fema project

8/9/2019 FEMA Project

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0404 Kapil Asrani

0606 Ruchika Chabra

0808 Samita Damle

1010 Jigar Derashri

1212 Deepa Dilawari

1414 Melrosa Fernandes

1616 Leena Gudhekar

1818 Ashlesha Gupte

2020 Devendra Hattangadi

2424 Anushree Kanchan


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US India

Regulations

Exporter Importer

Bank

$

Foreign Exchange Market

The primary purpose of the foreign exchange market is

,to assist international trade and investment by allowing

.businesses to convert one currency to another currency

,support speculation and facilitate the carry trade

, in which

- (investors borrow low yielding currencies and lend invest

) -in high yielding currencies

Foreign Exchange


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Purpose of FERA

To help RBI in maintaining exchange rate stability.

To conserve precious foreign exchange.

To prevent/regulate foreign business in India

E R A t o F E M A


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( )Foreign Exchange Management Act FEMA 1999

Extent of FEMA applicable to the entire country

Agencies, branches, and offices, outside India, that are owned by Indianresidents

dispute that are committed in offices, agencies and branches outside Indiathat are owned by individuals covered by this act

Objectives of FEMA: to consolidate and amend the law relating to foreign exchange

to facilitate external trade and payments

to promote the orderly development and maintenance of foreign exchangemarket in India

Implementation of FEMA:


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Salient features of FEMA

Facilitate trade rather than prevent misuse of foreign

exchange.

Definitions of capital account transaction and current

account transaction

All current account transactions shall be allowed

All key sections simplified

Attitude is of putting trust in the persons covered


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&EMA Rules Policies Section 2 - clarity on several definitions and terms used in the

context of foreign exchange

Section 3 prohibits dealings in foreign exchange except through

an authorized person

Section 4restrains any person resident in India from acquiring,

holding, owning, possessing or transferring any foreign

exchange, foreign security or any immovable property situated

outside India except as specifically provided in the Act.

Section 6 deals with capital account transactions.


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New terms under FEMA

Person

Person resident in India A person who has been residing in India for more than 182 days, in

the last financial year

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 aperson resident in India

Person resident outside India "CAPITAL ACCOUNT TRANSACTIONS" means a transaction,

which alters the assets or liabilities, including contingentliabilities, outside India of persons resident in India or assets orliabilities in India of persons resident outside India

Current Account Transactions


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Step ahead from FERA To FEMA

ithdrawal of Foreign Exchangemission of Criminal Proceedings

esidential Statusmmovable Property outside India

mmovable Property in Indiaxport of Services


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:FERA FEMA Similarities

.and central government would continue to be the regulatory bodies ( )esumption of extra territorial jurisdiction as envisaged in section 1 of FERA has been retainThe Directorate of Enforcement continues to be the agency for enforcement of the provision


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:FERA FEMA Differences

,sisted of 81 sections and was more complex, .FEMA is much simple and consist of only 49 sections( ) ( )Presumption of negative intention Mens Rea and joining hands in offence abatement exThese presumptions of Mens Rea and abatement have be

" " ( ( )Authorized Person in FERA was a narrow one 2 b, , . ( ( )Authorized person has been widened to include banks money changes off shore banking Units etc 2 c


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Amendments

Automatic Approval for External Commercial Borrowings amounts upto US $ 50 Million without taking prior approval of

the Ministry of Finance / RBI, subject to the followingconditions:

The loan is raised from internationally acceptable andrecognized lenders

The average maturity of the loan is not less than 3 years

The loan should be organized through a reputed merchantbanker registered with the regulatory authorities of the hostcountry.

