Compilation of R-Returns: Reporting under FETERS, Revision in Form A2 & Online submission of Form A2 by the remitter

Compilation of R-Returns: Reporting under FETERS, Revision in Form A2 & Online submission of Form A2 by the remitter

Attention of Authorised Dealer (Category I) banks is invited to A.P.(DIR Series) Circular No.84 dated February 29, 2012 giving guidelines for compilation of R-Returns for reporting under the Foreign Exchange Transactions Electronic Reporting System (FETERS), A.P.(DIR Series) Circular No.101 dated February 4, 2014 on Export of Goods and Services: Export Data Processing and Monitoring System (EDPMS) for facilitating banks to submit export-related information through EDPMS platform and A.P.(DIR Series) Circular No.15 dated July 28, 2014 which discontinued separate reporting of information in ENC (Export Bills Negotiated / sent for collection) for acknowledgement of receipt of export documents and Sch.3 to 6 (realization of export proceeds) under FETERS.

 

Web based data submission by AD banks

2. In order to enhance the security-level in data submission and further improve data quality, the following modifications shall be effected in the guidelines for submission of data under the FETERS from 1st fortnight of April 2016 (i.e., reporting of those transactions which take place from April 1, 2016):

        i.            The present email-based submission will be replaced by web-portal based data submission. However, there are no changes in periodicity, file-layout, delimiter, consistency checks, and inter-relationship among BOP6.TXT and QE.TXT files as well as their naming convention.

      ii.            Nodal offices of banks have to access the web-portal https://bop.rbi.org.in with the RBI-provided login-name and password, to submit data (Contact and other details are given in the above-mentioned Circular dated February 29, 2012).

    iii.            Banks may download RBI-provided validator template from this portal on their computer and perform off-line check of their FETERS data-file for error, if any, before its submission on the portal. Both Java-based and Excel-based validators are provided: Use of Java-based validator is advised for larger files. This portal also gives relevant master files (e.g., country, currency, AD code, purpose code masters).

    iv.            On uploading validated files, banks will get acknowledgment. They can view the data-files submitted by them during the previous two fortnights, with download facility. They can also revise the purpose codes for transaction submitted earlier, if required, which will be authenticated by RBI in the system.

      v.            Banks may report (a) addition of AD code for their bank and (b) update AD category, which will be incorporated in the AD-master database by RBI after due authentication.

    vi.            With the discontinuation of ENC.TXT and SCH3to6.TXT files in FETERS, the purpose codes P0105 [Export bills (in respect of goods) sent on collection – other than Nepal and Bhutan] and P0107 [Realisation of NPD export bills (full value of bill to be reported) – other than Nepal and Bhutan] have become defunct and are, therefore, discontinued.

 

Revision in Form A2

3. Further, in-order to streamline the reporting of the transactions relating to the Liberalised Remittance Scheme (LRS) in FETERS and On-line Return Filing System (ORFS), it has been decided that transactions relating to LRS may be reported under respective FETERS purpose codes (e.g. travel, medical treatment, purchase of immovable property, studies abroad, maintenance of close relatives; etc.) instead of reporting collectively under the purpose code S0023. This would help AD banks in classification of transactions for similar activity under single purpose code. Therefore, the purpose code S0023 would be revised as follows to enable reporting of ‘Opening of foreign currency account abroad with a bank’:

Purpose Code	Description as per the A.P.(DIR Series) Circular No.84 dated February 29, 2012 and in Form A2	Revised Description
S0023	Remittances made under Liberalised Remittance Scheme (LRS) for Individuals	Opening of foreign currency account abroad with a bank

i. For facilitating the existing monthly reporting of LRS transactions under ORFS, AD banks may use the following purpose codes only:

Sr. No.	Items under LRS	Corresponding FETERS purpose codes, if transaction is identified under LRS
1	Opening of foreign currency account abroad with a bank under LRS	S0023
2	Purchase of immovable property	S0005
3	Investment in equity, debt, JV, WoS, ESOPs, IDRs	S0001, S0002, S0003, S0004, S0021, S0022
4	Gift	S1302
5	Donations	S1303
6	Travel (business, pilgrimage, medical treatment, education, employment, personal)	S0301, S0303, S0304, S0305 & S0306
7	Maintenance of close relatives	S1301
8	Medical Treatment	S1108
9	Studies abroad	S1107
10	Emigration	S1307
11	‘Others’ such as loan to NRI close relatives and health insurance	S0011, S0603

ii. AD banks should also ensure that the data pertaining to LRS transactions reported by them in FETERS tallies with that reported by them in ORFS.

 

iii. The Form A2 is also being revised (as per Annex) by introducing a check-box for LRS transactions in the relevant block as follows:

Sr. No.	Whether under LRS (Yes/No)	Purpose Code	Description
		As per the Annex

iv. Further, the ‘Application cum Declaration for purchase of foreign exchange under the Liberalised Remittance Scheme of USD 250,000’ has been clubbed with Form A2 in order to reduce multiplicity of forms to be filled in by the customers.

