Foreign Exchange Issues for Indian Residents
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Transcript of Foreign Exchange Issues for Indian Residents
5 DECEMBER 09 www.afterschoool.tk 1
FOREIGN EXCHANGE ISSUES FOR INDIAN RESIDENTS
by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
mobile : 91+9414430763
5 DECEMBER 09 www.afterschoool.tk 2
Who is resident?
182 days of stay in India during last financial year.
5 DECEMBER 09 www.afterschoool.tk 3
Difference between foreign currency and foreign exchange
Foreign currency means currency notes of other countries
foreign exchange is a wider word and includes currency, cheque, drafts and other
instruments of other countries.
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HOW MUCH FOREIGN CURRENCY CAN YOU TAKE?
Authorised dealers can release upto $25000 for a business trip to any country except Nepal and Bhutan. If you want more amount, you
have to obtain permission from RBI.
5 DECEMBER 09 www.afterschoool.tk 5
What is non cooperative countries / territories?
List of the countries where you cannot take foreign exchange – as identified by FATF (FINANCIAL ACTION TASK FORCE)
see the website : www.fatf-gafi.org
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For students ...
Students going abroad for studies are treated as NRIs and are given all the facilities that are
offered to NRIs. They can receive remittances upto $100000
they can take with them $2000 for their expenditure in cash and remaining amount in
traveller cheque/ bank draft.
5 DECEMBER 09 www.afterschoool.tk 7
Private visit abroad
If you are going for private visit (for example for tourism) you are allowed to take upto
$10000 per annum from authorised dealers. You may visit more than once, but the total
aggregate foreign exchange withdrawals may be upto $10000, beyond which you have to take permission from RBI. You Can take it for visit for education / employment also.
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VISIT TO NEPAL & BHUTAN
No foreign exchange is available for visit to Nepal and Bhutan
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Visit to Iraq & Libya
Normally a person can get foreign currency notes upto $2000 when he visits abroad, but when a person is visiting Iraq or Libya, he
can get upto $5000 .
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How to get foreign exchange?
Go to any authorised dealer / money exchanger and collect foreign exchange against rupees. You can do it in cash upto Rs. 50000. if the amount is more than Rs. 50000, you have to
do it against cheque / draft.
5 DECEMBER 09 www.afterschoool.tk 11
ICC
With international credit card, you can make payment of international journals,
international payments etc. You can also buy international book and meet personal
expenses in foreign exchange through ICC.
5 DECEMBER 09 www.afterschoool.tk 12
Foreign Traveller
A foreign traveller can keep upto Rs. Rs. 5000, and foreign currency upto $5000 and total
foreign exchange upto $10000. if the amount is more than this limit, the traveller will have
to make declaration at airport in Currency Declaration form at the customs office.
5 DECEMBER 09 www.afterschoool.tk 13
Current account / capital account
Current account transaction refers to expenditure on day to day items and other
usual transactions. Capital account transactions refers to investments for long term like Debentures / mutual funds etc. Current account transactions in foreign
exchange are generally permitted. Capital account transactions generally require prior
permission.
5 DECEMBER 09 www.afterschoool.tk 14
Permissible capital account transactions....
Following capital account transactions are permissible :
schedule I – for residents in India
schedule II – fore persons from out of India
Non permissible : - real estate investments, TDR (transferrable development rights),
agriculture, plantation,nidhi company, chit fund, etc.
5 DECEMBER 09 www.afterschoool.tk 15
Schedule I
for residents in India :
insurance policy out of india
investment in foreign security
export / import of foreign currency
etc.
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Schedule II – for persons from out of India
Foreign currency accounts
export / import of foreign currency
remittance out of india
acquisition of immovable property in India
etc.
5 DECEMBER 09 www.afterschoool.tk 17
Restrictions on Indian residents Generally Indian residents are not permitted to
give loan in Rupees to a foreign nationals subject to some exceptions. Indian residents can take loan in Rupees on non-repatriation
basis from non-residents subject to some conditions like amount has to come from NRE / NRNR/NRO account and period of
loan should not be more than 3 year. Rate of interest should not be more than 2% than
bank rate.
