective (a) to consolidate and amend the law relating to foreign exchange.
behind the Foreign (b) to facilitate external trade and payments.
Exchange Management (c) to promote the orderly development and maintenance of foreign
Act (1999) is:- exchange market in India.

25 FEMA Act, 1999 - Introduction

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REASON FOR REPLACEMENT OF FERA, 1973
FEMA was introduced because the FERA didn’t fit in with post-liberalisation policies.
A significant change that the FEMA brought with it, was that it made all offenses regarding foreign
exchange civil offenses, as opposed to criminal offenses as dictated by FERA.
Unlike other laws where everything is permitted unless specifically prohibited, under FERA nothing was
permitted unless specifically permitted.
Hence the tenor and tone of the Act was very drastic. It provided for imprisonment of even a very minor
offence.
Under FERA, a person was presumed guilty unless he proved himself innocent whereas under other
laws, a person is presumed innocent unless he is proven guilty.
FEMA has brought a new management regime of Foreign Exchange consistent with the emerging frame
work of the World Trade Organisation (WTO).

COMPARISON OF FERA AND FEMA

S. No. FERA FEMA
1. FERA was Criminal Law FEMA is Civil Law
2. There has 81 Sections There is 49 Sections
3. Under FERA there was 3 Authorities Under FEMA there is 3 Authorities
(a) Ministry of Finance (a) Ministry of Finance
(b) Reserve Bank of India (b) Reserve Bank of India
(c) Enforcement Directorate (c) Enforcement Directorate
4. Presumption of MENS REA on Defendant No presumption of MENS REA on Defendant
5. Imprisonment and fine Only fine not imprisonment

STRUCTURE OF FEMA
FEMA, 1999 contains only basic legal framework.
Sec. 46 of FEMA authorizer Central Govt. to make Rules and
Sec. 47 authorizes RBI to make Regulations to carry out the provisions of the Act.
The legislations, rules and regulations, governing Foreign Exchange Management are as under:
(a) FEMA contains 7 Chapters divided into 49 sections of which 12 sections cover operational part and
the rest deals with contravention, penalties, adjudication, appeals, enforcement directorate, etc.
CHAPTER I – Preliminary (Section 1&2)
CHAPTER II- Regulation and Management of Foreign Exchange (Section 3 –9)
CHAPTER III – Authorised Person (Section 10 –12)
CHAPTER IV – Contravention and Penalties (Section 13-15)
CHAPTER V – Adjudication and Appeal (Section 16- 35)
CHAPTER VI – Directorate of Enforcement (Section 36-38)
CHAPTER VII- Miscellaneous (Section 39 – 49)

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FEMA,1999 (TOTAL 49 SECTIONS)

SECTION 46 SECTION 47

AUTHORISES C/G TO MAKE RULES AUTHORISES RBI TO MAKE

UNDER FEMA REGULATIONS UNDER FEMA

FEMA,1999 - ADMINISTRATION

MINISTRY OF FINANCE

RBI

ENFORCEMENT DIRECTORATE (ED) (NEW DELHI)

NEW DELHI MUMBAI KOLKATA CHENNAI CHANDIGARH

16 ZONAL OFFICE 11 SUB-ZONAL OFFICE

(JOINT DIRECTOR) (DEPUTY DIRECTOR)

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(b) Rules made by Ministry of Finance under section 46 of FEMA (Subordinate or delegated
Legislations)
(c) Regulations made by RBI under section 47 of FEMA (Subordinate or delegated Legislations)
(d) Master Direction issued by RBI on every year
(e) Foreign Direct Investment policy issued by Department of Industrial Policy and Promotion.
(f) Notifications and Circulars issued by Reserve Bank of India.

The RULES made under FEMA are as follows:

1. FEM (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000
2. FEM (Authentication of Documents) Rules, 2000
3. FEM (Current Account Transaction) Rules, 2000
4. FEM (Adjudication Proceedings and Appeal) Rules, 2000
5. FEM (Compounding Proceedings) Rules, 2000
6. FEM (Non-debt Instruments) Rules, 2019

The REGULATIONS made under FEMA are as follows:

1. FEM (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015
2. FEM (Borrowing and Lending in Rupees) Regulations, 2000
3. FEM (Borrowing or Lending in Foreign Exchange) Regulations, 2000
4. FEM (Deposit) Regulations, 2016
5. FEM (Export and Import of Currency) Regulations, 2015
6. FEM (Guarantees) Regulations, 2000
7. FEM (Acquisition and Transfer of Immovable Property in India) Regulations, 2000
8. FEM (Establishment in India of Branch office or a Project office or any other Place of
Business)Regulations, 2016
9. FEM (Export of Goods and Services) Regulations, 2015
10. FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015
11. FEM (Insurance) Regulations, 2015
12. FEM (Investment in Firm or Proprietary Concern in India) Regulations, 2000
13. FEM (Manner of Receipt and Payment) Regulations, 2016
14. FEM (Permissible Capital Account Transactions) Regulations, 2000
15. FEM (Possession and Retention of Foreign Currency) Regulations, 2015
16. FEM (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2015
17. FEM (Remittance of Assets) Regulations, 2016
18. FEM (Transfer or Issue of Security by a person Resident outside India) Regulations, 2017
19. FEM (Foreign Exchange Derivative Contracts) Regulations, 2000
20. FEM (Transfer or Issue of any Foreign Security) Regulations, 2004
21. FEM (Crystallization of inoperative Foreign Currency Deposits) Regulations, 2014
22. FEM (International Financial Services Centre) Regulations, 2015
23. FEM (Regularization of Assets Held Abroad by a Person Resident in India) Regulations, 2015

AUTHORITIES UNDER FEMA

Reserve Bank of India is the overall controlling authority in respect of FEMA.
In addition to RBI, Directorate of Enforcement has also been formed for the implementation of FEMA.
The FEMA head-office, also known as Enforcement Directorate is situated in New Delhi and is headed
by a Director.

