Provisions of Foreign Exchange Management Act

The Foreign Exchange Regulations are framed by the Directorate of Foreign Trade and the Reserve Bank of India (RBI). Foreign Exchange Regulations introduced compliances in Foreign Exchange to check the increased flow of both the inbound and outbound funds.

Provisions of Foreign Exchange Management Act (FEMA) provides free transaction on current account subject to the guidelines by the RBI. Enforcement of Foreign Exchange Management Act (FEMA) is entrusted to a separate directorate, which undertakes investigations on contraventions of the Act.

The main aim of FEMA is to facilitate external trade, balance the payments, promote the orderly development, and maintain the foreign exchange market in India.

The Important Compliances to be followed under provisions of FEMA / RBI.

1. Single Master Form {w.e.f. 30.06.2018}

Integrates the reporting requirements for FDI in India, irrespective of the instrument through which foreign investment is made.

Subsumes of FC-GRP, FC-TRS, LLP-I, LLP-II, CN, ESOP, DI, DRR forms into one single master form

• FDI reporting in Form FC-GPR under SMF has to be done within 30 days after the allotment.
• Reporting under FC-TRS under SMF has to be done within 60 days of transfer of capital instruments or receipt / remittance of funds whichever is earlier.
• Form LLP-I & LLP-II is filed for reporting FDI & transfer of capital contribution or profit share in LLPs, respectively.
• Reporting in respect of issue or transfer of Convertible Notes (CN) is done in Form CN within 60 days of such transfer.

2. FLA Return: Annual Return on Foreign Liabilities and Assets

• Is required to be submitted mandatorily by all the Indian Resident Companies which have received FDI and/ or made ODI in any of the previous year(s), including current year
• Who holds foreign assets or liabilities in their financial statements as on 31 March. 
• Due Date - on or before 15 July every year

3. Annual Performance Report (APR)

• An Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) has to submit an Annual Performance Report (APR) in Form ODI Part II to the AD bank in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India.
• An Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) Due Date- on or before 31 December every year

4. External Commercial Borrowings

• Borrowers are required to report all ECB transactions to the RBI on a monthly basis through an AD Category – I Bank in the form of ‘ECB 2 Return’.
• borrowers are required to report all ECB transaction

Monthly Basis

5. Advance Reporting Form (ARF)

• report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank through its AD Category I bank
• An Indian company receiving investment from outside India for issue of shares or other eligible securities under the FDI Scheme.
• Not later than 30 days from the date of receipt in the Advance Reporting Form (ARF)

6. Form FC-GPR

• Issue of bonus or rights shares to persons resident outside India directly or on amalgamation/ merger with an existing Indian company, as well as issue of shares on conversion of ECB/ royalty/ lumpsum technical know-how fee/ import of capital goods by units in SEZs has to be reported in Form FC-GPR. 
• After issue of shares or other eligible securities, the Indian company has to file Not later than 30 days from the date of issue of shares

7. Form FC-TRS

• Reporting of transfer of shares and other eligible securities between residents and non-residents and vice- versa is to be made in Form FC-TRS.
• The Form FC-TRS should be submitted to the AD Category - I bank Within 60 days from the date of receipt of the amount of consideration.

8. Form ODI

• Overseas investments (or financial commitment) in Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS)
• An Indian Party and a Resident Individual making an overseas investment is required to submit form ODI receive share certificates or any other documentary evidence of investment in the foreign JV / WOS as evidence of investment and submit the same to the designated AD within 6 months;

Compounding of offence Before RBI

• In accordance with the provisions of section 15 of Foreign Exchange Management Act, 1999 (FEMA) which provide compounding of contraventions and empowers the Reserve Bank of India (RBI) to compound any contravention as defined under section 13 of the FEMA, except contraventions under section 3 (a) of FEMA, on an application made by the person committing such contravention.

   

• Process of Compounding involves:

•  

  Ø  Power to Compound on the basis of monetary limits/ A Delegation of Powers to Regional Offices

  Ø  Types of contravention can be considered under Compounding for Offences

  Ø  Procedure of Compounding of Offences under FEMA- Who can Apply? When to Apply

  Ø  Method of Computing for calculating amount to be imposed

  Ø  Legal Effect of Compounding of offences under FEMA?

  Ø  Penalties, nature of Penalty Proceedings under Compounding of offences under FEMA, monetary Ceiling on Penalty etc

  Ø  Prosecution aspects

  
  For better assistance over all factors of FEMA Consultancy or Compliance contact us on info@thecompanywala.com
• Disclaimer:- The materials provided herein are solely for information purposes and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The material s written on the basis of the provision applicable as on date of writing of this article.