5 DECEMBER 09 www.afterschoool.tk 18
Indian companies issueing debentures...
If Indian companies issues debentures to non-residents, they have to inform RBI about it.
If they issue non-convertible debentures, they will have to give all the details to RBI in 30 days. Rate of interest should not be more
than PLR of SBI + 300 basis points. Minimum duration of such debenture must
be 3 years. The company cannot deal in agri / plantation / nidhi / chit fund activities.
5 DECEMBER 09 www.afterschoool.tk 19
Immovable property out of India
RBI has made Foreign exchange management (acquisition and transfer of immovable
property out of India) regulations 2000 – as per that no person can acquire immovable
property out of India other than as gift without RBI permission. This doesnot apply
to NRI or non-residents.
5 DECEMBER 09 www.afterschoool.tk 20
Repatriation of foreign exchange If you earn any foreign exchange than you have to bring it to India within maximum 60
days (if you resident in India) as per FEM (realisation, repatriation and surrender of
foreign exchange) regulations 2000
if you have taken some foreign exchange from an authorised dealer for travel etc, you have to return it back in 90 days from return back
to India
5 DECEMBER 09 www.afterschoool.tk 21
Facilities for foreign tourists For a short stay in India, they can open NRO rupee account for maximum 6 months. When
they return back they can get it converted into foreign exchange. AD (Authorised
dealers) have to ensure that repatriation of money from India is such which is
repatriable. A resident in India can repatriate to his relative upto his salary only.
Forign nationals living in India can open resident rupee account with banks and can
deal in rupees.
5 DECEMBER 09 www.afterschoool.tk 22
Role of AD
They have follow all the rules and ensure that they give money as per FEMA. They can release foreign exchange upto $25000 for
business trip, $100000 for education / employment / medical purpose and upto
$10000 for tourism purpose. They have to ensure that forign exchange is repatriated as
per law.
5 DECEMBER 09 www.afterschoool.tk 23
Gifts from residents
You can give gifts upto Rs. 500000 to non-residents.
5 DECEMBER 09 www.afterschoool.tk 24
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IMPORTANT INFORMATION DOCUMENTS
EXIM POLICY
HANDBOOK OF IMPORT AND EXPORT PROCEDURE
FEMA
EXCHANGE CONTROL MANUALS
FEDAI DOCUMENTS
5 DECEMBER 09 www.afterschoool.tk 26
IMPORTANT DOCUMENTS AT THE TIME OF IMPORT
IMPORT LICENSE
FOREIGN EXCHANGE CONTROL COPY
BILL OF ENTRY FOR HOME CONSUMPTION
CUSTOMS ASSESSMENT CERTIFICATE OR POSTAL ASSESSMENT FORM
5 DECEMBER 09 www.afterschoool.tk 27
OPENING L/C Importer will approach his bank for opening an
L/C
L/C = Letter of credit
the bank of the importer will give a guarantee about payment to the bank of the exporter under L/C. When the exporter exports, he
can obtain immediate payment from his bank on producing L/C of the importer's bank. The
banks will have transaction between themselves.
5 DECEMBER 09 www.afterschoool.tk 28
Difference between packing credit and L/C
Packing credit is issued to exporter, but L/C is issued to importer. Packing credit covers all the expenditure till export, L/C covers the
price of import = and as per this the exporter gets payment as soon as he exports. The
bank of the importer provides this facility to the importer against some charges.
5 DECEMBER 09 www.afterschoool.tk 29
Foreign exchange requirements
Importer requires foreign exchange for imports. The banker / authorised dealer
provides foreign exchange after looking at the necessary documents like import licence etc. The foreign exchange must be used for the purpose for which it has been obtained. The banker / authorised dealer has to ensure
that only that amount is released which is actually required.
5 DECEMBER 09 www.afterschoool.tk 30
Mode of payment Authorised dealers will ensure that payment
regarding impor is made in account. Cash payments are not permitted.
