Central legislation for inbound/outbound investments and international trade.
Key Definitions:
Foreign Exchange: Includes foreign currency, deposits, credits, and negotiable instruments in foreign currency [Section 2(n)].
Foreign Security: Securities denominated in foreign currency, including those with returns payable in Indian currency [Section 2(o)].
Person: Includes individuals, HUFs, companies, firms, associations, agencies, and juridical persons [Section 2(u)].
Person Resident in India: Defined based on physical presence (>$182$ days) and intention, with exclusions for employment/business abroad [Section 2(v)].
'Repatriate to India’ means bringing into India the realised foreign exchange.
Current Account Transactions:
All transactions that are not capital account transactions.
Include payments for short-term banking, interest on loans, investment income, remittances for living expenses, and travel/education/healthcare expenses.
Prohibited Transactions:
Remittances from lottery winnings or income from racing.
Payments for lottery tickets, banned magazines, football pools.
Commissions on exports under Rupee State Credit Route (exceptions for tea/tobacco).
'Call back service' payments and interest on Non-resident Special Rupee Scheme Accounts.
Transactions Requiring RBI Approval:
Donations exceeding $1\%$ of past 3 years' forex earnings or \$5,000,000, whichever is less.
Commissions to agents exceeding \$25,000 or $5\%$ of inward remittance for property sales.
Consultancy service remittances exceeding \$10,000,000 for infrastructure projects, \$1,000,000 for others.
Reimbursement of pre-incorporation expenses exceeding $5\%$ of investment or \$100,000, whichever is higher.
Liberalised Remittance Scheme (LRS):
Resident individuals can remit up to \$250,000 per financial year for permitted current or capital account transactions.
Not available to corporates, partnership firms, HUF, Trusts, etc.
Capital Account Transactions:
Transactions altering assets or liabilities outside India for Indian residents or in India for non-residents.
Examples: Investments in foreign securities, property transfers, loans, and guarantees [Section 6(3)(a)].
Repatriation of Foreign Exchange:
Must be brought into India and sold to an authorized person for rupees.
May be retained in an account with an authorized dealer, subject to RBI limits.
Can be used to discharge forex-denominated debts.
Surrender of Foreign Exchange:
Unspent forex from foreign travel (excluding individuals) must be surrendered.
Within 90 days if in currency notes/coins, 180 days for traveler's checks.
Remittance of Assets:
AD may allow remittance of assets by a foreign national (retired, inherited) up to $1 million per financial year
Remittance of Assets Requiring RBI Approval:
Exceeding \$1,000,000 per financial year due to legacy, bequest, or inheritance to a citizen of a foreign state.
Manner of Receipt and Payment:
Transactions between residents and non-residents must be through authorized banks/persons.
Trade with Nepal/Bhutan generally in Indian Rupees; with ACU countries via ACU mechanism.
Acquisition/ Transfer of Immovable Property by NRI or an OCI
NRIs/OCIs can purchase any immovable property in India (except agricultural land, plantation property, farm house).
Obligations of Exporters:
Furnish declaration of export value to RBI or authorized authority.
Adjudication and Appeal:
Central Government appoints Adjudicating Authorities for inquiries.
Appeals can be made to Special Director (Appeals), then to the Appellate Tribunal.
High Court appeal on questions of law within 60 days.
Directorate of Enforcement:
Enforces FEMA, investigates contraventions.
Contravention and Penalties:
Penalties up to three times the sum involved; confiscation of equivalent value.
Imprisonment up to 5 years with fine.
Contravention by Companies:
Every person in charge of the company is deemed guilty unless they prove lack of knowledge or due diligence.
Reserve Bank of India (RBI):
Empowered to issue directions to authorized persons.
Regulates currency, credit system, and foreign exchange.