COMMENTS ON FEMA (FOREIGN EXCHANGE AND MANAGEMENT ACT

PAYTM TO PAY RS 18.76 LAKH AFTER RBI COMPOUNDS FEMA VIOLATION LINKED TO SUBSIDIARY

2026-02-03T23:13:00.000-08:00

PAYTM TO PAY RS 18.76 LAKH AFTER RBI COMPOUNDS FEMA VIOLATION LINKED TO SUBSIDIARY

WHAT IS THE ISSUE ?

In a stock exchange filing on Monday, the company said the RBI has imposed a compounding fee of Rs 18.76 lakh in connection with certain investments made in Little Internet Private Limited by Little Internet Singapore. The underlying transactions, with an aggregate value of about Rs 33 crore, pertained to the period between March 2016 and June 2017.

DETAILS OF THE RBI ORDER

PENALTY AMOUNT	₹18.76 lakh
REASON:	FEMA contravention related to investments in Little Internet Pvt Ltd by Little Internet Singapore.
TRANSACTION VALUE:	Approximately ₹33 crore worth of transactions between March 2016 and June 2017.
COMPANY INVOLVED:	One 97 Communications Ltd (Paytm’s parent company).
COMPLIANCE STATUS:	Paytm has stated it is taking necessary steps to comply with the RBI order.
COMPOUNDING ORDER:	A compounding order allows a company to settle FEMA contraventions by paying a fee, avoiding prolonged litigation.
NATURE OF CONTRAVENTION:	The issue arose from cross-border investment flows between Paytm’s Indian and Singapore entities.

TABLE OF PENALTIES LEVIED ON PAYTM PAYMENTS BANK

PENALTY AMOUNT	REASON / VIOLATION	DATE OF ORDER
₹5.39 crore	Non-compliance with KYC norms, failure to identify beneficial owners, weak monitoring of payout transactions, and cyber security framework violations	October 10, 2023
₹5.49 crore	Violations under the Prevention of Money Laundering Act (PMLA); linked to illegal online gambling transactions and failure to meet anti-money laundering obligations	February 15, 2024 (announced March 1, 2024)
₹1 crore (Paytm Payments Bank) and ₹27.78 lakh (Western Union)	Paytm: Misrepresentation in application for Certificate of Authorisation under Payment and Settlement Systems Act, 2007;	October 1, 2021 (Paytm);

CONCLUDING REMARKS

This compounding order is not a major financial setback for Paytm but underscores the importance of strict compliance with FEMA regulations in cross-border investments. It also reflects the RBI’s increasing vigilance over fintech companies’ international transactions.

· RBI penalties focus on compliance failures in KYC, cyber security, and payment system regulations.

• FIU penalty was more severe in terms of reputational risk, as it linked Paytm Payments Bank to money laundering and illegal gambling networks.

• The ₹5.39 crore and ₹5.49 crore fines are among the largest regulatory actions against Paytm Payments Bank, while the ₹1 crore penalty in 2021 was tied to authorization irregularities.

R V SECKAR , FCS , LLB 79047 19295

RBI’S FOREIGN EXCHANGE MANAGEMENT (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026----A MAJOR FEMA COMPLIANCE OVERHAUL

2026-01-16T23:18:00.000-08:00

RBI’S FOREIGN EXCHANGE MANAGEMENT (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026----A MAJOR FEMA COMPLIANCE OVERHAUL

FEMA (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026

The RBI has introduced the FEMA (Export & Import of Goods and Services) Regulations, 2026, effective October 1, 2026, overhauling old rules for simplified, unified, and digitalized trade compliance, bringing services under a single framework, easing burdens for smaller traders, and shifting more responsibility to AD banks for monitoring via systems like EDPMS and IDPMS.

WHAT IS NEW ?

KEY CHANGES INCLUDE

· streamlined reporting timelines (e.g., within 5 days for export forms),

· tighter monitoring, and

· new reporting for guarantees (FEMA Guarantees Regulations 2026), aiming for greater transparency and ease of doing business.

EFFECTIVE DATE:

1 October 2026 (giving businesses time to realign systems & processes)

KEY CHANGES & BENEFITS

UNIFIED FRAMEWORK:

Combines goods and services trade under one set of rules.

DIGITAL FOCUS:

Mandates reporting via EDPMS/IDPMS for all remittances, with stricter timelines for AD banks.

EASE OF DOING BUSINESS:

Simplifies processes for smaller exporters and merchants, including self-declaration for import closures up to INR 1 million.

ENHANCED REPORTING:

Standardizes reporting for guarantees (Form GRN) and discontinues separate quarterly reporting for trade credit guarantees.

BANK RESPONSIBILITY:

Places more onus on Authorized Dealer banks for transaction oversight, using their internal assessment and digital platforms.

TRADE FAIR FLEXIBILITY:

Allows easier export of goods for exhibitions abroad, with provisions for selling, gifting, and simplified re-import reporting.

· Simplification and compliance ease, especially for MSMEs and small traders.

· Stronger oversight to mitigate risks such as delayed realization and misuse of advance payments.

MAJOR COMPLIANCE AND REPORTING CHANGES

A. REPORTING TIMELINES & DIGITAL PROCESSES

· Authorised Dealer (AD) banks must enter export and import declarations into EDPMS/IDPMS within strict timelines (e.g., within five business days of receipt of required export documentation).

· All inward and outward remittances tied to trade must be reported digitally, tightening the compliance regime relative to pre-existing circular-based processes.

COMPLIANCE IMPACT:

Trade finance teams must update SOPs and workflows to ensure punctual digital reporting and reconciliation, reducing manual exceptions.

EXTENDED REALISATION & REPATRIATION PERIODS

Although initially introduced in late 2025 under a second amendment, the 2026 Regulations formalize and align these extended timelines:

REALISATION OF EXPORT PROCEEDS: Extended to up to 15 months from the date of export (up from 9 months).

ADVANCE PAYMENTS:

Extended timelines to adjust/settle advance payments (previously a maximum of one year) — subject to AD bank assessment.

COMPLIANCE IMPACT:

Finance teams must revise cash-flow forecasts and FEMA tracking calendars to reflect extended realization windows.

SERVICE EXPORTS NOW FULLY WITHIN FEMA

A pivotal regulatory shift is that export of services — including software and IT services — is explicitly brought within the FEMA reporting regime, with defined timelines for filing Export Declaration Forms (EDF).

COMPLIANCE IMPACT:

Service exporters must adopt formal export tracking, aligning their documentation processes with those of goods exporters (EDF filing, bank reporting).

BANK DISCRETION AND OVERSIGHT

· The Regulations give authorized dealer banks greater discretion to:

· Grant extensions for delayed realization based on bona fide reasons.

