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Frequently Asked Questions

FAQs are for general guidance purpose only. In case of any inconsistency(ies) between FAQs and FEMA, 1999 and Rules/Regulations/Directions/Permissions issued thereunder, the latter shall prevail.

FAQ on FEMA

  • An entity authorised by the RBI to deal in forex. e.g. bank, money changer, off-shore banking unit or any other person for the time being authorised under Sub-Section (1) of Section 10 of FEMA.

  • Any electronic system, other than a recognised stock exchange, on which transactions in securities, money market instruments, foreign exchange instruments, derivatives, etc. are entered. ETP requires prior approval of RBI. Otherwise, such ETP may be penalised under FEMA/PMLA.

  • A resident individual can send remittances under LRS for purchasing immovable property outside India. All the members of a family may make remittances to purchase a property having their names in the record.

  • As per section 2 (ze) of FEMA, transfer means, sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.

    1. Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or Democratic People's Republic of Korea (DPRK)- citizens of these countries, irrespective of their residential status, cannot, without prior permission of the Reserve Bank, acquire or transfer immovable property in India, except on lease, not exceeding five years. This prohibition shall not be applicable to an OCI.
    2. Foreign nationals of non-Indian origin resident in India (except 11 countries listed at (a) above) can acquire immovable property in India.
    3. Foreign nationals of non-Indian origin resident outside India can acquire/ transfer immovable property in India, on lease not exceeding five years and can acquire immovable property in India by way of inheritance from a resident.

  • It is a remittance scheme for all resident individuals, including minors, who are allowed to freely remit foreign exchange as prescribed by RBI, per financial year (April - March) for any permissible current or capital account transaction or a combination of both. The Scheme is not for corporates, partnership firms, HUF, Trusts etc.

  • Remittances under the facility can be consolidated in respect of close family members under the terms and conditions of the Scheme. Further, a resident cannot gift to another resident, in foreign currency involving foreign currency account held abroad under LRS.

  • A resident nominee of an account held outside India has to close the account and bring back the proceeds to India through banking channels.

    1. Student who has gone abroad for studies. On the student's return to India, the account will be deemed to have been opened under the Liberalised Remittance Scheme.
    2. A resident who is on a visit to a foreign country for the period of stay abroad.
    3. A person going abroad to participate in an exhibition/ trade fair for crediting the sale proceeds of goods.
    4. An Indian citizen who is an employee of a foreign company and is on deputation to the office/ branch/ subsidiary/ joint venture/ group company in India.
    5. A foreign citizen who is a resident in India and is employed with an Indian company.
    6. For the purpose of sending remittances under the LRS.

  • EEFC is an account maintained in foreign currency with a bank authorized to deal in foreign exchange. It is a facility provided to the foreign exchange earners such as individuals, companies, etc., who are resident in India to credit 100 per cent of their foreign exchange earnings in EEFC. It is a current account.

  • FDI may be received through:-

    1. Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India.
    2. Government Route: Foreign investment not covered under the automatic route requires prior approval of the Government.

  • 'Capital Intruments' means:-

    1. Equity shares, Share warrants, fully, compulsorily and mandatorily convertible debentures, fully, compulsorily and mandatorily convertible preference shares.
    2. Non-convertible/ optionally convertible/ partially convertible preference shares issued up to 30.04.2007 and optionally convertible/ partially convertible debentures issued up to 07.06. 2007 till their original maturity are reckoned.
      (Non-convertible/ optionally convertible/ partially convertible preference shares issued after 30.04.2007 and optionally convertible/partially convertible debentures issued after 07.06. 2007 are debt under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange Regulations), 2000, as amended from time.

  • All the three are investment made by a person resident outside India:-

    1. Foreign Investment - investment on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP.
    2. Foreign Direct Investment (FDI) - investment (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.
    3. Foreign Portfolio Investment - any investment made where such investment is (a) less than 10 percent of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company.

  • Only NRIs/ OCIs are allowed to invest in partnership/ proprietorship concerns in India on non- repatriation basis.

  • For the transactions undertaken w.e.f. 07.11.2017, in the cases of reporting delays, the person/ entity responsible for filing the reports shall be liable for payment of Late Submission Fee (LSF). The payment of LSF is an additional option for regularising reporting delays without undergoing the compounding procedure.

  • The payment of LSF and Compounding both, are available to the persons for the transactions undertaken on or after November 07.11.2017.

FAQ on PMLA

    1. In the case of a company, the beneficial owner is the natural person(s), who, whether alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means.

      Explanation-
      1. Controlling ownership interest means ownership of/entitlement to more than 25% of the shares or capital or profits of the company.
      2. Control inter-alia is the right to appoint majority of the directors or to control the management or policy decisions.
    2. In the case of a partnership firm, the beneficial owner is the natural person(s), who, whether alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15% of capital or profits of the partnership.
    3. In the case of an unincorporated association or body of individuals (includes societies), the beneficial owner is the natural person(s), who, whether alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15% of the property or capital or profits of the unincorporated association or body of individuals.