Online submission of Form A2 by the remitter

4. With a view to facilitating miscellaneous remittances and reducing paperwork associated with payment transactions, it has been decided that Authorised Dealer banks, offering internet banking facilities to their customers may allow online submission of Form A2. Besides, they may also enable uploading/submission of documents, if and as may be necessary, to establish the permissibility of the remittances under the extant rules or regulations framed under the Foreign Exchange Management Act, 1999 (FEMA). Remittances that do not require any documentation (e.g. certain transactions under the LRS) may be put through on the basis of the Form A2 alone. To start with, remittances on the basis of online submission alone will be available for transactions with an upper limit of USD 25,000 (or its equivalent) for individuals and USD 100,000 (or its equivalent) for corporates. It may be noted that the remittance will be subject to satisfaction of the Authorised Dealer banks as laid down in Section 10 (5) of FEMA. Accordingly, Authorised Dealer banks are advised to frame appropriate guidelines for customer interface personnel to ensure ease of transactions for the customers within the ambit of the statutory/regulatory provisions. It may be further noted that reporting of transactions in FETERS shall continue, as hitherto, by the Authorised Dealer banks.

5. Appropriate changes in technology and/or operating procedure may be carried out by Authorised dealer banks immediately and compliance in this regard furnished to RBI.

6. The changes introduced through this circular may be implemented with immediate effect and in any case not later than April 1, 2016

WE HELP YOU TO INCORPORATE A WHOLLY OWNED SUBSIDIARY OF A FOREIGN COMPANY IN INDIA

WE HELP YOU TO INCORPORATE A WHOLLY OWNED SUBSIDIARY OF A FOREIGN COMPANY IN INDIA

 The Meaning of Wholly Owned Subsidiary Company

A Wholly Owned Subsidiary company is an entity of which 100 per cent shares are held by another company. If a foreign company owns 100% of shares of a Indian company, then Indian Company shall be considered as the wholly owned subsidiary of that foreign company.

What is Foreign Company?

A company that is incorporated outside India (i.e. in a foreign country) is called Foreign Company. For example Coca-Cola. USA.

 

What is Wholly Owned Subsidiary Company in India by Foreign Company?

When a foreign company makes 100 per cent FDI (Foreign Direct Investment) in India through an automatic route, the Indian company becomes the Wholly Owned Subsidiary Company of that Foreign Company. Let’s say Coca-Cola. USA owns 100 per cent shares in Coca-Cola (India) Pvt. Ltd. Then Coca-Cola (India) Pvt. Ltd. becomes the Subsidiary Company.

This is possible where 100 per cent FDI is permitted and no prior approval of Reserve Bank of India is required.

Under automatic route FDI is allowed without the prior approval of Government and Reserve Bank of India.

FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the Government:

Ø Activities/items that require an Industrial License;

Ø Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the 'same' field,

Ø Proposals for acquisition of shares in an existing Indian company in: Financial services sector and where Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers ) Regulations, 1997 is attracted;

Ø All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.

 

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors through online e-filing .

Please note that FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:

i) Atomic Energy

ii) Lottery Business

iii) Gambling and Betting

iv) Business of Chit Fund

v) Nidhi Company

vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities (other than Tea Plantations) (c.f. Notification No. FEMA 94/2003-RB dated June 18, 2003).

vii) Housing and Real Estate business (except development of townships, construction of residen­tial/commercial premises, roads or bridges to the extent specified in Notification No. FEMA 136/2005-RB dated July 19, 2005).

viii) Trading in Transferable Development Rights (TDRs).

ix) Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

(Please also see the website of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India at www.dipp.gov.in for details regarding sectors and investment limits therein allowed, under FDI)

Minimum requirements

1.     Minimum two directors

2.     Minimum two shareholders

3.     Minimum paid up capital of Rs1 lakh

Incorporation procedure

1.     Two directors are required to apply for DSC (Digital Signature Certificate).

2.     All the directors are required to apply for DIN (Director’s Identification No.).

3.     Applicant is required to apply for name of the company in Form INC-1.

4.     After obtaining name approval from ROC, an applicant is required to file form INC-7 (Application for Incorporation of Company (Other than OPC)), form DIR-12 (Particulars of appointment of directors and the key managerial personnel and the changes among them) and form INC-22 (Notice of situation or change of address of the registered office of the company) along with Memorandum and Articles of Association of the Company.

5.     After filing of the incorporation documents, you are required to pay online ROC fees and Stamp duty. (This is based on the authorized capital of the company).

6.     After the payment of ROC fees and Stamp Duty, ROC verifies the filed documents. Form INC-22 and DIR-12 are approved through the Straight Through Process (STP) and verifies form INC-7 in detail. ROC may suggest some changes in the form or attachment. We will have to make changes accordingly.