· Set-off receivables against payables within stipulated periods.

· Monitor import payments and advance remittances with heightened scrutiny.

However, in cases of prolonged non-realisation of proceeds, exports may only continue against full advance payment or irrevocable letters of credit.

RELIEF FOR SMALL-VALUE TRANSACTIONS

For transactions up to ₹10 lakh per bill/invoice:

· Self-declarations by exporters/importers are permitted for closing entries in EDPMS/IDPMS, easing small-value compliance burdens.

ADVANCE REMITTANCES & PROHIBITIONS

Advance remittances for imports continue to be allowed, but advance payments for bullion imports are now prohibited under the refreshed regime.

OTHER KEY HIGHLIGHTS

🔹 Under-realization norms rationalized with commercial practicality + self-declaration for smaller cases

🔹 Set-off & third-party receipts/payments allowed, subject to AD Bank satisfaction

🔹 Advance & default rules clarified (same AD routing + interest cap linked to trade credit norms)

🔹 Merchanting Trade tightened: entire cycle must be completed within 6 months

🔹 Higher accountability for AD Banks (SOPs, fair charges, transparency & customer protection)

TAKEAWAY FOR BUSINESSES

This is a shift from procedural FEMA compliance to outcome-based regulation.

Exporters/importers—especially service exporters, startups, MNCs & Merchanting trade players—should start preparing early for system/process alignment.

R V SECKAR FCS,LLB 79047 19295

RBI ISSUED COMPOUNDING ORDER FOR FEMA VIOLATIONS BY NEARBUY INDIA PVT. LTD AND NEARBUY SAVED LAKHS OF RUPEES AS FINE FOR FEMA VIOLATIONS

2025-12-19T21:43:00.000-08:00

RBI ISSUED COMPOUNDING ORDER FOR

FEMA VIOLATIONS BY NEARBUY INDIA

PVT. LTD AND NEARBUY SAVED LAKHS OF

RUPEES AS FINE FOR FEMA VIOLATIONS

RBI Vs NEARBUY INDIA PVT. LTD

FACTS OF THE CASE

VIOLATIONS:

The violations were identified as procedural delays, not involving fraud or malicious intent.

The specific contraventions included:

· Late reporting of foreign inward remittances totalling ₹35.82 crore.

· Late filing of Form FCGPR (Foreign Currency-Gross Provisional Return) after issuing shares, covering transactions worth ₹73.01 crore.

SECTION 15 OF THE FEMA

The Reserve Bank of India (RBI) has issued a compounding order under Section 15 of the Foreign Exchange Management Act, 1999 (FEMA), in the case of Nearbuy India Private Limited which has resulted in the termination of proceedings against the company for alleged contraventions of the act, the Directorate of Enforcement (ED).

WHAT PROVISIONS OF SECTION 15 OF FEMA SAYS

COMPOUNDING AUTHORITY:

The power to compound contraventions under Section 13 is held by the Directorate of Enforcement (DoE) and authorized officers of the Reserve Bank of India (RBI). The RBI handles most contraventions, except those under Section 3(a) of FEMA, which fall under the DoE.

APPLICATION PROCESS:

An application for compounding must be made to the relevant authority within 180 days. Applications can be submitted through the RBI's PRAVAAH Portal or physically.

EFFECT OF COMPOUNDING:

Once compounded, no further proceedings will be initiated for that specific contravention.

CONDITIONS AND LIMITATIONS:

Compounding requires admission of guilt and obtaining necessary approvals. Similar contraventions within three years of a previous compounding order are not eligible, nor are serious cases like money laundering.

PENALTY PAYMENT:

The penalty must be paid within 15 days of the order. Failure to pay renders the compounding void and other penalties apply.

Section 15 provides an administrative way for individuals and entities to resolve FEMA breaches by paying a penalty, thus avoiding prolonged legal procedures.

R V SECKAR , FCS, LLB 79047 19295

RBI SAYS NO OVERSEAS FDI OR ODI IF OLD LAPSES NOT FIXED

2025-05-07T21:23:00.000-07:00

RBI SAYS NO OVERSEAS FDI OR ODI IF

OLD LAPSES NOT FIXED

The RBI will be cracking down on corporates with unresolved ODI of FDI violations, setting an August 25, 2025 deadline.

NON-RECTIFICATION PAST LAPSES

Companies failing to rectify past lapses face compounding or adjudication before making further foreign financial commitments.

FACE ADJUDICATION BY THE ENFORCEMENT DIRECTORATE

In an email sent in late April, the RBI instructed bank compliance heads to notify all corporate clients that failure to rectify past lapses by August 25, 2025, would require them to either undergo the compounding process or face adjudication by the Enforcement Directorate before making any further foreign financial commitments, according to banking industry sources.

WHAT ARE THE UNREPORTED ODIs

· Incorporating an offshore subsidiary company

· Acquiring a stake in an unlisted foreign company

· Acquiring in excess of 10% of any foreign listed company

· Extending loans or guarantee to a foreign company

At present an company Indian company can invest as ODI 4 times of its net-worth.

Contraventions pertain to a company’s failure to disclose financial details of earlier ODIs either inadvertently or due to lack compliance.

Now companies have to rectify past lapses by August 25, 2025 else they can not make any further ODI investments.

R V Seckar FCS , LLB 79047 19295

RBI CAPS FEMA VIOLATION PENALTY AT RS 2 LAKH TO SIMPLIFY COMPLIANCE BURDEN

2025-05-07T21:20:00.000-07:00

RBI CAPS FEMA VIOLATION PENALTY AT

RS2 LAKH TO SIMPLIFY COMPLIANCE

BURDEN

RBI CAPS FEMA VIOLATION PENALTY AT RS 2 LAKH TO SIMPLIFY COMPLIANCE BURDEN

PENALTY FOR FEMA VIOLATIONS NOW

CAPPED -RBI

RBI has capped the penalty amount for FEMA violations to Rs 2 lakh, down from a percentage of the amount of violations earlier in an easing of regulations. Violations including

· use of liberalised remittance scheme (LRS) proceeds not reinvested within 180 days,

· exports not made within one year of advance receipt

· and gifting high value shares without RBI permission will now be penalised to a maximum of Rs 2 lakhs versus 0.30% to 0.75% of the violation amount earlier.

AMENDMENT TO MASTER CIRCULAR BY RBI

The changes were made in the master directions on FEMA by RBI on Thursday. “…based on the nature of contravention, exceptional circumstances/ facts involved in case, and in wider public interest, the maximum compounding amount imposed may be capped at Rs 2 lakh for contravention of each regulation/ rule (applied in a compounding application)…” RBi said.