29 FEMA Act, 1999 - Introduction

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 (Source- ED website)

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DEFINITIONS
SECTION 2

1. FOREIGN EXCHANGE
Foreign (a) Deposits, credits and balance payable in any foreign currency
exchange means (b) Drafts, travelers’ cheques, letters of credit or bill of exchanges expressed or
‘foreign drawn in Indian currency but payable in foreign currency
currency’ and (c) Drafts, travelers’ cheques, letters of credit or bill of exchange drawn by
includes the banks, institutions or person outside India payable in Indian currency
following :-

2. FOREIGN SECURITY
Foreign security means any security in the form of shares, stocks, bonds, debentures or any other
instrument denominated or expressed in foreign currency.
Further, the term foreign security also includes security expressed in foreign currency but where
redemption or any form of return such as interest or dividend is payable in Indian currency.

3. PERSON
Person includes an individual, a Hindu Undivided Family, a company, a firm, an association of
persons or body of individuals, whether incorporated or not; any agency, office or branch owned or
controlled by such persons. Further, it includes any other artificial person.

4. PERSON RESIDENT IN INDIA

Person resident in India means the following:-
(1) A person residing in India for more than 182 days during the course of preceding financial
year but does not include the following:

(A) Person who has gone out of India or who stays outside India for any of the following
purposes:-
(a) For taking up employment outside India;
(b) For carrying on a business or vocation outside India;
(c) For any other purpose in such circumstances as would indicate his intention to stay
outside India for an uncertain period;
(B) Person who has come to India or who stays in India for any purpose other than the
following purposes:

(a) For taking up employment in India;

(b) For carrying on a business or vocation in India;
(c) For any purpose in such circumstances as would indicate his intention to stay in India
for an uncertain period;
(2) Any person or body corporate registered or incorporated in India;
(3) An office, branch or agency established in India which is owned or controlled by a person
resident outside India;
(4) An office, branch, or agency established outside India, which is owned or controlled by a
person resident in India.

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PERSON RESIDENT IN INDIA

INCLUDES THE FOLLOWING DOESN’T INCLUDES THE FOLLOWING

OR OR

A person residing in Person who has come to India A person residing Person who goes out of
India for or who stays in India for following in India for less India or who stay outside India for
183 days or more purposes: than183 days following purposes:
during the course of (a) For taking up employment in India; during the course (a) For taking unemployment OUTSIDE
preceding financial (b) For carrying on a business or of preceding India;
year vocation in India; financial year (b) For carrying on a business or
(c) For any purpose in such vocation OUTSIDE India;
circumstances as would indicate his (c) For any purpose in such
intention to stay in India for an circumstances as would indicate his
uncertain period; intention to stay OUTSIDE India for

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5. PERSON RESIDENT OUTSIDE INDIA
It means a person who is not resident in India

6. PERSON OF INDIAN ORIGIN (PIO)

It means a citizen of any country other than Pakistan or Bangladesh :-
Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955;

or
(i) Who belonged to a territory that became part of India after the 15th day of August, 1947; or
(ii) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person
referred to in clause (a) or (b); or
(iii) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person
referred to in clause (a) or (b) or (c).

Explanation: PIO will include an ‘Overseas Citizen of India’ cardholder within the meaning of
Section 7(A) of the Citizenship Act, 1955.

7. NON-RESIDENT INDIAN (NRI)

Non-resident India means a person resident outside India who is a citizen of India.

8. AUTHORIZED PERSON
Authorized person means an authorized dealer, moneychanger, off shore banking unit or any
other person for the time being authorized for the following purposes:-
(a) To deal in or transfer any foreign exchange or foreign security to any person;
(b) To receive any payment by order or on behalf of any person resident outside India in any name;
(c) To open the various accounts like Non-Resident (Ordinary) Rupee A/c, Non- Resident(External)
Rupee A/c, Foreign Currency (Non-resident) A/c, Resident Foreign Currency A/c, Exchange
Earners Foreign Currency A/c.
(d) To sale or purchase foreign exchange for current account transactions;
(e) To sale or purchase foreign exchange for permissible capital account transactions.

Normally, nationalised banks, leading non nationalized banks and foreign banks are appointed as
authorized persons

Power of the Reserve Bank to issue directions to authorised person

Section 11 of the Act empowers the RBI to issue directions to the authorised person in regard to
making of payment or doing or desist from doing any act relating to foreign exchange or foreign
security. Reserve Bank has also been empowered to issue directions to the authorised persons to
furnish such information in such manner as it deems fit.

Power of Reserve Bank to Inspect authorised person

Section 12 of the Act empowers RBI to inspect the business of any authorised person for the
purpose of verifying the correctness of any statement/information or particulars furnished.
In case authorised person fails to furnish the information sought, the RBI can initiate inspection of
the authorised person for obtaining such information.
RBI may also inspect the business of an authorised person for securing compliance with the
provisions of the Foreign Exchange Management Act or any of the Rules, Regulations or directions.
The Reserve Bank may make an order in writing authorising any of its officer for this purpose.

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 Power of Reserve Bank to revoke the authorisation
Reserve Bank of India has been empowered to revoke the authorisation granted to any person at any
time in the public interest.
It may also revoke the authorisation after giving an opportunity, if the authorised person failed to
comply with the conditions subject to which the authorisation was granted or
contravened any of the provisions of the Act, rules, notifications or directions.

9. ADJUDICATING AUTHORITY
‘Adjudicating Authority’ means an officer authorised under Sub-section (1) of Section 16 for the
purposes of adjudication in respect of penalties under Section 13.
Section 16 empowers the Central Government, to appoint, by an order published in the Official
Gazette, as many officers as it may think fit as the adjudicating authorities for holding an
enquiry in the manner prescribed after giving the person alleged to have committed any
contravention, an opportunity of being heard.

10. APPELLATE TRIBUNAL

‘Appellate Tribunal’ means Appellate Tribunal for Foreign Exchange to hear appeals against the
orders of the adjudicating authorities and Special Directors (Appeals) under the Act.

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Q. 1.

