Thursday, October 25, 2012

Now , FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India

Now , FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India

As per the extant guidelines, only designated branches of AD Category I banks maintaining accounts of FIIs are allowed to act as market makers to FIIs for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.
 
It has now been decided to allow FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date subject to the following conditions:
 
The eligibility for cover may be determined on the basis of a valuation certificate provided by the designated AD category bank along with a declaration by the FII to the effect that its global outstanding hedges plus the derivatives contracts cancelled across all AD category banks is within the market value of its investments.

The FII should also provide a quarterly declaration to the custodian bank that the total amount of derivatives contract booked across AD Category banks are within the market value of its investments.
 
The hedges taken with AD banks other than designated AD banks, have to be settled through the Special Non-Resident Rupee A/c maintained with the designated bank through RTGS/NEFT.

Ref_ AP DIR Circular 45 dated 22 October 2012

Further Liberalisation for the Supply of Goods and Services by Special Economic Zones (SEZs) to Units

Supply of Goods and Services by Special Economic Zones (SEZs) to Units
in Domestic Tariff Areas (DTAs) against payment in foreign exchange
 

Attention of the Authorised Dealer (AD) Category - I banks is invited to A.P. (Dir Series) Circular No.105 dated June 16, 2003, in terms of which units in the Domestic Tariff Areas (DTAs) have been permitted to purchase foreign exchange from ADs for making payment towards goods supplied to them by units in the Special Economic Zones (SEZs).

The matter has since been reviewed in consultation with the Ministry of Commerce and Industry, Government of India and it has been decided to allow ADs to sell foreign exchange to a unit in the DTA for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (i.e. a unit in SEZ) to a DTA unit. It may, however, be ensured that there is an enabling provision of supplying these goods/services by the SEZ unit to the DTA unit and for payment in foreign exchange for such goods/ services to the SEZ unit, in the Letter of Approval (LoA) issued to the SEZ unit by the Development Commissioner(DC) of the SEZ.
Ref _ AP DIR 46 dated 23 October 2012

Further Simplification and Revision of Softex Procedure

Simplification and Revision of Softex Procedure
A software exporter from any part of India , whose annual turnover is at least Rs.1000 crore or who files at least 600 SOFTEX forms annually on all India basis, will be eligible to submit a statement in excel format
Attention of the Authorised Dealers is invited to Regulation 6 of the Notification No. FEMA 23/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, as amended by the Notification No.FEMA.36/2001-RB dated February 27, 2001, in terms of which designated officials of the Ministry of Information Technology, Government of India at the Software Technology Parks of India (STPIs) or at Free Trade Zones (FTZs) or Export Processing Zones (EPZs) or Special Economic Zones (SEZs), had been authorized to certify exports declared through SOFTEX Forms.
2. Considering the spurt in the volume of software exports from India in recent times, the complexity of work contracts involved, the voluminous nature of contract agreements and the duration involved in execution of each contract as well as the time-consuming process involved in the certification of SOFTEX forms, simplified and revised Softex procedure was introduced vide A.P. (DIR Series) Circular No.80 dated February 15, 2012. Initially the revised procedure was applicable in STPI at Bangalore, Hyderabad, Chennai, Pune and Mumbai with effect from April 01, 2012.
3. Since the revised procedure is running successfully at the 5 designated centres, it has been decided to implement the revised procedure in all the STPIs in India with immediate effect.
4. As per the revised procedure, a software exporter, whose annual turnover is at least Rs.1000 crore or who files at least 600 SOFTEX forms annually on all India basis, will be eligible to submit a statement in excel format as detailed in our A.P. (DIR Series) Circular No.80 dated February 15, 2012

Ref- AP DIR- 47 dated 23 October 2012

Thursday, October 18, 2012

Loans to Non Residents / third parties against security of Non Resident (External) Rupee Accounts [NR (E) RA] / Foreign Currency Non Resident (Bank) Accounts [FCNR (B)] Deposits

Loans to Non Residents / third parties against security of Non Resident (External) Rupee Accounts [NR (E) RA] / Foreign Currency Non Resident (Bank) Accounts [FCNR (B)] Deposits


The Committee to review the facilities for individuals under FEMA, 1999 (Chairperson: Smt. K.J.Udeshi) has recommended that the banks may sanction Rupee loans in India or foreign currency loans outside India to either the account holder or a third party to the extent of the balance in the NRE/FCNR (B) account subject to margin requirements. The existing position in this regard has been reviewed and it has been decided, in exercise of powers under paragraph 6(d) of Schedule-1 read with para 9(1) of Schedule-2 of the Foreign Exchange Management (Deposit) Regulations, 2000, that the banks may now grant loans against NR(E)RA and FCNR(B) deposits either to the depositors or the third parties as under:-

Existing provision
Proposed provision
Rupee loans* in India
Loans against NRE/FCNR(B) Fixed Deposits
Rs. 100 lakhs ceiling applicable
Rupee loans to be allowed to depositor/third party without any ceiling subject to usual margin requirements**
Foreign Currency loan* in India/ outside India
Loans against NRE/FCNR(B) Fixed Deposits
Rs. 100 lakhs ceiling applicable
Foreign Currency loans to be allowed to depositor/third party without any ceiling subject to usual margin requirements **

* The term ‘loan’ shall include all types of fund based/non-fund based facilities.