FEMA rules prevents for example

· Foreign property to be bought on a mortgage abroad,

· Overseas direct investment (ODI) sale without a valuation report

· or ODI sale proceeds not repatriated within 90 days,

· resident Indians gifting high value shares to non-resident relatives without RBI permission

· and agricultural property purchases by NRIs.

“Rationalization of the penalty amount would significantly ease the burden on individuals and corporations involved in high-value contraventions.

Key Highlights of the New FEMA Penalty Framework

Penalty Cap: The maximum penalty for any FEMA contravention has been capped at ₹2 lakh.

Reporting Contraventions: For reporting-related violations, such as non-submission or delayed submission of forms like FCGPR, FLA Returns, or APR, the penalty structure is as follows:

Fixed Amount: ₹10,000 per contravention.

Variable Amount: Calculated based on the amount involved and the duration of the contravention.

Ceiling: The total penalty is subject to a ceiling of ₹2 lakh.

Project Offices: For Project Offices, the penalty is calculated at 10% of the total project cost.

Non-Reporting Contraventions: For other violations, such as non-allotment of shares or contraventions by Liaison Offices (LO), Branch Offices (BO), or Project Offices (PO), the penalty includes:

Fixed Amount: ₹30,000 per contravention.

Variable Amount: A percentage of the amount under contravention, varying based on the duration of the contravention.

Ceiling: The total penalty is subject to a ceiling of ₹2 lakh.

Benefits of the Revised Framework

Simplified Compliance: The cap on penalties reduces the financial uncertainty for businesses, making it easier to comply with FEMA regulations.

Encouragement for Voluntary Compliance: The predictable penalty structure encourages businesses to voluntarily rectify violations without prolonged litigation.

Streamlined Procedures: The revised framework aims to expedite the compounding process, reducing administrative delays.

These changes are part of the government's broader initiative to ease the compliance burden on businesses and promote a more investor-friendly environment.

If you require assistance in calculating potential penalties for specific contraventions or need guidance on the compounding process, feel free to ask.

Courtesy: ECONOMIC TIMES

R V SECKAR FCS,LLB 79047 19295

HOW CAN INDIAN RESIDENTS ACQUIRE FOREIGN ASSETS THROUGH GIFT CITY , AHAMADABAD UNDER LRS SCHEME AND GIFT CITY FACILITATES ALL FINANCIAL TRANSACTIONS IN INDIA USING FOREIGN CURRENCY TO NON-RESIDENTS

2024-12-30T04:24:00.000-08:00

HOW CAN INDIAN RESIDENTS ACQUIRE FOREIGN ASSETS THROUGH GIFT CITY , AHAMADABAD UNDER LRS SCHEME AND GIFT CITY FACILITATES ALL FINANCIAL TRANSACTIONS IN INDIA USING FOREIGN CURRENCY TO NON-RESIDENTS

WHAT IS GIFT CITY?

GIFT City is short for GUJARAT INTERNATIONAL FINANCE TEC-CITY. Situated close to Ahmedabad, GIFT City facilitates all financial transactions in India using foreign currency (not Indian rupees).

Though it is located within India, it is considered a jurisdiction separate from the rest of India.

INTERNATIONAL FINANCIAL SERVICES CENTRES (IFSC)

Countries aspire for other countries to conduct international transactions within their borders because it can fuel economic growth and bring foreign capital into the country. So, some countries set up International Financial Services Centres (IFSC) within their territory, facilitating such transactions.

DUBAI INTERNATIONAL FINANCIAL CENTRE

One that is close to us and widely known is DIFC – Dubai International Financial Centre. GIFT City is India’s first IFSC centre.

TAX ADVANTAGES

NRIs can invest in foreign currencies without converting to Indian rupees. Numerous tax advantages are also given to such investments to attract more investors and capital.

WHAT ARE THE BENEFITS OF TRADING/INVESTING IN GIFT CITY?

The central government has exempted capital gain tax on the transfer of the following securities listed on a recognized stock exchange located in IFSC for non-residents –

(i) Foreign currency-denominated equity share of a company;

(ii) Foreign currency-denominated bond;

(iii) Bullion depository receipt;

(iv) Unit of investment trust; (v) unit of a scheme;

(v) Unit of an Exchange Traded Fund launched under IFSCA FME Regulations, 2022.

· Exemption from requirement to obtain PANS by certain non-residents who qualify as foreign investors, subject to fulfilment of certain conditions.

· Exemption from stamp duty for transactions carried out on the IFSC exchanges.

· Exemption from commodities transaction tax and securities transaction tax in respect of transactions carried out on the IFSC exchanges.

RESIDENTS CAN INVEST IN FOREIGN STOCKS

While there are no tax benefits specifically for Indian residents, it allows investment in foreign stocks or Unsponsored Depository Receipts (representing foreign shares) that are being traded on the exchange in the GIFT City.

DECLARATION BY RESIDENTS FOR INVESTMENT IN FOREIGN SHARES OR INVESTMENTS

Schedule FA section of the Income Tax Return (ITR) form requires residents and ordinary residents to disclose details of any beneficial interests held in foreign bank accounts or other overseas investments.

NON-DISCLOSURE ATTRACTS PENALTY

Non-disclosure or incorrect reporting of foreign assets can attract severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, with fines going up to ₹10 lakh.

INDIAN RESIIDENTS CAN INVEST IN FOREIGN STOCK UP TO $250000 PER ANNUM IN FOREIGN ASSETS OR FOREIGN STOCKS THROUGH LRS SCHEME.

IFSCA has provided much-needed clarity on operational aspects for opening bank accounts in GIFT IFSC under the LRS route through various circulars. Accordingly, remittances under the LRS route to GIFT IFSC are likely to pick up and therefore, disclosure requirements under Schedule FA need to be carefully evaluated. While the regulations are still evolving, it’s crucial to tread carefully and seek professional advice.

R V Seckar FCS, LLB

79047 19295

rvsekar2007@gmail.com

NRI’s Rupees 3 crores gift to his mother is genuine, not taxable and cannot be treated as unexplained cash credit under Section 68 of the I-T Act – Held ITA Tribunal

2024-12-11T07:01:00.001-08:00

NRI’s Rupees 3 crores gift to his mother is

genuine, not taxable and cannot be treated as

unexplained cash credit under Section 68 of the

I-T Act – Held ITA Tribunal

NOT A CIRCULAR TRADING TRANSACTION

The Mumbai ITAT ruled in favor of a taxpayer who received a ₹3 crore gift from her NRI son. The I-T department questioned the gift's legitimacy, alleging a circular trading transaction, but the tribunal upheld the gift's validity due to the son's proven financial capacity and dismissed the circular trading claim by ITO.