Answer to Question No. 1:-

Addl. Pages NKJ PRE-CS-EXAM-TEST

Q. 2.

Answer to Question No. 2:-

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 FOREIGN
EXCHANGE
TRANSACTIONS &
3 COMPLIANCES

 Dealing and holdings in foreign exchange, foreign security, etc.

 Realisation, repatriation and holding of foreign currency
 Transactions under FEMA
 Provisions relating to current account transactions
 Provisions relating to capital account transactions
 Foreign exchange management regulations 2000
 Adjudication and appeal
 Contravention and penalties
 Compounding of contraventions

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 FOREIGN EXCHANGE TRANSACTIONS &
COMPLIANCES
DEALINGS AND HOLDINGS IN FOREIGN EXCHANGE, FOREIGN
SECURITY,ETC.
DEALING IN FOREIGN EXCHANGE, ETC
SECTION-3
Save as otherwise provided in this Act, rules or regulations made there under, or with the general or
special permission of the Reserve Bank, no person shall:—
(a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person;
(b) make any payment to or for the credit of any person resident outside India in any manner;
(c) receive otherwise than through an authorised person, any payment by order or on behalf of any person
resident outside India in any manner;
Explanation.—For the purpose of this clause, where any person in, or resident in, India receives any
payment by order or on behalf of any person resident outside India through any other person
(including an authorised person) without a corresponding inward remittance from any place outside
India, then, such person shall be deemed to have received such payment otherwise than through an
authorised person;
(d) enter into any financial transaction in India as consideration for or in association with acquisition or
creation or transfer of a right to acquire, any asset outside India by any person.

HOLDING OF FOREIGN EXCHANGE, FOREIGN SECURITY & IMMOVABLE

PROPERTY
SECTION-4
Save as otherwise provided in the Act, rules or regulations, no person resident in India shall acquire,
hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated
outside India.

FOREIGN EXCHANGE MANAGEMENT (POSSESSION AND RETENTION OF

FOREIGN CURRENCY) REGULATIONS, 2015
Foreign exchange can be possessed and retained subject to the following conditions:-
(a) A person resident in India can retain foreign exchange up to US $ 2000 or its equivalent in
aggregate provided:-
(1) Such foreign exchange have been acquired by him while on a visit to any place out of India
by way of payment for services or by way of honorarium or gift. or,
(2) Such foreign exchange have been acquired by him from any person resident outside India
and who is on a visit to India for services rendered or by way of honorarium or gift or in
settlement of any lawful obligation. or,
(3) Such foreign exchange represents unspent amount of foreign exchange acquired by him from
an authorized person for travel abroad;

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TIME LIMIT FOR SURRENDER/REPATRIATION

SOLD TO DISCHARGING A FOREIGN UNUSED

‘AP’ EXCHANGE DEBT OR LIABILITY ‘FE’

WITHIN7 DAYS OF ITS WITHIN90 DAYS

RECEIPT OF ITS RECEIPT FOREIGN TRAVEL OTHERPURPOSE

WITHIN60 DAYS OF
CURRENCY NOTES TRAVELLERCH ITS PURCHASE
AND COINS EQUES

WITHIN WITHIN
90 DAYS OF RETURN OF 180 DAYS OF RETURN OF
TRAVELLER TO INDIA TRAVELLER TO INDIA

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(b) Any person can possess foreign coins without limit;
(c) Authorized person can retain or possess foreign currency and coins within the scope of his
authority without any limit
(d) A person resident in India but not permanently resident in India may possess foreign exchange
without any limit if such foreign exchange was acquired, held or owned by him when he was
resident outside India and has been brought into India in accordance with the prescribed
regulations.
The expression ‘not permanently resident’ means a person resident in India for employment of a
specified duration or for a specific job or assignment, the duration of which does not exceed 3 years.

REALISATION, REPATRIATION AND HOLDING OF FOREIGN

CURRENCY
FOREIGN EXCHANGE MANAGEMENT (REALISATION, REPATRIATION AND
SURRENDER OF FOREIGN EXCHANGE) REGULATIONS, 2015
A person resident in India to whom any foreign exchange is due or has accrued, should take all reasonable
steps to realise and repatriate to India such foreign exchange.
A person resident in India, to refrain from doing anything/taking any action, resulting in
delay in receipt of foreign exchange in whole or part, or

ceasing in whole or part the foreign exchange receivable by him.

MANNER OF REPATRIATION
After realisation of foreign exchange due, the person concerned shall repatriate the same to India and
sell it to an authorised person or

retain it to the specified extent in an account with an authorised dealer or

use it for discharging a foreign exchange debt or liability to the specified extent.

TIME LIMIT FOR SURRENDER OF REALISED FOREIGN EXCHANGE

Any foreign exchange should be sold by the person concerned to an authorised person within a period of
seven days of its receipt, and in all other cases within 90 days from the date of its receipt.
any person who has acquired or purchased foreign exchange for any purpose mentioned in the declaration
made by him to an authorised person and does not use it for such purpose or for any other purpose for
which purchase or acquisition of foreign exchange is permissible, shall surrender such foreign
exchange or the unused portion thereof to an authorised person within a period of sixty days from the date
of its acquisition or purchase by him.

However, in case the foreign exchange acquired or purchased by any person from an authorised person is
for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall be surrendered
to an authorised person:-
(a) within ninety days from the date of return of the traveller to India, when the unspent foreign
exchange is in the form of currency notes and coins; and
(b) within one hundred eighty days from the date of return of the traveller to India, when the unspent
foreign exchange is in the form of travellers cheques.

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The provisions of Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign
Exchange) Regulation are not applicable to foreign exchange in the form of currency of Nepal or Bhutan.