In case advance payment is made, physical goods must come in 3 months. If the amount
is more than $25000 then there must be a guarantee from some international bank. Proper EC copy must be submitted by the
importer
5 DECEMBER 09 www.afterschoool.tk 31
Time limit for settlement
Import payments must be settled within 6 months from the date of import. If it is more than 6 months, then it will be treated as ECB
(external commercial borrowing) and will require prior permission of RBI/ Government
5 DECEMBER 09 www.afterschoool.tk 32
Export remittances
The exporter has to declare exports to RBI and has to ensure that payments are received
within time and as per approved methods of payments. Payments can be collected
through bank account / international credit card / FCNR / NRE account / escrow account
etc
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Exports that dont require declarations....
Demonstrations / sales promotions (UPTO 2% OF TOTAL EXPORTS ONLY) , gifts (upto 1 lakhs), exports for reimports only, goods
sent for repairs, goods less than 25000 rupees in value, samples, publicity material,
personal goods of travellers.
5 DECEMBER 09 www.afterschoool.tk 34
What is consignment export ?
Consignment means you are sending goods to someone for trade on your responsibility –
and if goods are not sold, they are your property and you may get it back.
Consignment export means sale or return back. It has to be settled in 6 months.
5 DECEMBER 09 www.afterschoool.tk 35
Exports requiring RBI approval
Examples : project exports, export as contract against imports, elongated payment period, exports relating to agrements of government
of India or other governments
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Remittances relating to exports...
These include : agency commission, export claims etc.
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SEZ
If you are operating from SEZ you are permitted to have foriegn currency account
with an authorised dealer
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Authorised dealers
These are listed with RBI as per FEMA, they have to obtain RBI permission for some
specified business transactions. Example: they cannot give guarantee in favour of
exporters without RBI permission unless that exporter is listed as non-caution exporter.
5 DECEMBER 09 www.afterschoool.tk 39
Forfaiting
Factoring and forfaiting can be undertaken by EXIM bank / authorised dealers. Under this
they collect payments regarding export receivables against commission.
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New trends....
Indian companies are now permitted to have foreign exchange accounts in other countries
and to have properties in other coutnries (with prior approval from RBI) and they can acquire businesses / firms in other countries also as per their business requiremetns (as
per govt. Policies) .
5 DECEMBER 09 www.afterschoool.tk 41
PEM
PEM stands for Project Export memorandum – when companies are entering into project exports, they have to follow guidelines
relating to this. Project exports generally has deferred payments - therefore prior
permission must obtained before enteringi into PEM.
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Other provisions
Authorised dealers have to ensure that they get copesof GR Form and other documents required andforeign currency is used for acutal import / export and all required
documents are submitted.
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FDI
Upto 100% Foreign Direct Investment is permitted under automatic route in many
sectors. Investors will have to inform regional office of RBI in 30 days of
remittances. In some sectors industrial licence is required and in some sectors, FDI is not permitted. But in most of the sector,
now it is permitted including atomic energy etc.
5 DECEMBER 09 www.afterschoool.tk 44
Shares issue to NRIs
Within 30 days of share issue to Non-residents, FC – GPR form has to be submitted. They have to submit all the details like they have
implemented all the provisions of companies act & FEMA for this purpose.
5 DECEMBER 09 www.afterschoool.tk 45
Transfer from NR
Now non residents can transer shares to other non-residents / residents and such transfer can be for consideration / as a gift. This tranfer can be only to an NRI / resident
Indian. They can also sell it in stock exchanges through brokers. They will have to take NOC from income tax department
5 DECEMBER 09 www.afterschoool.tk 46
Tranfer by residents
As per RBI notification of 2000, residents can also tranfer to non-residents – as per FEMA
– so long as it is in automatic route. You have to keep in mind SEBI (Substantial
acquisition of shares and takeover) regulation 1997 + required regulations under
IRDA or other such laws.
