Foreign Exchange Management Act (Fema): Any Branch, office and agency, which is situated outside India, but is owned or controlled by a person resident in India. Any contravention of provisions of FEMA, by all those, who are covered under above two aspects committed outside India. Categories & Status Of Different Persons: Broadly speaking FEMA, covers, three different types of categories, and deals differently with them. These categories are: A. Person: For the purpose of provisions, a person shall include any of the following: An individual A Hindu Undivided family A company A Firm An association of persons or a body of individuals, whether incorporated or not, Every artificial judicial person, not falling within any of the preceding sub clauses, and Any agency, office or branch owned or controlled by such person.
B. Person Resident In India: "A person resident in India", shall include any of the following A person who has been residing in India for more than 182 days, in the last financial year. This means if a person has to be assessed, as to whether he is person resident in India, for any offence committed in August 2001, then he should be residing in India for more than 182 days during April 2000 to March 2001 Any person or body corporate registered or incorporated in India, or An office, branch or agency in India owned or controlled by a person resident outside India, or An office, branch or agency outside India owned or controlled by a person resident in India.
However, in following cases a person shall not be person resident in India", even if he is residing in India for more than 182 days in the last financial year: (i) A person who has gone abroad, for :
Taking up employment outside India or
For carrying on any business outside India, or
For any other purpose, which itself would indicate his intention to stay outside India for an uncertain period.
(ii) Similarly, a person who has come to India for any purpose except :
Taking up employment in India, or
Carrying on any business in India, or
For any other purpose, which itself would indicate his intention to stay in India for an uncertain period.
C. Person Resident Outside India: Simply putting it, "a person resident outside India" means "a person who is not resident in India"
Implication On Different Categories Person Resident In India: Provision of FEMA, are applicable with different implication on Person resident in, and outside India.
With respect to " Person Resident in India", they are: A person who is resident in India, can acquire, hold, own possess or transfer any foreign Exchange, foreign security or any immovable property situated outside India, only according to FEMA
FOREIGN SECURITY: means any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency Transfer or issue of any foreign security by a person resident in India.
Any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India.
Deposits between persons resident in India and person resident outside India:
R.B.I. may make all these restrictions, in general or with respect to "Capital Account Transactions."
Capital Account Transactions: means a transaction, which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India. Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred, by a person resident in India and owed to a person resident outside India. Transfer of immovable property outside India, other than a lease not, exceeding five years, by a person resident outside India.
A person resident in India may hold, own transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
If any amount of foreign exchange has become due or has accrued to any person resident in India, then he shall take steps to realise and bring it back to India within the time frame and manner specified by Reserve Bank
Person Resident Outside India: Implications of FEMA, on "Person Resident outside India", are as follows: 1. For making any sort of payment in any manner, to a "person resident outside India", provisions of FEMA has to be complied, and also general or special permission of Reserve Bank is required Similarly, for receiving any payment by order or on behalf of any "person resident outside" in any manner, provisions of FEMA has to be complied, and also general or special permission of Reserve Bank is required. The Reserve Bank may prohibit, restrict or regulate any of the following
Transfer or issue of any security by a person resident outside India. Transfer or issue of any security or foreign security by any branch, office or agency in India of a "person resident outside India." Any borrowing or lending in rupees in whatever name called between a "person resident in India" and a "person resident outside India".
Deposit between "persons resident in India" and "persons resident outside India"
Acquisition or transfer of immovable property in India other than a lease, not exceeding five years, by a person resident outside india. Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred, by a person resident outside India.
The Reserve Bank of India may also regulate the above noted activities, with respect to "Capital Account Transactions". A "person resident in india" may hold, own, transfer or invest in foreign currency, foreign security, or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was ' resident outside India" or inherited from a "person who was resident outside India." A "person resident outside India" may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was "resident in India" or inherited from a person who was resident in India Reserve Bank may by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a "person resident outside India", for carrying on any activity relating to such branch, office or other place of business.
Important Provisions From Fema: RELEVANT PROVISIONS OF EXCHANGE CONTROL MANUAL FOR THE PURPOSE OF FEMA
Some of the relevant provisions of Exchange Control Manual under FEMA, which are still existing are:
1. Refund Of Inward Remittances:
If a request is made from the overseas for cancellation of Inward Remittances, Authorised Dealers may do so without referring to Reserve Bank, if refunds is not to compensate for a loss.
2. Application For Remittances In Foreign Currency:
A person firm or bank may apply to an Authorized Dealer for remittances in any foreign currency to a beneficiary abroad.
Application should be made in FORM -A1, if the purpose of remittance is import of goods into India.
For any other purpose in Form -A2
The Authorized Dealer may sell the foreign Exchange applied for if he think fit provided it is within his powers, and the purpose of remittance is an approved one.
3. Mode Of Payment Of Rupees Against Sale Of Foreign Exchange:
In case of sale of foreign Exchange or remittance foreign Exchange amounting to Rs. 20,000 or more the payment received by the Authorized Dealer, from the applicant should be through a crossed cheque drawn on the applicant bank account or on the bank account of the Firm/ Company. Payment can also be accepted in the form of a Banker's cheque / Pay Order / Demand Draft.
Receipt of Payment in cash in case of such sale of foreign Exchange or remittance in foreign Exchange is strictly prohibited.
4. Travellers Cheque Negotiable Only In India: Rupee Travelers cheque cannot be encased outside India, if they are issued solely for use within India. In such a case they cannot be taken or sent out of India.
Reimbursements should be strictly refused where such travelers cheques have been encased outside India.
5. Reimbursement Outside India:
Rupee Travelers cheque, which are issued by authorized dealers, encashable outside India, may be reimbursed by Authorized Dealers or by their selling Agent.
6. Import Of Foreign Currency Notes: When the stock of foreign currency notes with Authorized Dealer is not adequate for meeting their normal business requirement they could import foreign currency notes from their overseas branches or correspondents.
7. Reconversion Of Indian Currency:
Foreign currency may be sold against Indian Rupees held by persons who are not resident of India but are passing through or leaving India after a visit, at the time of their departure from India. For this purpose, a Bank or Encashment certificate issued by Authorized Dealer, exchange bureau or Authorized Money changer in form BCI, ECF OR ECR, is required to show that the rupee had been acquired by sale of foreign Exchange to an Authorized Dealer or money changer in India. Such a certificate is valid for such reconversion i.e. a period of three months is not over from the date of sale of the foreign currency by the traveler.
8. Rates Of Exchange:
Authorized dealers and their Exchange bureau may buy from and sell to public foreign currency notes and coins at rates of exchange determined by market conditions. Dealings in foreign currency notes and coins between authorized dealers and between authorized dealers and money changers would also be at rates determined by market conditions. |
Business-Commercial-Law