** In case of FCNR deposits, the margin requirement shall be notionally calculated on the rupee equivalent of the deposits in accordance with para 9(2) of Schedule-2 of Foreign Exchange Management (Deposit) Regulations, 2000.

Further, the facility of premature withdrawal of NRE/FCNR deposits shall not be available where loans against such deposits are to be availed of. This requirement may specifically be brought to the notice of the deposit holder at the time of sanction of the loan. The existing loans which are not in conformity with the above instructions shall continue for their existing term and shall not be rolled over/renewed. Other conditions as regards grant of loan against NRE/FCNR deposits shall remain unchanged

Friday, October 12, 2012

Foreign investment in NBFC Sector - Further Liberalisation for establishing step down subsidiaries by NBFCs with FDI

Foreign investment in NBFC Sector - Further Liberalisation for establishing step down subsidiaries by NBFCs with FDI


Ref: RBI AP DIR 41 dated October 10, 2012


RBI has revised the conditions for the establishing step down subsidiraries by NBFCs with FDI as per details below

No. 137 dated June 28, 2012
Earlier Condition
Revised condition
Sr.No.24.2 (1) (iv)
10 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1, therefore, shall not apply to downstream subsidiaries.
NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital.The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1of 2012 dated April 10, 2012 on Consolidated FDI Policy, therefore, shall not apply to downstre
am subsidiaries

Wednesday, October 10, 2012

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

 
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 99 dated March 30, 2012 relating to ECB.

2. It has been decided that the all-in-cost ceiling as specified in A.P. (DIR Series) Circular No. 99 dated March 30, 2012 will continue to be applicable until further review.


:
Average Maturity Period
All-in-cost over 6 month LIBOR*
Three years and up to five years
350 bps
More than five years
500 bps
* for the respective currency of borrowing or applicable benchmark

3. All other aspects of ECB policy remain unchanged and AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

Reference A.P. (DIR Series) Circular No. 40 dated October 09, 2012

Tuesday, October 9, 2012

NRIs beat FDI, keep the money coming, In Last Three Years ,NRI has sent more money than receipts through FDIs

Remittances or private money transfers from non-resident Indians (NRIs) have been rising steadily despite a slowdown of the global economy and have become a more reliable source of funds for many Indian families compared with the tangible volume and benefits of foreign direct investment
Official data for the past three years show that while FDI inflows fluctuated and even dipped, inward remittances were upwardly mobile.

In 2011-12, NRI remittances were $66.13 billion ( Rs. 3,42,884.05 crore), against an FDI inflow of $46.84 billion into the country. Inward remittances have been on an upswing over the past three years, unaffected by factors, such as a fragile global economy and boosted by a falling rupee, of late. http://www.hindustantimes.com/Images/popup/2012/10/08-10-12-pg-01a.jpg

The Gulf countries (West Asia) and North America are the two top sources of remittances to India, with Europe placed a distant third.

A Reserve Bank of India study finds that 30.8% of total foreign remittances came from West Asia, while 29.4% came from North America and 19.5% came from Europe.

The study also said that 40% of all such remittances were used for household expenses.

These remittances now account for around 4% of gross domestic product (GDP).

Kerala, Tamil Nadu, Punjab and Uttar Pradesh are among the top remittance-receiving states in India.

In 2011, remittances to Kerala clocked R49,965 crore, accounting for 31.2% of its GDP, according a Kerala Migration Survey, conducted by the Centre for Development Studies (CDS) for the ministry of overseas Indian affairs.

In other words, remittances were more than six times the money Kerala gets in Union government assistance.

According to World Bank estimates, in 2011, the other major inward remittance beneficiary countries were China ($57 billion), Mexico ($24 billion), the Philippines ($23 billion), and Pakistan and Bangladesh ($12 billion each).

However, compared with the Indian official figure, the World Bank's figure for India was $58 billion.

Although, the amounts are different in the two estimates, India tops the chart for top remittance-receivers in the word.


The Indian official figure states that remittance to the country was $55.62 billion in 2010-11, which rose from $53.64 billion in 2009-10.

When compared with remittance figures, there was no great cheer on the FDI front in 2010-11.

That year, India received an FDI of $34.84 billion, which was lower than the corresponding figure of $37.74 billion in 2009-10, according to data from the industrial policy and planning department.

Government officials also say a depreciating rupee and higher interest rate for deposits are driving NRIs to park more of their money in the country.

"The interest rates our banks offer are more than that of developed countries and even the Gulf countries, where over six million Indians work," an official said.

 "This trend of rise in remittances is here to stay. Indians prefer to park their money back home, which they find a very safe option. The falling rupee has also been a windfall for them."