TRANSACTIONS UNDER FEMA

TRANSACTIONS UNDER FEMA

CURRENT ACCOUNTS CAPITAL ACCOUNTS

TRANSACTIONS TRANSACTION
('CAT') ('CAT')

PROVISIONS RELATING TO
CURRENT ACCOUNT TRANSACTIONS
CURRENT ACCOUNT TRANSACTIONS - MEANING
Current account transaction means a transaction other than a capital account transaction.
Without prejudice to the generality of the foregoing provisions include the following:-
(a) Payments due in connection with foreign trade, other current business, services and short-term
banking and credit facilities in the ordinary course of business;
(b) Payments due as interest on loans and as net income from investments;
(c) Remittances for living expenses of parents, spouse and children residing abroad;
(d) Expenses in connection with foreign travel, education and medical care of parents, spouse and
children.

DEALINGS IN CURRENT ACCOUNT TRANSACTIONS

SECTION 5
Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a
current account transaction
Provided that the Central Government may, in public interest and in consultation with the Reserve Bank,
impose such reasonable restrictions for current account transactions as may be prescribed.
Thus, generally all current account transactions are free subject to reasonable restrictions, which may
be imposed by Central govt. in consultation with RBI.

FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT

TRANSACTIONS) RULES, 2000
 PROHIBITION ON DRAWAL OF FOREIGN EXCHANGE FOR CERTAIN
TRANSACTIONS
Rule 3 prohibits the drawal of foreign exchange for the purposes of transactions;-
(a) specified in the Schedule I or
(b) a travel to Nepal and/or Bhutan or a transaction with a person resident in Nepal or Bhutan.
However, in the case of transaction with a person resident in Nepal and Bhutan, the prohibition may
be exempted by RBI subject to such terms and conditions as it may consider necessary.

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 Schedule I enumerate the following situations in which the drawal of foreign exchange is prohibited:-
(a) Remittance out of lottery winnings;
(b) Remittance of income from racing/riding etc. or any other hobby;
(c) Remittance for purchase of lottery tickets, banned/prescribed magazine, football pools, etc.
(d) Payment of commission on exports made towards equity investment in joint ventures/wholly
owned subsidiaries abroad of Indian Companies.
(e) Payment of Commission on exports under Rupee State Credit Route, except commission upto 10%
of invoice value of exports of tea and tobacco.
(f) Payment related to ‘call back service’ of telephone.
(g) Remittance of interest income on funds held in Non-resident Special Rupee Scheme Account.

 PRIOR APPROVAL OF GOVERNMENT OF INDIA FOR CERTAIN

TRANSACTIONS
Rule 4 requires prior approval of the Government of India for the transactions as specified in Schedule
II. However, this does not apply to the cases where the payment is made out of funds held in Resident
Foreign Currency Account (RFC) of the remitter.

 PRIOR APPROVAL OF RESERVE BANK FOR CERTAIN TRANSACTION

As per Rule 5 of the Foreign Exchange Management (Current Account Transactions)
Amendment Rules, 2015, every drawal of foreign exchange for transactions included in Schedule III
shall be governed as provided therein:
Provided that this rule shall not apply where the payment is made out of funds held in Resident
Foreign Currency (RFC) Account of the remitter.

Transactions included in Schedule III

1. Facilities for individuals—
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
Provided that for the purposes mentioned at item numbers (iv), (vii) and (viii), the individual may
avail of exchange facility for an amount in excess of the limit prescribed under the Liberalised
Remittance Scheme if it is so required by a country of emigration, medical institute offering treatment
or the University, respectively.

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CAPITAL ACCOUNT TRANSACTION

MEANS
TRANSACTION
ALTERS
ASSET/LIABILITIES

OF

PERSON RESIDENT IN INDIA PERSON RESIDENT OUTSIDE INDIA

OUTSIDE INDIA IN INDIA

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 Provided further that if an individual remits any amount under the said Liberalised Remittance
Scheme in a financial year, then the applicable limit for such individual would be reduced from USD
2,50,000 by the Amount so remitted.
Provided also that for a ‘person who is resident but not permanently resident in India' and
(a) is a citizen of a foreign State other than Pakistan; or
(b) 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, may make remittance up to his net
salary (after deduction of taxes, contribution to provident Fund and other deductions).
Explanation: For the purpose of this item, a person resident in India on account of his Employment or
deputation of a specified duration (irrespective of length thereof) or for a specific Job or assignments,
the duration of which does not exceed three years, is a resident but not Permanently resident:
Provided also that a person other than an individual may also avail of foreign exchange Facility,
mutatis mutandis, within the limit prescribed under the said Liberalised Remittance Scheme for the
purposes mentioned herein above.

2. Facilities for persons other than individual -

The following remittances by persons other than individuals shall require prior approval of the
Reserve Bank of India.
(i) 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-
(a) creation of Chairs in reputed educational institutes,
(b) contribution to funds (not being an investment fund) promoted by educational institutes; and
(c) 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 percent 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
100,000Whichever is higher, by an entity in India by way of reimbursement of pre-incorporation
expenses.”

PROVISIONS RELATING TO
CAPITAL ACCOUNT TRANSACTIONS
CAPITAL ACCOUNT TRANSACTIONS - MEANING
Capital account transaction means a transaction, which alters
the assets and liabilities, including contingent liabilities outside India of person resident in India or

assets and liabilities in India of a person resident outside India.

Capital account transaction relate to movement of capital. These include transactions in
property and investments and lending and borrowing money.

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REGULATION OF CAPITAL ACCOUNT TRANSACTION
SECTION 6
Section 6 empowers RBI to specify, in consultation with the Central Government, the permissible
capital account transactions and the limits up to which foreign exchange will be allowed for such
transactions by making the appropriate regulations.

Thus, capital account transactions are permitted to the extent specifically permitted by RBI.