The gift is from a NRI son, who is a prominent hedge fund operator based in Hong Kong.

The IT officer sought to tax this sum in the hands of the mother.

GIFTS EXCEEDING RS 50,000 ARE TAXABLE

Under the I-T Act, gifts exceeding Rs 50,000—barring for events such as marriage are generally taxed in the hands of the recipient at the applicable slab rates under the head ‘Income from Other Sources'.

GIFTS MADE TO CLOSE RELATIVES ARE NOT TAXABLE IN THE HANDS OF THE RECIPIENT

However , gifts made to close relatives are not taxable in the hands of the recipient.

UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE I-T ACT

I-T officer treated the Rs 3 crore received by the mother as unexplained cash credit under Section 68 of the I-T Act and sought to tax it in her hands. Tax laws prescribe for a higher rate of 60% (plus cess and surcharge) on sums classified as unexplained cash credit.

This action by the I-T officer was dismissed by the commissioner (appeals), but the I-T department went ahead and filed an appeal with the ITAT.

A COLOURABLE DEVICE

As per IT department a subsequent grant of an unsecured loan given by the mother to an Indian company was a colourable device to invest in the Indian security market—it was a circular trading transaction .

GIFT RECEIVED AND RETURNED BACK

The gift amount was received in 2010-11 and in 2012-13, this sum was returned to her son.

ITAT viewed that "The actions of the recipient (mother) of investing the gift amount in an Indian company and subsequently returning the funds to her son are unrelated to the issue of addition under Section 68."

EARLIER RULINGS ON GIFTS RECEIVED

· This ruling follows a similar August 2024 decision, where the Mumbai ITAT held that a Rs 20 lakh gift from a UAE-based NRI to his sibling in India was not taxable.

· GIFT RECEIVED FROM NRI BROTHER CAN BE EXCLUDED FROM TAXATION AND NOT TAXABLE : INCOME TAX APPELLATE TRIBUNAL

https://rvseckarfema.blogspot.com/2024/08/gift-received-from-nri-brother-can-be.html

KEY HIGHLIGHTS ON UPDATE IN RBI MASTER DIRECTIONS FOR OVERSEAS INVESTMENS (OI) BY INDIVIDUALS UNDER FEMA

2024-12-04T20:33:00.000-08:00

KEY HIGHLIGHTS ON UPDATE IN RBI

MASTER DIRECTIONS FOR OVERSEAS

INVESTMENS (OI) BY INDIVIDUALS

UNDER FEMA

https://www.linkedin.com/pulse/key-highlights-update-rbi-master-directions-overseas-oi-r-v-seckar-jvf1c/

Courtesy : Greenlife

R V Seckar , FCS , 79047 19295

rvsekar2007@gmail.com

FEMA :- NRE and NRO Account Guide

2024-12-01T20:48:00.001-08:00

FEMA :- NRE and NRO Account Guide

https://www.linkedin.com/pulse/fema-nre-nro-account-guide-r-v-seckar-ggcoc/

1) NRE Account is rupee denominated account, funds deposited in it must originate from foreign sources.

2) NRP Account is rupee denominated account, funds can be deposited from foreign sources and India.

3) NRO accounts are restrictive in nature

.4) Many NRI open NRO account even if they have NRE account, they do no use it often and they do in piecemeal.

5) To transfer the money from an NRO to an NRE account or to a foreign account, NRI need documentary proof of the source of funds being used for repatriation. They need to fill in form 15CA.

6) Some transactions require form 15CB and CA certificate. In many cases, only form 15CA is needed. If 15CA Part A, B or D is provided, it does not require Form 15CB or CA certificate.Form 15CB is required only in the case of Form 15CA part C

.Source: Hindustan Times

SEBI STUDY UNCOVERS ALARMING TRENDS IN ROYALTY PAYMENTS BY LISTED COMPANIES- EVEN LOSS MAKING COMPANIES ARE ALLOWED TO PAY ROYALTIES

2024-11-26T03:52:00.005-08:00

SEBI STUDY UNCOVERS ALARMING TRENDS IN ROYALTY PAYMENTS BY LISTED COMPANIES- EVEN LOSS MAKING COMPANIES ARE ALLOWED TO PAY ROYALTIES

ROYALTY AND FOREIGN TECHNICAL COLLABORATION PAYMENT

Royalty and Foreign Technical collaboration payment are governed by the RBI circular AP ( DIR Series) Circular No 5 dated 21 July 2003.

LIBERALIZED THE FOREIGN TECHNOLOGY COLLABORATION AGREEMENT POLICY

Under liberalized the foreign technology collaboration agreement policy through Press Note No 2 (2003 Series) dated 24 -06-2003 , irrespective of who have entered into foreign technology collaboration agreements were permitted on the automatic approval route to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of royalty payments.

AUTOMATIC ROUTE:

The Government of India has reviewed the extant policy vide the press note no 8 (2009 series ) dated 16th December 2009 and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route without any limit as stated in the following table i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

With effect from16-12.2009, after issue of Press Note 8 (2009 series)

For more details , please visit the following link:

https://rvseckarfema.blogspot.com/2011/02/foreign-technology-colloborations.html

ROYALTY PAYMENTS EVEN BY LOSS MAKING COMPANIES

In one out of four times, listed entities paid royalties exceeding 20% of their net profits to related parties.

And 185 instances of royalty payments were by companies that made losses.

SEBI Study found that some listed companies dolled out more than 20 per cent of their net profits as royalty to related parties.

SEBI study analysed 233 listed companies over a period of ten years, starting from financial year 2014 (FY14).

LESS THAN 5% AND MORE THAN 5%

SEBI study found 1,538 instances of royalty payments (RPs) below the approval requirement threshold, which is set at 5 per cent of the turnover.

Royalty payments of more than 5 per cent of the turnover must be ratified by majority of minority shareholders.

The cumulative 185 royalty payments by 63 loss-making companies amounted to Rs 1,355 crore.

SKIPPING OF DIVIDEND PAYMENT

Further, one out of two times, listed companies that paid royalty, did not pay dividend or paid more royalty to RPs than dividend paid to non-RP shareholders, the study revealed.

POOR DISCLOSURE LEVELS, UNFAIR PAYOUTS

SEBI’s study throws a light on poor disclosure levels, unfair payouts and unjustified payments for brand usage and technology know-how by these companies.

“In case of MNCs, shareholders of the Indian subsidiary have little information on the rates of royalty being charged from fellow subsidiaries in other geographies,” SEBI study said.