Courtesy - Mr.Jayanth Jacom , Hindustan Times , 8th October 2012

Monday, October 8, 2012

ANNUAL STATEMENT IN FORM 49C MUST BE FILED BY FOREIGN REPRESENTATIVE OR LIAISON OFFICE IN INDIA TO INCOME TAX COMPULSORILY HENCEFORTH

ANNUAL STATEMENT IN FORM 49C MUST BE FILED BY FOREIGN REPRESENTATIVE OR LIAISON OFFICE IN INDIA TO INCOME TAX COMPULSORILY HENCEFORTH


Central Board of Direct Taxes (CBDT) in a recent notification has provided detailed information that foreign companies with representative or liaison offices must provide to tax authorities in accordance to a 2011 tax law amendment.

The new reporting requirements allow the government greater access to information about Liaison Offices. The highlights are;
 
§ The annual statement must be signed and verified by a chartered accountant or a signatory duly authorized by the Liaison Office parent
 
§ The annual statement must be provided via an electronic form with a digital signature
 
§ The following information that must be provided:
 
§ All details for the financial year that relate to India. This includes receipts, income and expenses of the nonresident from or in India (this is not information related to the Liaison Office only);
 
§ Details of all purchases, sales of materials and services from or to Indian parties during the year by the nonresident parent (not just transactions entered into by the Liaison Office);
 
§ Salary or compensation details where the salary or compensation is paid or is payable outside India to any employee working in India or for services rendered in India;
 
§ Total count of employees working at the Liaison Office for the current year
 
§ Complete details about the representatives, distributors and agents of the nonresident parent in India and details of the top five parties in India with whom the Liaison Office has liaised;
 
§ Complete information about the product or service for which research or preparatory activity is carried out by the Liaison Office along with details of any other entity for which liaising activity is carried out by the Liaison Office;
 
§ Information about group entities that maybe present in India e.g. branch office, company, limited liability partnership, etc., established in India
 
§ Details of other Liaison Offices of group entities in India; and
 
§ Information regarding other group entities operating from the same premises as the office of the Liaison Office.
 
Non-resident companies with Liaison Offices in India must file an annual statement. The latest CBDT notification provides details on the specific form for the statement (Form No. 49C) and the rules that are effective since April 1, 2012.
 
[Income tax Rule for Furnishing of Annual Statement by a non-resident having Liaison Office in India.
 



114DA.
 
(1) The annual statement as provided under section 285 for every financial year, shall be furnished in Form No. 49C.
 
(2) The annual statement referred to in sub-rule (1) shall be duly verified by the Chartered Accountant or the person authorized in this behalf by the non-resident person, who shall be known as the Authorized Signatory.
 
(3) The annual statement referred to in sub-rule (1) shall be furnished in electronic form along with digital signature.
 
(4) The Director General of Income-tax (Systems) shall specify the procedure for filing of annual statement referred to in sub-rule (1) and shall also be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to statements so furnished.

Extension of Deadline for the year 2011-2012



The Income tax authority of India has extended the due date for filing 49C form for particular categories of assessees having a Liaison Office in India. On account of technical difficulties in providing appropriate facility for electronic filing, the due date has been extended up to September 30, 2012, for the financial year 2011-12.
 
Formerly, the assessees were directed to file Form 49C electronically, within 60 days from the end of financial year. However to ensure compliance, Indian tax authorities have allowed assessees to file Form 49C in ‘paper mode’ instead of filing it electronically. The Form 49C (Paper Mode) should be sent to the following address by 'Registered Post' or 'Speed Post':
 
The Director General of Income Tax (International Taxation),
4th Floor, Drum Shaped Building,
I.P. Estate, New Delhi-11002.

 
 
This annual statement must be submitted within 60 days from the close of the Liaison Office’s financial year.

These reporting requirements are in addition to a separate guideline that requires a Liaison Office to submit an Annual Activity Certificate to the designated authorized bank in India with a copy to jurisdictional Directorate General of Income Tax under FEMA.

Relaxation in Capitalization norms for subsidiaries of Foreign owned NBFCs


A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

Chapter 6 of Consolidated FDI Policy of the Government of India (effective from 10.04.2012) provides about the Sector Specific Conditions on FDI. Para. 6.1 enumerates the prohibited sectors for FDI and 6.2 states the permitted sectors for FDI. In terms of Para. 6.2.24 of the Government Policy, NBFCs are permitted to have 100% FDI under the Automatic Route subject to minimum capitalization norms.

Uptil now, 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million could set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. In such cases the minimum capitalization condition did not apply.

The Department of Industrial Policy and Promotion has now reviewed their policy in this regard and have decided to permit NBFCs (i) having foreign investment above 75% and below 100% and (ii) with a minimum capitalisation of US$ 50 million, to set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital.

This means that the Indian investing company registered as NBFC and having minimum 75% and up to 100% FDI can now set up any number of step down subsidiaries with minimum capitalization of US$ 50 million.
 
 
Ref: Press Note No.9 (2012 Series) dated 03.10.2012 of DIPP