FOREIGN EXCHANGE MANAGEMENT (PERMISSIBLE CAPITAL

ACCOUNTTRANSACTIONS) REGULATIONS, 2000
 PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS
(a) of persons resident in India(PRI)- SCH-I
(b) persons resident outside India(PROI)- SCH-II

Following are Permissible Capital Account Following are Permissible Capital

Transactions of persons resident in India(PRI) Account Transactions of persons
resident outside in India(PROI)
(a) investment in foreign securities. (a) Investment in security of body
(b) foreign currency loans raised in India and abroad; corporate India
(c) transfer of immovable property outside India (b) Deposits between a person resident
(d) guarantees issued in favour of a person resident in India and a person resident outside
outside India; India
(e) export, import and holding of currency/currency (c) Acquisition and transfer of
notes; immovable property in India.
(f) loans and overdrafts from a person resident outside (d) Guarantee in favour of, or on behalf
India; of a person resident in India.
(g) maintenance of foreign currency accounts in India and (e) Import and export of
outside India currency/currency notes into/from
(h) taking out of insurance policy from an insurance India
company outside India; (f) Maintenance Foreign Currency
(i) loans and overdrafts to a person resident outside accounts in India
India; (g) Remittance outside India of capital
(j) remittance outside India of capital assets; assets in India.
(k) sale and purchase of foreign exchange derivatives in
India and abroad and commodity derivatives abroad.

MANNER FOR PAYMENT FOR INVESTMENT

The payment for investment are required to be made by remittance from abroad through normal banking
channels or by debit to an account of the investor maintained with an authorised person in India in
accordance with the regulation made by the Reserve Bank of India.

MODES OF ACQUIRING PROPERTY OUTSIDE INDIA BY A

RESIDENT
According to section 6(4) of the of Foreign Exchange Management Act, 1999 read with Foreign
Exchange Management (Acquisition and transfer of immovable property outside India) Regulations,
2015,

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A person resident in India can hold, own, transfer or invest in any immovable property situated outside
India
if such property was acquired, held or owned by him/ her when he/ she was resident outside India or
inherited from a person resident outside India.
1. A resident can acquire immovable property outside India by way of gift or inheritance from:
(a) a person resident in India can hold, own, transfer or invest in any immovable property situated
outside India if such property was acquired, held or owned by him/ her when he/ she was resident
outside India or inherited from a person resident outside India.; or
(b) a person resident in India who had acquired such property on or before July 8, 1947 and
continued to be held by him with the permission of the Reserve Bank.
(c) a person resident in India who has acquired such property in accordance with the foreign
exchange provisions in force at the time of such acquisition.
2. A resident can purchase immovable property outside India out of foreign exchange held in his/ her
Resident Foreign Currency (RFC) account.
3. A resident can acquire immovable property outside India jointly with a relative who is a person
resident outside India, provided there is no outflow of funds from India.
ACQUISITION UNDER THE LIBERALISED REMITTANCE SCHEME (LRS)
A resident individual can send remittances under the Liberalised Remittance Scheme for purchasing
immovable property outside India.

REMITTANCE OF ASSETS
In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, the Reserve
Bank issued the Foreign Exchange Management (Remittance of Assets) Regulations, 2016 in respect of
remittance outside India
by a person whether resident in India or not,
of assets in India.
REMITTANCES BY INDIVIDUALS NOT BEING NRIs/ PIOs.
‘Remittance of assets’ means remittance outside India of funds
in a deposit with a bank/ firm/ company, provident fund balance or
superannuation benefits,
amount of claim or maturity proceeds of insurance policy,
sale proceeds of shares, securities, immovable property or any other asset held in India
in accordance with the provisions of the Foreign Exchange Management Act, 1999 (FEMA) or rules/
regulations made there under.
Authorised Dealer (AD) may allow remittance of assets by a foreign national where:
(i) the person has retired from employment in India;
(ii) the person has inherited from a person referred to in section 6(5) of the Act;
(iii) the person is a non-resident widow/widower and has inherited assets from her/his deceased spouse
who was an Indian national resident in India
(iv) the remittance is in respect of balances held in a bank account by a foreign student who has
completed his/ her studies.

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REMITTANCES BY NRIs/ PIOs
ADs may allow NRIs/ PIOs, on submission of documentary evidence, to remit up to USD one million,
per financial year:
(i) out of balances in their non-resident (ordinary) (NRO) accounts/ sale proceeds of assets/ assets acquired
in India by way of inheritance/ legacy;
(ii) in respect of assets acquired under a deed of settlement made by either of his/ her parents or a
relative as defined in Companies Act, 2013. The settlement should take effect on the death of the settler;
(iii) in case settlement is done without retaining any life interest in the property i.e. during the lifetime of
the owner/ parent, it would amount to regular transfer by way of gift

REMITTANCES BY COMPANIES/ ENTITIES

ADs may allow remittances by Indian companies under liquidation on directions issued by a Court in
India/ orders issued by official liquidator in case of voluntary winding up on submission of:
(i) Auditor’s certificate confirming that all liabilities in India have been either fully paid or
adequately provided for.
(ii) Auditor’s certificate to the effect that the winding up is in accordance with the provisions
of the Companies Act.
(iii) In case of winding up otherwise than by a court, an auditor’s certificate to the effect that
there are no legal proceedings pending in any court in India against the applicant or the
company under liquidation and there is no legal impediment in permitting the remittance.
ADs may also allow Indian entities to remit their contribution towards the provident fund/
superannuation/ pension fund in respect of their expatriate staff resident but “not permanently
resident” in India

REMITTANCE OF ASSETS REQUIRING RBI APPROVAL

Prior approval of the Reserve Bank is necessary for remittance of assets where:
(a) Remittance is in excess of USD 1,000,000 (US Dollar One million only) per financial year
(i) on account of legacy, bequest (will) or inheritance to a citizen of foreign state, resident outside
India;
(ii) by NRIs/ PIOs out of the balances held in NRO accounts/ sale proceeds of assets/ the assets
acquired by way of inheritance/ legacy.
(b) Hardship will be caused to a person if remittance from India is not made to such a person.
Remittance of funds from the sale of assets in India held by a person, whether resident in or outside
India, not covered under the directions stipulated above will require approval of the Reserve Bank.

ESTABLISHMENT OF BRANCH OFFICE (BO)/ LIAISON

OFFICE (LO)/ PROJECT OFFICE (PO) IN INDIA
Establishment of branch office/ liaison office / project office or any other place of business in India by
foreign entities is regulated in terms of Section 6(6) of Foreign Exchange Management Act, 1999 read with
Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a
project office or any other place of business) Regulations, 2016 and amended from time to time.