NO ADEQUATE DISCLOSURES IN ANNUAL REPORT

The SEBI study stated, "It has been observed that many of the companies are disclosing the royalty payment just as an item under the statement of transactions with RPs in the Annual Report, with no details being provided with respect to the rationale and rate of such royalty paid."

NON-DISCLOSURE OF PERIOD OF ROYALTY PAYMENTS

The SEBI study stated that the companies seeking approval of shareholders with respect to royalty payments, are not disclosing period or tenure of approval of such transactions. This is suggestive of the company seeking a perpetual approval for transactions."

ROYALTY PAYMENTS IN EXCESS OF 20% OF NET PROFITS

When analyzing consistent royalty payers, of which there were 79 companies, the study found that eleven out of them consistently paid royalty exceeding 20% of net profits during all the 10 years.

MY VIEWS:

· Government should ban the loss making companies to pay royalties as it will diminish the forex reserves of the nation. Only profit making companies should be allowed to pay royalties.

· In Directors Report , there should be a report on royalty paid , rate of royalty paid , turnover on which royalty paid so that shareholders will come to know the details about the royalties paid.

· Audit committee should thoroughly scrutinize the amount of royalty paid, the justification for the payment .

Courtesy : SEBI STUDY REPORT

R V SECKAR, FCS 4075, 7904719295

#GIFT RECEIVED FROM NRI BROTHER CAN BE EXCLUDED FROM TAXATION AND NOT TAXABLE : INCOME TAX APPELLATE TRIBUNAL

2024-08-24T23:54:00.000-07:00

GIFT RECEIVED FROM NRI BROTHER CAN BE EXCLUDED FROM TAXATION AND NOT TAXABLE : INCOME TAX APPELLATE TRIBUNAL

#DISH TV PENALISED BY BSE, NSE FOR LACKING BOARD STRENGTH

2024-08-24T23:48:00.000-07:00

#DISH TV PENALISED BY BSE, NSE FOR LACKING BOARD STRENGTH

#NFRA LEVIED A HEFTY RS 10-CR PENALTY ON BSR & ASSOCIATES AUDIT FIRM IN COFFEE DAY CASE AND DEBARS TWO OF ITS AUDITORS.

2024-08-24T23:29:00.000-07:00

#NFRA LEVIED A HEFTY RS 10-CR PENALTY ON BSR & ASSOCIATES AUDIT FIRM IN COFFEE DAY CASE AND DEBARS TWO OF ITS AUDITORS.

#GOVT SIMPLIFIES FDI RULES TO HELP INDIAN COMPANIES EXPAND VIA MERGERS, ACQUISITIONS THROUGH SHARE SWAPS

2024-08-17T15:58:00.000-07:00

#GOVT SIMPLIFIES FDI RULES TO HELP

INDIAN COMPANIES EXPAND VIA

MERGERS,ACQUISITIONS THROUGH

SHARE SWAPS

The Finance Ministry on Friday issued a notification amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, to simplify FDI rules for enabling easier cross-border share swaps between Indian and foreign companies.

In an important amendment to the FEMA (Non Debt Instruments) Rules, 2019, which deal with foreign investment in Indian entities, it is now permitted to issue shares by an Indian company against swap of equity capital of an overseas company.

Earlier:

1. An Indian company could issue its own equity shares to a non-resident/ foreign entity against acquisition of shares of an “Indian company”; or

2. An Indian company could sell its equity capital in an overseas entity to an overseas company against shares being issued by such overseas acquirer to the Indian company.

ODI-FDI Share Swap not permitted earlier:

However, in a non-cash transaction involving share swap, issuance of shares by an Indian company to a non-resident/ foreign entity against acquisition of shares of an overseas company owned by such foreign seller was not permitted.

Effective Share Swap:

While an effective swap could be effectuated through acquisition of an overseas company from a foreign entity by the Indian company for cash consideration, and thereafter issuance of shares by the Indian company to the overseas seller against cash consideration, complications in terms of conceptualising the construct of binding documents and foreign exchange loss arose.

With this amendment, a direct swap is now permissible, and logically so, the said complications could now be addressed.

It sounds like RBI wants to facilitate acquisition offshore but not the capital flow? Effectively a company in India wanting to set up a WoS could identify a target & share swap to own it - with little or no cash considerations?

https://pib.gov.in/PressReleasePage.aspx?PRID=2046086

NEW FLA FORM HAS BEEN INTRODUCED BY RBI UNDER FEMA. LATE DATE FOR FILING FLAIR FORM THROUGH WEB BASED SYSTEM TO RBI IS 15 JULY 2019.

2019-06-29T00:37:00.001-07:00

Dear Friends,

NEW FLA FORM HAS BEEN INTRODUCED BY RBI UNDER FEMA. LATE DATE FOR FILING FLAIR FORM THROUGH WEB BASED SYSTEM TO RBI IS 15 JULY 2019.

For more details , please click the following link:

https://docs.google.com/presentation/d/1GxJWpIwk-qrioqlsudWVva5PCE11qfQs3wl8TignjmU/edit?usp=sharing

R V Seckar

Practicing Company Secretary

rvsekar2007@gmail.com

07904719295

Process Of Raising Funds Through Non-Convertible Debentures by an Indian Company from NRIs

2019-05-18T10:22:00.000-07:00

Process Of Raising Funds Through Non-Convertible Debentures by an Indian Company from NRIs

Dear All,

In this video , I am going to explain the procedures for obtaining loan by an Indian Company either on repatriation basis or non-repatriation basis from NRIs for their own business purposes.

For details , please click the following video link:

https://youtu.be/SwFzw42v1ZU

R V Seckar

Practicing Company Secretary

rvsekar2007@gmail.com

7904719295

NOW INDIAN COMPANIES WHO ARE IN CIRP PROCESS CAN USE ECB TO REPAY THEIR RUPEE TERM LOAN.

2019-02-19T20:11:00.000-08:00

NOW INDIAN COMPANIES WHO ARE IN CIRP PROCESS CAN USE ECB TO REPAY THEIR RUPEE TERM LOAN.

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph 1 of the Statement on Developmental and Regulatory Policies of the Sixth Bi-monthly Monetary Policy Statement for 2018-19 dated February 07, 2019.

RELAXATION

2. In terms of paragraph 2.1.(viii) of the Annex to the A.P. (DIR Series) Circular No. 17, dated January 16, 2019 on “External Commercial Borrowings (ECB) Policy – New ECB Framework”, ECB proceeds cannot be utilised for repayment of domestic Rupee loans, except when the ECB is availed from a Foreign Equity Holder as defined in the aforesaid framework.