5 DECEMBER 09 www.afterschoool.tk 47
Permission from RBI
If it is not falling in automatic route, apply for permission to RBI with a copy of FIPB approval and details like pric, mode of
payment etc. Price must not be lower than the higher of the average weekly high / low of last 6 months. FC-GPR form with details
of existing shareholding must also be submitted.
5 DECEMBER 09 www.afterschoool.tk 48
FDI in different modes
FEMA regulations 2000 give schedule I which gives list of industries for which automatic
route is there. It doesnt requre prior RBI permission, for othe industries, take prior permission from RBI. Rate of dividend
should not exceed SBI prime lending rate + 300 basis points. For other sectors take permission from SIA / FIPB/ RBI for
investments.
5 DECEMBER 09 www.afterschoool.tk 49
PORTFOLIO INVESTMENT
FIIs including asset management companies, mutual funds, hedge funds etc. Are permitted to invest in shares in India. FII have to invest
in ratio of 70:30 in equity and debt when they invest in India, they are also permitted
to invest as 100% debt.
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Limits for FII investment
An NRI / PIO can buy upto 5% in a company. All NRI/PIO/OCB can invest upto 10% in a company. A single FII can invest upto 10% in a company and all FIIs together can invest
upto 24% in a company. Companies can raise this limit by passing board resolution and special resolution in general meeting subject to sectoral cap (like 49'% or 74%
etc.)
5 DECEMBER 09 www.afterschoool.tk 51
FII dealings
FII can deal through stock exchanges without RBI permission, but if they are dealing
without stock exchanges, they have to obtain permission from RBI.
5 DECEMBER 09 www.afterschoool.tk 52
NRI dealings
NRIs have to deal through NRE /FCNR account only. Sometimes they are permitted to deal in NRO account also – when they are
investing on non-repatriation basis.
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PERMITTED FIIs
FOLLOWNG CAN REGISTER AS FII WITH RBI & SEBI:
banks, pension funds, hedge funds, mutual funds, insurance companies, investment
funds etc.
5 DECEMBER 09 www.afterschoool.tk 54
ECB
External commercial borrowings : Indian comapnies can raise loans from other
countries through various routes like : FRN (floating rate note), ECP (euro commercial paper), FCCB (foreign currency convertible bond), NIF (note issue facility), syndicate
loan, etc.
5 DECEMBER 09 www.afterschoool.tk 55
ECB MECHANISMS
Companies engage in many ECB mechanisms like :
arbitrage
hedging
underwriting
fund raising etc.
5 DECEMBER 09 www.afterschoool.tk 56
ADR /GDR
American depository receipt / Global depository receipt are permitted by RBI as per scheme of 1993, companies can also
sponsor issue of ADR / GDR. Infosys, Wipro etc. Are some of the companies which went for ADR / GDR during 1990s. After ADR/ GDR company will have to submit return in
proforma as per annexure C of RBI notification 2000.
5 DECEMBER 09 www.afterschoool.tk 57
Royalty / technical fees
Upto $2million of royalty upto 5% of domestic sale or 8% of export sale is
permitted as royalty.
5 DECEMBER 09 www.afterschoool.tk 58
EEFC account
Exchange Earners Foreign Currency account – a person who has earned foreign currency
can retain 50% of the foreign currency earned in EEFC account with authorised
dealers. This account can be used for current account transactions or for permitted capital
account transactions.
5 DECEMBER 09 www.afterschoool.tk 59
RFC account
Resident foreign currency account – if an NRI is returning India for ever, he can keep his foreign currency in RFC account and there are no restriction on use of funds in RFC
account.
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RFC (DOMESTIC) ACCOUNT
A Resident who lives in India but receives foreign exchange payments / honorarium can open RFC (Domestic) account for retaining
such payments.
5 DECEMBER 09 www.afterschoool.tk 61
Liberalised Remittance Scheme
Residents can use upto $25000 for payments for permitted transactions per annum in this
scheme Foreign Exchange Management (current account transactions) rules 2000
schedule I and II.
5 DECEMBER 09 www.afterschoool.tk 62
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