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BRANCH OFFICE- BO
Branch office in relation to a company, means any establishment described as such by the company.
Permitted activities for a branch office in India of a person resident outside India;-
Normally, the branch office should be engaged in the activity in which the parent company is engaged.
(i) Export/import of goods.
(ii) (ii) Rendering professional or consultancy services.
(iii) Carrying out research work in which the parent company is engaged.
(iv) Promoting technical or financial collaborations between Indian companies and parent or overseas
group company.
(v) Representing the parent company in India and acting as buying/ selling agent in India.
(vi) Rendering services in Information Technology and development of software in India.
(vii) Rendering technical support to the products supplied by parent/group companies.
(viii) Representing a foreign airline/shipping company

LIAISON OFFICE- LO
Liaison Office means a place of business
to act as a channel of communication between the principal place of business or Head Office or by
whatever name called and entities in India
but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and
maintains itself out of inward remittances received from abroad through normal banking channel.
Permitted activities for a liaison office in India of a person resident outside India;-
(i) Representing the parent company / group companies in India.
(ii) (ii) Promoting export / import from / to India.
(iii) Promoting technical/ financial collaborations between parent / group companies and companies in
India.
(iv) Acting as a communication channel between the parent company and Indian companies.

PROJECT OFFICE- PO
Project office means a place of business in India to represent the interests of the foreign company
executing a project in India but excludes a Liaison Office.
Parameters of project office
A foreign company may open project office/s in India provided it has secured from an Indian
company, a contract to execute a project in India, and
(i) the project is funded directly by inward remittance from abroad; or
(ii) the project is funded by a bilateral or multilateral International Financing Agency; or
(iii) the project has been cleared by an appropriate authority; or
(iv) a company or entity in India awarding the contract has been granted term loan by a Public Financial
Institution or a bank in India for the Project.

GENERAL CRITERIA
1. Applications from foreign companies (a body corporate incorporated outside India, including a firm
or other association of individuals) for establishing BO/ LO/ PO in India shall be considered by the
AD Category-I bank as per the guidelines given by Reserve Bank of India (RBI).

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 If the principal business of the entity resident outside India falls under sectors where 100 percent
Foreign Direct Investment (FDI) is allowed in terms Foreign Exchange Management (Transfer or
issue of Security by a Person Resident outside India) Regulations, 2000, as amended from time to time,
and the entity seeks to open a BO/LO/PO, the AD Category-I bank may consider such applications
under the delegated powers.
2. RBI APPROVAL
i. An application from a person resident outside India for opening of a BO/LO/PO in India shall
require prior approval of Reserve Bank of India in the following cases:

3. The non-resident entity applying for a BO/LO in India should have a financially sound track
record viz:
Ranch Office A profit making track record during the immediately preceding five
financial years in the home country and net worth of not less than
USD 100,000 or its equivalent.
Net worth [total of paid-up capital and free reserves, less intangible
assets as per the latest Audited Balance Sheet or Account Statement
certified by a Acertifies Public Accountant or any Regestered
Accounts Practitioner by whatever name called].
Liaison Ofice A profot making track record during the imidetatly preceeding three
financial years in the home country and net worth of not less than
USD 50,000 or its euquivalent.
A applicant that is not May submit a Letter of Comfort (LOC) from its parent/ group
financially sound and is a company, subject to the condition that the parent/ group company
subsidiary of another company. satisfies the prescribed criteria for net worth and profit.

PROCEDURE FOR ESTABLISHMENT

The application for establishing BO / LO/ PO in India may be submitted by the non-resident entity in
Form FNC to a designated AD Category - I bank (i.e. an AD Category – I bank identified by the applicant
with whom they intend to pursue banking relations) along with the prescribed documents and the LOC,
wherever applicable.

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Following are the prescribed documents:
(a) Copy of the Certificate of Incorporation / Registration; Memorandum of Association and Articles of
Association attested by the Notary Public in the country of registration. [If the original Certificate is in
a language other than in English, the same may be translated into English and notarized as above
and cross verified/attested by the Indian Embassy/ Consulate in the home country].
(b) Audited Balance sheet of the applicant company for the last three/ five years in case of branch
office/ liaison office respectively. [If the applicants’ home country laws/regulations do not insist on
auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any
Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted]
(c) Bankers’ Report from the applicant’s banker in the host country / country of registration showing the
number of years the applicant has had banking relations with that bank.
(d) Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not
signing the Form FNC.
The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background,
and satisfying itself as regards adherence to the eligibility criteria for establishing BO/LO/PO, antecedents
of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with
the extant KYC norms grant approval to the foreign entity for establishing BO/LO/PO in India.
GENERAL PERMISSION IN SEZ
There is a general permission to non-resident companies for establishing BO in the Special Economic
Zones (SEZs) to undertake manufacturing and service activities subject to the conditions that:
(a) such BOs are functioning in those sectors where 100% FDI is permitted;
(b) such BOs comply with Chapter XXII of the Companies Act, 2013(companies incorporated outside
india); and
(c) such BOs function on a stand-alone basis

REMITTANCE OF PROFIT/SURPLUS
i. BOs are permitted to remit outside India profit of the branch net of applicable Indian taxes, on
production of the following documents to the satisfaction of the AD Category-I bank through whom
the remittance is effected:
(a) A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.
(b) A Chartered Accountant’s certificate certifying
(i) the manner of arriving at the remittable profit;
(ii) that the entire remittable profit has been earned by undertaking the permitted activities; and
(iii) that the profit does not include any profit on revaluation of the assets of the branch.

ii. AD Category – I bank can permit intermittent remittances by POs pending winding up / completion
of the project provided they are satisfied with the bonafides of the transaction, subject to the
following:
(a) The PO submits an Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient
provisions have been made to meet the liabilities in India including Income Tax, etc.
(b) An undertaking from the PO that the remittance will not, in any way, affect the completion of
the project in India and that any shortfall of funds for meeting any liability in India will be
met by inward remittance from abroad.