NOW , ECB CAN BE RAISED TO REPAY THE RUPEE TERM LOAN BY COMPANIES UNDER CIRP

3. On a review it has been decided, in consultation with the Government of India, to relax the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP) and allow them to raise ECBs from the recognised lenders, except the branches/ overseas subsidiaries of Indian banks, for repayment of Rupee term loans of the target company under the approval route. Accordingly the resolution applicants, who are otherwise eligible borrowers, can forward such proposals to raise ECBs, through their AD bank, to Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval.

4. All other provisions of the ECB policy remain unchanged. AD Category – I banks should bring the contents of this circular to the notice of their constituents and customers. The amended ECB policy will come into force with immediate effect.

5. The directions contained in this circular have been issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully

Ajay Kumar Misra
Chief General Manager-in-Charge

REPORTING FDI ( FOREIGN DIRECT INVESTMENTS) TO RBI UNDER SMF AND FIRMS

2019-02-02T19:09:00.000-08:00

REPORTING OF FOREING INVESTMENTS TO RBI UNDER SMF AND FIRMS

Reserve Bank of India has issued a Circular dated June 7, 2018- introducing Single Master Form [SMF] with an objective of integrating the existing reporting norms for various types of foreign investment in India. Further, RBI vide notification dated August 31, 2018, has directed AD Banks that all the Foreign Investment reporting would be made on FIRMS RBI website in Single Master Form [SMF] w.e.f. September 1, 2018.

INTRODUCTION:

As per Regulation 2(xviii) of the FEMA 20(R) - ‘Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP;

As per Regulation 2(xvii) of the FEMA 20(R) “Foreign Direct Investment? (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company, or in 10 percent or more of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company;”

Single Master Form subsumed 9 reporting Forms, such as FCGPR, FC-TRS, Form LLP-I, Form LLP-II, Form ESOP, Form CN, Form ODI and Form InVi.

S.N0	Type of Form	Full Form	Applicability Form
01	Form- FC-GPR	Foreign Currency – Gross Provisional Return	Issue of capital instruments by an Indian company to a person resident outside India
02	Form- FC-TRS	Foreign Currency – Transfer of Shares	Transfer of capital instruments between a person resident outside India and a person resident in India
03	Form LLP-I	Limited Liability Partnerships-I	Foreign direct investment in an LLP through capital contribution and profit shares;
04	Form LLP-II	Limited Liability Partnerships-II	Disinvestment or transfer of capital contribution and profit shares in an LLP
05	Form ESOP	Employees’ stock option Scheme	Issue of employee stock options, sweat equity shares or shares against the exercise of employee stock options by an Indian company to an employee resident outside India
06	Form CN	Convertible Notes	Issue or transfer of convertible notes;
07	Form DRR	Depository Receipts	Issue or transfer of depository receipts;
08	Form DI	Downstream Investment	Reporting of downstream investment or indirect foreign investment in a company or an LLP; and
09	Form InVi	Investment Vehicle	Reporting of investment by a person resident outside India in an investment vehicle

Procedure to be followed for reporting of SMF

Step 1: Register as Entity User

· Creation of Entity Master is the first step towards reporting under Single Master Form.

The RBI portal for registration in Entity Master can be accessed here: https://firms.rbi.org.in

· To register on Entity Master, the reporting Indian entity must authorize a single person to act as Entity User?, by issuing an authority letter in his favor.

· Please refer to the format of authority letter at the end of the User Manual. The Entity User will be solely responsible for the information reported and shall be the point of contact for RBI, w.r.t. foreign investment in the entity.

Step 2: Register as Business User

· The Business User will register itself on FIRMs and select the IFSC code of the bank which would approve the eKYC and the reporting would be made in SMF. In case the IFSC details are changed.e BU wishes to submit the reporting to another branch or another bank, the entity being the same, he/she needs to repeat the registration process for a Business user with the new IFSC code and obtain separate Login.

1. Go to the FIRMS website at https://firms.rbi.org.in

2. At the Login box, click on the Registration form for New Business User.

3. Fill up the details in the popped up registration form for BU;

4. Click Submit button. In case any error is displayed, rectify the same and click the Submit button.

5. A Message “Record Saved Successfully” is displayed at the top of the Login box.

DOCUMENTS REQUIRED TO BE ATTACHED TO THE SMF
S.NO	Type of Form	When to File	Attachments	Remarks
1	For FCGPR	Within 30 days from the date of allotment	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Report	File Size Allowed 1 MB
			d. CS Certificate	Merge into one file & File size shall not exceed 1 MB
			e. Board Resolution
			f. Terms of CCPS & Shareholding Pattern
			g. Declaration Letter-By authorized a representative of Indian Company
			h. Reason for the delay- If any
			i. Debit advice note or Swift Message- In case of Excess amount received
			In case the inward remittance received from a different person [i.e from other than Investor] following documents required to be attached :	File Size Allowed 1 MB
			(a) KYC reports of both the remitter and the beneficial owner.
			(b) A no-objection certificate (NOC) from the remitter for issuing capital instruments to the beneficial owner mentioning their relationship.
			(c) A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf.
			(d) A copy of agreement/board resolution from the investee company for issuing capital instruments to a person other than from who the remittance has been received.

2	For FC-TRS	Within sixty days of the transfer of capital instruments or receipt/ remittance of funds[ whichever is earlier.]	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Report	File Size Allowed 1 MB
			d. Buyer Consent Letter	Merge into one file & File size shall not exceed 1 MB
			e. Seller Consent Letter
			f. FEMA Declaration & Other attachments
			g. Declaration by Auth Representative- i.e Director
			h. Debit Authorization Letter if any
			i. Declaration by the non-resident transferor or transferee
			j. Reason for Delay - If any

3	Form LLP-1	within 30 days from the date of receipt of the amount of consideration	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			d. Other Relevant Attachments if any

4	Form LLP-2	within 60 days from the date of receipt of funds	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Certificate	File Size Allowed 1 MB
			d. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			e. Other Relevant Attachments if any

5	Form CN	within 30 days of issue/ transfer	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			d. Other Relevant Attachments if any

6	Form ESOP	within 30 days from the date of issue	a. CS Certificate	File Size Allowed 1 MB
			b. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			c. Other Relevant Attachments if any

7	Form DRR	Within 30 days of close of the issue/ program.	a. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			b. Other Relevant Attachments if any

8	Form DI	Within 30 days from the date of allotment of capital instruments.	a. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			b. Other Relevant Attachments if any

Delays in Reporting:

a) The person/ entity responsible for filing the reports provided in Part IV of this Master Directionshall be liable for payment of late submission fee (LSF) for any delays in reporting.

(i) The LSF shall be applicable to the transactions undertaken on or after November 7, 2017.