      (Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official.)
    4. In the case of a Trust, the beneficial owner(s) shall include author of the Trust, the Trustee, the beneficiaries with 15% or more interest in the Trust and any other natural person exercising ultimate effective control over the Trust through a chain of control or ownership.
    5. The Beneficial Owner is defined in sub rule (3) of Rule (9) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 ("PMLA Rule 9") as a natural person holding in excess of the threshold, 15% or 25% as applicable.
    6. Beneficial owner means an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person.

  • The Supreme court ruled that the 2016 amendment to the Benami Property Law cannot be applied retrospectively. (Vijay Madanlal Choudary & Ors v. Union of India,).

  • AML Rules as such do not identify high risk categories of customers/ business partners/ transaction. All reporting entities to furnish information relating to:-

    1. All cash transactions of the value of more than Rs. ten lakhs or its equivalent in foreign currency;
    2. All series of cash transactions integrally connected to each other which have been individually valued below Rs. ten lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds an amount of Rs. ten lakh or its equivalent in foreign currency.
    3. PMLA and the Rules thereunder require all reporting entities to furnish information relating to suspicious transactions.

  • Whenever, wealth from illegal means is possessed or disguised to avoid suspicion of Law Enforcement Authorities and to wipe the trail of incriminating evidence, the process is called money laundering. It may be done by terrorists and terrorist organization to hide and disguise money.

  • Actions under PMLA that may be taken against the persons, involved in Money Laundering, are:-

    1. Attachment of property derived or obtained as a result of a scheduled offense. The attached properties may be confiscated and disposed off. (Sections 5 & 8 of PMLA).
    2. Persons found guilty of an offense of Money Laundering are punishable with imprisonment for a term which shall not be less than three years but may extend up to seven years and shall also be liable to a fine. (Section 4 of PMLA).

      (When the scheduled offense is committed under the Narcotic and Psychotropic Substances Act, 1985, the punishment shall be imprisonment for a term which shall not be less than three years but may extend up to ten years.
    3. PMLA and the Rules thereunder require all reporting entities to furnish information relating to suspicious transactions.

    THE FUGITIVE ECONOMIC OFFENDERS ACT, 2018

    An Act to provide for measures to deter fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts, to preserve the sanctity of the rule of law in India and for matters connected therewith or incidental thereto. The provisions of this Act shall apply to any individual who is, or becomes, a fugitive economic offender on or after the date of coming into force of this Act. It is effective from 31.07.2018.

    1. Any conduct by a person at a place outside India which constitutes an offense at that place and which would have constituted an offense specified in the Schedule under PMLA, had it been committed in India and if such person transfers in any manner the proceeds of such conduct or part thereof to India; or
    2. Any offense specified in the Schedule under PMLA which has been committed in India and the proceeds of crime, or part thereof have been transferred to a place outside India or any attempt has been made to transfer the proceeds of crime, or part thereof from India to a place outside India.

  • The provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings so far they are not inconsistent with the provisions of PMLA, to arrest, search and seizure, attachment, confiscation, investigation, prosecution, and all other proceedings under PMLA.

    For PMLA, the Special Court shall be deemed to be a Court of Session, and the persons conducting the prosecution before the Special Court, shall be deemed to be a Public Prosecutor.

  • PMLA is implemented outside India through agreements with foreign countries:-

    1. The Central Government may enter into an agreement with the Government of any country outside India for (a) enforcing the provisions of this Act; (b) exchange of information for the prevention of any offense under this Act or under the corresponding law in force in that country or investigation of cases relating to any offense under this Act, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.
    2. The Central Government may, by notification in the Official Gazette, direct that the application of this Chapter in relation to a contracting State with which reciprocal arrangements have been made, shall be subject to such conditions, exceptions or qualifications as are specified in the said notification.

  • Reciprocal arrangements through Special Court for processes and assistance. Special Court may send summons or warrant for execution outside India for the following:-

    1. A summons to an accused person, or
    2. A warrant for the arrest of an accused person, or
    3. A summons to any person requiring him to attend and produce a document or other thing or to produce it, or
    4. A search warrant, issued by it shall be served or executed at any place in any foreign country

  • Special Court in India upon request of a foreign court may pass orders for the execution of the following in India:-

    1. A summons to an accused person, or
    2. A summons to an accused person, or
    3. A warrant for the arrest of an accused person, or
    4. A summons to any person requiring him to attend and produce a document or other thing, or to produce it, or
    5. A search warrant

  • Special Court in India requests to the court of the foreign countries for the execution of the attachment, seizure and confiscation of the properties outside India. Similarly, upon receipt of the request of a foreign court, special court in India orders for the attachment, seizure and confiscation of the properties in India.