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 ADJUDICATION AND APPEAL
 DIRECTORATE OF ENFORCEMENT
Section 36 of the act empowers the central government to establish a directorate of enforcement with
a director and other officers or class of officers, for the purposes of the enforcement of the Act.
The Central Government has also been empowered to authorise Director, Additional Director,
Special Director or Deputy Director to appoint officers of enforcement below the rank of Assistant
Director of Enforcement to exercise the powers and discharge the duties conferred or imposed on him
under the Act

 APPOINTMENT OF ADJUDICATING AUTHORITY

Section 16 empowers the central government to appoint by notification in the official gazette as
many adjudicating authorities as it may think fit for holding enquiries under section 13. The central
government is, however under obligation to specify the jurisdiction of the adjudicating authority.
There are 3 levels of Adjudicating Authorities i.e. Deputy Director, Additional Director and Director
of Directorate of Enforcement in the ascending order of hierarchy.

The adjudicating authority has been empowered to hold any enquiry on a complaint made in writing
by an officer authorised by a general or special order by the central government. The officers so
appointed shall exercise the like powers which are conferred on income tax authorities under the
income tax Act, 1961, subject to such conditions and limitations as laid down under that act.
In case, a complaint has been made in respect of a person alleged to have committed the contravention,
such person shall be given a reasonable opportunity of being heard before imposing any penalty
under section 13.
 APPEAL TO SPECIAL DIRECTOR (APPEALS)
Section 17 of the act provides for appointment of one or more special directors (appeals) to hear
appeals against the orders of the adjudicating authorities.

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 The appeal shall be filed in prescribed Form with prescribed fee within 45 days from the date of the
receipt of the order by aggrieved person.
The special director (appeals) has however, been empowered to entertain appeal after the expiry of the
said period of forty five days.

 ESTABLISHMENT OF APPELLATE TRIBUNAL

Under section 18, the central government is empowered to establish an appellate tribunal, by a
notification in the official gazette, to hear appeals against the orders of adjudication authorities and
special director (appeals).
The central government or any person aggrieved by the orders of adjudicating authority or special
director (appeals) may prefer an appeal to the appellate tribunal.
every appeal shall be filed within a period of forty-five days from the date on which a copy of the
order made by the Adjudicating Authority or the Special Director (Appeals) is received by the
aggrieved person or by the Central Government and it shall be in such form, verified in such manner
and be accompanied by such fee as may be prescribed

 APPEAL TO HIGH COURT

A right to appeal to high court lies with the appellant who is aggrieved by the decision of the
tribunal. Such appeal must be filed within 60 days from the date of communication of the decision or
order of the tribunal.
The appeal to the high court can be made on any question of law arising out of such order. A
relaxation for a maximum period of sixty days for making an appeal may be granted by the high court,
if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the
specified period.

 INVESTIGATION
Section 37 of the Act empowers the Director of Enforcement and other officers not below the rank
of an Assistant Director to take up for investigation the contravention referred to in Section 13 of the
Act.
In addition, the Central Government may also authorise any officer or class of officers in the
Central Government, State Government, Reserve Bank of India, not below the rank of Under
Secretary to Government of India, to investigate any contravention under Section 13 of the Act. The
officers so appointed shall exercise the like powers which are conferred on income tax authorities
under the Income Tax Act,1961, subject to such conditions and limitations as laid down under that Act.

CONTRAVENTION AND PENALTIES

Section 13 provides that any person contravening any provision of the act, shall be liable for penalty upon
adjudication, which may extend
upto thrice the sum involved in such contravention where such amount is quantifiable or

upto two lakh rupees where the amount is not quantifiable.

If the contravention continues, the penalty of`5,000 per day during the period in which the
contravention continues, shall be imposed.

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 CONTRAVENTION BY COMPANIES
where the person committing the contravention of the act or rules happened to be a company, every
person who at the time the contravention was committed, was in charge of and was responsible to the
company for the conduct of the business of the company shall be deemed to be guilty of the
contravention and liable to be proceeded against and punished accordingly.
However, no such persons shall be deemed to be guilty of committing any offence if he proves that
such contravention took place without his knowledge or that he exercised adequate steps to prevent
such contravention.
In case the contravention is committed by a company and it is proved that such contravention is
committed with the knowledge, consent and connivance or is attributed to the neglect on the part of
any director, manager or secretary or other officer of the company, they will also be deemed to be
guilty of contravention and liable to be proceeded against and punished accordingly.

 ENFORCEMENT OF THE ORDERS OF ADJUDICATING AUTHORITY

In terms of section 14 of the act, if any person fails to make full payment of the penalty imposed within
a period of ninety days from the date on which the notice of payment of such penalty is served on him,
he shall be liable for civil imprisonment.

COMPOUNDING OF CONTRAVENTIONS
Contravention is a breach of the provisions of the Foreign Exchange Management Act (FEMA), 1999 and
rules/regulations/notification/orders/directions/circulars issued there under.
Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and
seeking redressal.
The Reserve Bank is empowered to compound any contraventions as defined under section 13 of
FEMA, 1999. Any person who contravenes any provision of the FEMA, 1999 [except section 3(a)] or
contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this
Act or contravenes any condition subject to which an authorization is issued by the Reserve Bank, can
apply for compounding to the Reserve Bank.

APPLICATION FOR COMPOUNDING

All applications for compounding may be submitted together with the prescribed fee by way of a demand
draft drawn in favour of “Reserve Bank of India” and payable at the concerned Regional Office and by
way of a demand draft drawn in favour of “Reserve Bank of India” and payable at Mumbai for cases
submitted to the Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign
Exchange Department, Reserve Bank of India, Central Office, Mumbai.

CONDITION OF COMPOUNDING

The benefit of compounding shall not be available in case a contravention committed by any person
within a period of three years from the date on which a similar contravention committed by him
was compounded under these rules.

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SCOPE AND PROCEDURE FOR COMPOUNDING

On receipt of the application for compounding, the Reserve Bank shall examine the application based on
the documents and submissions made in the application and assess whether contravention is quantifiable
and, if so, the amount of contravention.