(ii) The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure.

b) Calculation and Payment of LSF:

(i) Where LSF is required to be paid, the reports shall be, wherever necessary, conditionally acknowledged subject to payment of the LSF. The final acknowledgment/ communication, wherever applicable, shall be given after the late submission fee is paid by the applicant.

(ii) The amount of LSF will be as per the following Matrix:

Amount involved in reporting	Late Submission	Maximum amount of LSF
(in Rs.)	Fee (LSF) as % of	Applicable
	amount involved *
Up to 10 million	0.05 percent	Rs.1 million or 300% of the
		amount involved, whichever
		is lower
More than 10 million	0.15 percent	Rs.10 million or 300% of the
		amount involved, whichever
		is lower

* The % of LSF will be doubled every twelve months the floor (minimum applicable amount) for LSF will be Rs 100

(iii) For calculating the LSF amount, the period of contravention shall be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}.

(iv) For the purpose of calculation, “months” shall include Sundays/ Holidays

(v) For the purpose of calculation, the period shall begin from the day after the 30th day (from the date of receipt of funds/ allotment or transfer of shares) and end on the day preceding the day on which the transaction report is received in the Reserve Bank The date of reporting to the AD bank shall be deemed to be the date of reporting to the Reserve Bank provided the prescribed documentation is complete in all respects.

(vi) In case the reporting form (whether in physical or electronic form) is incomplete then the delay will continue till such time the form is received completely in all respects.

(vii) The applicant cannot claim a refund in any manner for the amount already deposited as LSF. It will, therefore, be in the applicant’s own interest to ensure compliance with the reporting norms and timelines.

The LSF may be paid by way of a demand draft drawn in favor of “Reserve Bank of India” and payable at the Regional Office concerned.

Courtesy : CSThukaram Jadhav

RBI NOTIFICATION-ALL NEW FILINGS FOR FC-GPR , FC-TRS , LLP-I , LLP-II AND CN WILL BE IN SMF ONLY W.E.F SEPTEMBER 01, 2018. FC-GPR AND FC-TRS SHALL NOT BE FILED ON EBIZ

2018-09-01T20:57:00.000-07:00

RBI NOTIFICATION-ALL NEW FILINGS FOR FC-GPR , FC-TRS , LLP-I , LLP-II AND CN WILL BE IN SMF ONLY W.E.F SEPTEMBER 01, 2018. FC-GPR AND FC-TRS SHALL NOT BE FILED ON EBIZ

PENDING FCGPR/ FCTRS IN e-biz

As you aware , RBI with the objective of integrating extant reporting structure of various types of foreign investment in India would introduce a Single Master Form (SMF) which would be available online from September 1 ,2018.

Hitherafter FCGPR –FCTRS has to be filed in Form SMF

Hitherafter , all FEMA compliances and reporting to be made through RBI website https://firms.rbi.org.in in Form SMF.

NO MORE AVAILABILITY OF e-biz PORTAL FOR FILING

At present , FCGPR / FCTRS filing is carried through on e-biz portal. Due to launching of SMF portal on 1 Septemeber ,2018 , e-biz portal would no longer be available for filing. All the Banks are advised to all filings pending for disposal in the e-biz portal at the earliest on or before 20 Septemebr 2018. All Banks should send a weekly report to this effect has to be forwarded to Regional Office , RBI , FED giving detaisl fo cases pending and cases cleared , for monitoring.

ALL PENDING FILING CASES

Further , it is also observed that many cases are pending at the company / entity level for resubmission with clarification or additional documents. You are therefore , advised to immediately inform all your clients who have received foreign investment to ensure that cases where resubmission was to be done should be done within one week with complete documents failing which it would not be possible for us to treat the FCGPR as filed.

To Provide Reasons for not Filing

Further, where the entities have not been able to register for the Entity master, they may do so from September 01, 2018. However, they may provide the reasons for not registering within the time period along with the authority letter.

Ref : RBI Circular FE.CO.FID/1282/10/02/035/2018-19 dated 31 August ,2018

Foreign investment in India - Reporting in Single Master Form

2018-06-28T00:27:00.000-07:00

Dear All ,

Foreign investment in India - Reporting in Single Master Form

For details click the following:

https://drive.google.com/file/d/1uX_RtDUJcEfRUsM2WPP1i3gE5OVj5Uei/view?usp=sharing

The Interface for uploading the Single Master Form is available in the following link:

https://firms.rbi.org.in

Regards

R V Seckar

https://drive.google.com/file/d/1uX_RtDUJcEfRUsM2WPP1i3gE5OVj5Uei/view?usp=sharing

DEADLINE REMINDER - LAST DATE FOR FILING OF FLA RETURN UNDER FEMA FALLS ON 15 JULY 2018

2018-06-25T21:36:00.001-07:00

DEADLINE REMINDER - LAST DATE FOR FILING OF FLA RETURN UNDER FEMA FALLS ON 15 JULY 2018

RBI INTRODUCES CHANGES IN THE ECB MONTHLY REPORTING THROUGH ECB 2 RETURN

2018-06-08T04:11:00.002-07:00

RBI INTRODUCES CHANGES IN THE ECB MONTHLY REPORTING THROUGH ECB 2 RETURN

CHANGES IN PART E.1 and E.2 OF ECB 2 MONTHLY RETURN

It has been decided to capture the details of the hedges for ECBs through a simplified format of ECB 2 Return. Part E of the Return, accordingly, is modified so as to include only standard information on hedged/unhedged ECB exposure (Annex).

Details of hedging in Part E.1 of the Return and foreign exchange earnings and expenditure in Part E.2 of the Return should be furnished in additive format.

Further, for reporting in respect of natural hedge, provisions contained in paragraph 2 (iii) of A.P. (DIR Series) Circular No. 15 dated November 07, 2016 should be followed.

REVISED FORM ECB-2 WILL BE WITH EFFECT FROM END OF JUNE 2018

Revised monthly reporting format of ECB 2 Return would be applicable from month-end June 2018.

Any Lapse will be considered as a Contravention under FEMA

It is reiterated that any lapse at the time of reporting through this return and / or failure to adhere to the time line of its submission and / or any lapse at the time of reporting through Form 83 is a contravention of the provision of Foreign Exchange Management Act, 1999 (42 of 1999).

PROVIDING PRACTICING COMPANY SECRETARIAL SERVICES

For more details, please click the following link

https://www.linkedin.com/company/r-v-seckar-co-practicing-company-secretary/

RBI INTRODUCES SINGLE MASTER FORM (SMF) FOR REPORTING Foreign investment in India(FDIs) .