Amendments relating to Inbound Investments

Registered Foreign Venture Capital Investors permitted to invest in

Indian Venture Capital Companies

Foreign Investment prohibited in Print Media

Prohibition on Overseas Corporate Bodies to make further

investments in Indian Companies under the Portfolio InvestmentScheme


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.Amendments contd

Amendments relating to Outbound Investments

Rules for direct investments outside India

liberalised

Indian Companies can now freely invest upto US $50 Million in a financial year in JV / Wholly Owned

Subsidiaries outside India

Indian Companies, which have issued ADR/GDR,

can also use 100% of such proceeds for overseas

investments as against the limit of 50% earlier

Registered Partnership Firms in India are now

permitted to invest upto USD 1 Million in a

financial year

Employees of Indian Branches / Indian Subsidiaries


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.Amendments contd

Other Amendments Endorsement of the foreign exchange drawn on the

passport, has now been made optional.

An Indian party can make a payment to a foreigncompany / entity , which has paid the guarantee amount

on behalf of the Indian party. Authorized Dealers have been permitted to grant loans to

Non Residents in India in Indian Rupees for their official /personal purposes.

Foreign Nationals resident in India are now permitted toopen foreign currency accounts outside India, withoutany approval from the RBI.

Indian companies are now permitted to payment in Rupeesto its non whole time director, who is a non resident &who visits India, towards sitting fees, commission etc.


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FEMA lead to Forex growth

BetterRegulators and Control mechanisms

Certain level of easy trading is available today

Rules and regulations are stricter. Unwanted transactionsand underground trading has reduced

RBI expects equal value service or goods

CSL certificate is required. Trading should be through properchannel only

Other Reasons

Liberalization no of transactions have increased.

Indian product has better acceptability and Marketincreasing

Dollar value decreasing. Same amount of gold for lesser inRupees.

Euro going weaker as well 1:1.4 ratio with dollar

Rupee stronger gold higher amount; fixed deposit 4%-


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Case Studies

Kites the movie FEMA violation in production

process

Foreigners buying immovable property in India ,

violating the FEMA Act.


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:Case Study Kites


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FEMA Provisions

an individual can carry up to $ 10,000 on foreign visits $5000 in cash and the rest in travel cheques

FEMA violations can attract a fine three times the transactionamount. Primarily there is no imprisonment for violation ofthe law. However, if the person cannot pay the penalty, thenhe can be arrested.

RBI Contraventions

:Case Study Kites

Evaluation The primary trigger for the highlight of this case is the issue of

pending dues between Spectrum Entertainment and Rakesh Roshan s

production house

,The first violation mentioned is the more serious offense and caninvite penalty of upto three times the original amount as

applicable

,Expenses upon personal budget are also supported by Challans., ,receipts etc but the production house which is gaining tax

,benefits can easily absorb the expenditure as creative expenses

:Case Study Kites


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: -Case Study Kites Conclusion

The ED might not be able to prove a FEMA

violation under point 1 (purchase of film).

The personal expense, if proved, must only invite

minimal penalty of 3 times the duty evaded.

The matter will not be taken up by the ED without

a proper evaluation of the situation between

the complainant & the Indian production house.

:Case Study Kites

:Case Study Foreigners buying immovable prop


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Facts of the Case

Illegal purchase of land in Goa

depriving locals of their business and means of livelihood

Russians on tourist visa are plying motorcycle taxis,operating food joints where licences from panchayatsand other authorities stand in the name of locals


Allegations

controversial real estate deals by foreigners in Goa could well havebeen funded by proceeds from crime and narcotics trade

large volumes of money were being illegally routed by several-foreign run companies from tax havens abroad to purchase properties

in coastal resort villages in the state no IT returns are filed at all



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FEMA Provisions

Who can freely purchase immovable property in India?

A foreign national of non-Indian origin cannot be a secondholder to immovable property purchased by NRI / PIO.

A foreign national of non-Indian origin, resident outsideIndia cannot purchase any immovable property in India.




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:Case Study Conclusion

This was a political issue which was raised with an objective arise

interest in the vote bank more than the legal applicability.

The provisions under FEMA do not allow the foreign national to

own immovable property, hence Taxis and motorbikes do not

fall under a FEMA violation.

The shops are being run by the foreign nationals and the owner on

paper is a PIO/NRI, which can definitely attract litigation this is

a clear violation

The formation of a Company under Companies Act is being

followed and advised by some of the foreign nationals, so it

falls under completely legal activities.



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Conclusion


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fema project

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