The following factors, which are only indicative, may be taken into consideration for the purpose of
passing compounding order and adjudging the quantum of sum on payment of which contravention shall
be compounded:

(a) the amount of gain of unfair advantage, wherever quantifiable, made as a result of the contravention;
(b) the amount of loss caused to any authority/ agency/ exchequer as a result of the contravention;
(c) economic benefits accruing to the contravener from delayed compliance or compliance avoided;
(d) the repetitive nature of the contravention, the track record and/or history of non-compliance of the
contravener;
(e) contravener’s conduct in undertaking the transaction and in disclosure of full facts in the application
and submissions made during the personal hearing;
(f) and any other factor as considered relevant and appropriate.

ISSUE OF THE COMPOUNDING ORDER

The Compounding Authority shall pass an order of compounding after affording an opportunity of
being heard to all the concerned as expeditiously as possible as and not later than 180 days from the
date of application on the basis of the averments made in the application as well as other documents and
submissions made in this context by the contravener during the personal hearings.

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Q. 1.

Answer to Question No. 1:-

Addl. Pages NKJ PRE-CS-EXAM-TEST

Q. 2.

Answer to Question No. 2:-

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 LIBERALIZED
REMITTANCE
SCHEME (LRS)
4
 The Permissible Capital Account Transactions by an Individual
Under LRS
 The Permissible Current Account Transactions by an Individual
Under LRS
 Remittance facilities to persons other than individuals
 Prohibited Transactions
 Self Test Questions

EXPECTED
MARKS COVERAGE
(15 to 20)
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 LIBERALIZED REMITTANCE SCHEME
(LRS)
The Reserve Bank of India as part of its liberalization measure to facilitate resident individuals to
remit funds abroad for permitted current or capital account transactions or combination of both issues
Liberalised Remittance Scheme.
Liberalised Remittance Scheme permits the Authorised Dealers to freely allow remittances by resident
individuals up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital
account transaction or a combination of both. The Scheme is available to all resident individuals including
minors.

THE PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS BY AN

INDIVIDUAL UNDER LRS
(i) opening of foreign currency account abroad with a bank;
(ii) purchase of property abroad;
(iii) making investments abroad;
(iv) acquisition of qualification shares of an overseas company for holding the post of director
(v) investment in units of mutual funds , venure capitl funds , promissory notes

PERMISSIBLE CURRENT ACCOUNT TRANSACTIONS BY AN

INDIVIDUAL UNDER LRS
The limit of USD 2,50,000 per Financial Year (FY) under the Scheme also includes/subsumes
remittances for current account transactions such as:

a. Private visits
For private visits abroad, other than visit to Nepal and Bhutan, resident individual can obtain foreign
exchange up to an aggregate amount of USD 2,50,000, from an Authorised Dealer, in any one
financial year, irrespective of the number of visits undertaken during the year.

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(b) Gift/donation
Any resident individual may remit up-to USD 2,50,000 in one Financial Year as gift to a person
residing outside India or as donation to an organization outside India.
(c) Going abroad on employment
A person going abroad for employment can draw foreign exchange up to USD 2,50,000 per Financial
Year from any Authorised Dealer in India.
(d) Emigration
A person wanting to emigrate can draw foreign exchange from AD Category I bank and AD Category
II up to the amount prescribed by the country of emigration or USD 250,000.
Remittance of any exchange outside India in excess of this limit may be allowed only towards meeting
incidental expenses in the country of immigration.
(e) Maintenance of close relatives abroad
A resident individual can remit up-to USD 2,50,000 per Financial Year towards maintenance of close
relatives.
(f) Business trip
Visits by individuals in connection with attending of an international conference, seminar, specialised
training, apprentice training, etc., are treated as business visits. For business trips to foreign countries,
resident individuals can avail of foreign exchange up to USD 2,50,000 in a Financial Year irrespective
of the number of visits undertaken during the year.
(g) Medical treatment abroad
Authorised Dealers may release foreign exchange up to an amount of USD 2,50,000 or its equivalent
per Financial Year without insisting on any estimate from a hospital/doctor. For amount exceeding the
above limit, Authorised Dealers may release foreign exchange under general permission based on the
estimate from the doctor in India or hospital/ doctor abroad.
(h) Facilities available to students for pursuing their studies abroad
AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000 or its
equivalent to resident individuals for studies abroad without insisting on any estimate from the foreign
University. However, AD Category I bank and AD Category II may allow remittances (without
seeking prior approval of the Reserve Bank of India) exceeding USD 2,50,000 based on the estimate
received from the institution abroad.

DOCUMENTATION BY THE REMITTER

(a) The resident individual is required to compulsorily designate a branch of an AD through which all the
remittances under the Scheme will be made. The resident individual seeking to make the remittance
should furnish Form A2 for purchase of foreign exchange under LRS.
(b) It is mandatory to have PAN card to make remittances under the Scheme for capital account transactions.

REMITTANCE FACILITIES TO PERSONS OTHER THAN

INDIVIDUALS
Gift/donation
General permission has been granted to persons other than individuals to remit towards donations up-to
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,

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(a) contribution to funds (not being an investment fund) promoted by educational institutes; and
(b) contribution to a technical institution or body or association in the field of activity of the donor
Company.
(c) Any additional remittance in excess of the same shall require prior approval of the Reserve Bank of
India.
PROCEDURE FOR REMITTANCE:
Applications for remittances for purposes other than those specified above may be forwarded to the
Reserve Bank of India together with ;-
(a) details of their foreign exchange earnings during the last 3 years,
(b) brief background of the company’s activities,
(c) purpose of the donation

PROHIBITED TRANSACTIONS

81 Liberalized Remittance Scheme (LRS)

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Addl. Pages Charts and Additional Writing

Q. 1.

Answer to Question No. 1:-

Addl. Pages NKJ PRE-CS-EXAM-TEST

Q. 2.

Answer to Question No. 2:-

Addl. Pages NKJ PRE-CS-EXAM-TEST