2018-06-07T20:17:00.002-07:00

RBI INTRODUCES SINGLE MASTER FORM (SMF) FOR REPORTING Foreign investment in India(FDIs) .

The Main Objective of SMF FORM

With an objective of integrating the extant reporting structures of various types of foreign investment in India, RBI will introduce a Single Master Form (SMF).

The SMF would be filed online.

SMF for Direct FDI and through Investment Vehicle Route

SMF would provide a facility for reporting total foreign investment in an Indian entity {as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2017, dated November 7, 2017}, as also investment by persons resident outside India in an Investment Vehicle.

Prior to implementation, RBI will provide an interface to Indian entities to input data on foreign investment in specified format between June 28, 2018 to July 12, 2018.

OFFERING SERVICES AS PRACTICING COMPANY SECRETARY

TO KNOW MORE ABOUT FOR ALL YOUR COMPANY SECRETARIAL NEEDS , PLEASE CLICK THE FOLLOWING LINK:

https://www.linkedin.com/company/r-v-seckar-co-practicing-company-secretary/

NON-COMPLAINT INDIAN COMPANIES

CANNOT RECEIVE FDIs

Entities not complying with this prerequisite will not be able to receive foreign investment and will be non-compliant with FEMA,1999.

The entities may be in readiness with the requirements to be provided in the Entity Master at Annex 1. The format of the SMF is at Annex 2. The final form, when hosted, will be available in the Master Direction-Reporting under FEMA, 1999.

ENTITY MASTER DATA -Annex I

1. All Indian Entities needs to provide till date all the foreign investments received by them which will be called Entity Master Data and the format is provided in Annex 1 of said notification.

Subsequent Investments in Annex 2

2. For any subsequent foreign investments, an Integrated reporting structure of various types of foreign investment introduced which will be called Single Master Form (SMF). The format of the SMF is at Annex 2 of said notification.

Important Amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018

2018-06-04T20:31:00.000-07:00

Important Amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018

The following are some of the important amendments made by RBI recently.

1.Prior Approval is needed for FDIs in investing companies investing in NBFCs not registered with the Reserve Bank and in core investment companies

Foreign Investment in investing companies not registered as Non-Banking Financial Companies with the Reserve Bank and in core investment companies (CICs), both engaged in the activity of investing in the capital of other Indian entities, will require prior Government approval.

2.100% Automatic Route for FDIs in NBFCs registered with RBI

Foreign investment in investing companies registered as Non-Banking Financial Companies (NBFCs) with the Reserve Bank, will be under 100% automatic route.

3.Joint Audit in case Foreign Investor Prefers

Wherever the person resident outside India who has made foreign investment specifies a particular auditor/ audit firm having international network for the audit of the Indian investee company, then audit of such investee company shall be carried out as joint audit wherein one of the auditors is not part of the same network.”

OFFERING FOLLOWING SERVICES AS PRACTICING COMPANY SECRETARY

For details , Please click the following link:

https://rvseckarcompanylaw.blogspot.com/2018/04/corporate-compliance-services-r-v.html

4.FDIs in Airlines is now Restricted to 49% (other than NRIs) under Automatic route

(a) (i) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline
(ii) Regional Air Transport Service

100%

Automatic up to 49%
Government route beyond 49%
(Automatic up to 100% for NRIs and OCIs)

5.Foreign investment in M/s Air India Limited shall be subject to the following conditions:

i. Foreign investment in M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49% either directly or indirectly.

ii. Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.”

6.100% FDIs are Allowed in Real Estate Broking Business

Real estate broking services shall be excluded from the definition of “real estate business” and 100% foreign investment is allowed in real estate broking services under automatic route.”

_{7.FDI in Single Brand Retailing}

“(i) Single brand retail trading entity shall be permitted to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1st April of the year of the opening of first store, against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing shall mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year from India over the preceding financial year, by the non-resident entities undertaking single brand retail trading, either directly or through their group companies. After completion of this 5 years period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.”

_{8.Definition of Sourcing Norms}

“Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. Thereafter, condition mentioned at 15.3.1(e) above will be applicable. A Committee under the Chairmanship of Secretary, DIPP, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject will examine the claim of applicants on the issue of the products being in the nature of ‘state-of-art’ and ‘cutting-edge’ technology where local sourcing is not possible and give recommendations for such relaxation.”

9.Definition of Medical Devises under Pharmaceuticals

“in-vitro diagnostic device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system, whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of examination of specimens derived from the human bodies or animals.”

10.Issue of Shares for the materials imported or pre-operative expenses incurred is under Automatic Route

(4) An Indian company may issue, subject to compliance with the conditions prescribed by the Central Government and/or the Reserve Bank from time to time, capital instruments to a person resident outside India, if the Indian investee company is engaged in an automatic route sector, against:

a. Swap of capital instruments; or

b. Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or

c. Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

Provided Government approval shall be obtained if the Indian investee company is engaged in a sector under Government route. The applications for approval shall be made in the manner prescribed by the Central Government from time to time.

For full details , Please click the following link:

https://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=11240

Filing of Annual Return on Foreign Liabilities and Assets (FLA return) under FEMA 1999 Due date for filing of FLA Return with RBI is falling on 15th July 2018.

2018-05-24T20:02:00.002-07:00

Filing of Annual Return on Foreign Liabilities and Assets (FLA return) under FEMA 1999

Due date for filing of FLA Return with RBI is falling on 15th July 2018.

Who has to File ?

Indian resident companies which have received FDI and/ or made overseas investment (ODI) in any of the previous year(s), including current year by July 15 every year.

Whether Non Filing of FLA Return is an Offence under FEMA?

Yes. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.

Whether Company has to go for Compounding?

Yes. If FLA Return is not filed within 15^th July 2018 , Company has to go for compounding and has to pay penalty.

Whether FLA is to be filed even when Audited Accounts are not ready?

Yes. In that case , an Indian Company which has FDI or and ODI has to prepare the FLA on unaudited Financials of the company.

If a company did not receive FDI or made overseas investment in any of the previous year(s) including the current year, do we need to submit the FLA Return?

If the Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, the company need not submit the FLA Return.

If the company has not received any inward FDI / made overseas investment in the latest year, do they need to submit the FLA Return?

If the company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest year but the company has outstanding FDI and/or ODI, then that company is required to submit the FLA Return every year by July 15.

One Full day seminar on FEMA at Mumbai on June 2 ,2018

Please attend one Full day seminar on FEMA at Mumbai on June 2 ,2018 as only limited seats are available. Please rush your request immediately.

For more details , please click the following link:

http://rvseckarfema.blogspot.in/2018/05/one-full-day-seminar-on-fema-at-mumbai.html