7.     Once ROC is satisfied, Certificate of Incorporation is sent through email.

8.     Documents required

9.     Office address

10.                        Address proof (electricity bill or rent agreement) and latest electricity bill in case of rented accommodation.

11.                        Indian National

12.                        PAN Card (mandatory)

13.                        Address proof (electricity bill, telephone bill, bank statement or passbook or rent agreement and latest electricity bill in case of rented accommodation)

14.                        Photo ID Proof (passport, Driving license, voter ID or Aadhar card)

15.                        Foreign National

16.                        Passport (mandatory).

17.                        Address Proof (electricity bill, telephone bill, bank statement or passbook or rent agreement and latest electricity bill in case of rented accommodation. Document must be certified by the Indian Consulate).

18.                        Photo ID Proof (Any government license or document containing name in full, photo and date of birth. Document must be certified by Indian Consulate).

IF Advance Reporting and FC-GPR is not filed within proposed due dates, Companies are required to pay a fine of 1% of the Aggregate of the FDI received – RBI Proposal Says

RBI Invites Comments from Stakeholders for its proposal for Changes in Timeframe for Issue of Shares and Reporting of FDI;

The Reserve Bank of India has proposed certain changes in respect of the time frame for issue of shares to align the provisions of Foreign Exchange Management Act, 1999 which requires an investee company receiving Foreign Direct Investments to issue shares within 180 days of receipt of foreign investment with the provisions of the Companies Act, 2013 and in respect of filing of report with the Reserve Bank regarding receipt of foreign investment and issue of shares and to further streamline the compliance process, as below:

S. No.	Paragraph of Schedule 1	Proposed Amendments
1	8	Time frame for issue of shares: At the time of filing FC-GPR the investee company shall be required to submit a certificate from a practising Company Secretary/Chartered Accountant to the effect that provisions of section 42 of Companies Act, 2013 have been complied with.
2	9(1) (A) and 9(1) (B)	Time frame for reporting: Delay in reporting beyond the prescribed period (30 days from receipt of funds in case of report ARF and 30 days from issue of shares in case of report FC-GPR) shall attract a penalty of one percent of the total amount of investment subject to a minimum of Rupees Five thousand and maximum of Rupees Five lakh per month or part thereof for the first six month of delay and twice that rate thereafter, to be paid online into a designated account in Reserve Bank of India.

Any company receiving foreign investment and submitting the required reports with delay but without paying the penalty as mentioned above shall be liable to penal provisions mentioned in FEMA, 1999 and the rules/regulations framed thereunder including compounding.

It is also proposed to introduce similar penalty structure for other mandatory reporting requirements under FEMA, 1999.

Members of public, including the stakeholders and experts in the area, are requested to offer their views and comments on the proposed changes. The comments may be sent latest by February 22, 2016 to email.

Background

Schedule 1 to Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 (FEMA 20), stipulates timelines for an investee company receiving FDI for issue of shares within 180 days of receipt of foreign investment and requires filing of a report with the Reserve Bank regarding receipt of foreign investment and issuance of shares.

As per Section 42 of Companies Act, 2013, an Indian company is required to issue shares within 60 days from the date of receipt of share application money. This provision is applicable to a company receiving share application money from foreign investors as well. In view of the specific and express provisions under Companies Act, 2013 it was felt that there is no need to have a separate and different time frame for these purposes in FEMA provisions.

 

Further, FEMA 20 also provides for reporting of inflow of funds/issue of shares, the descriptive guidelines for which are stated in paragraphs 9 (1) (A) and 9(1) (B) of Schedule 1 to FEMA 20. It was observed that many companies fail to comply with these provisions and it becomes a contravention of FEMA, 1999 which requires compounding. Since compounding is an elaborate process imposing a burden on the contravener as well as the Reserve Bank, it was felt that with a view to improving the ease of compliance, a summary framework may be put in place for dealing with reporting delays without compromising with the reporting discipline.

 

 

 

DISCONTINUANCE OF PHYSICAL FILING OF FORMS -ARF, FCGPR AND FC-TRS FROM FEBRUARY 8, 2016 UNDER FEMA

DISCONTINUANCE OF PHYSICAL FILING OF FORMS -ARF, FCGPR AND FC-TRS FROM FEBRUARY 8, 2016 UNDER FEMA

Foreign Direct Investment –Reporting under FDI Scheme, Mandatory filing of form ARF, FCGPR and FCTRS on e-Biz platform and discontinuation of physical filing from February 8, 2016

 With a view to promoting the ease of reporting of transactions related to Foreign Direct Investment (FDI), the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled online filing of the following returns with the Reserve Bank of India viz.

 – Advance Remittance Form (ARF) which is used by the companies to report the FDI inflows to RBI;

– FCGPR Form which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow; and

 – FCTRS Form which is submitted to RBI for transfer of securities between resident and person outside India.

 

At present both the options, i.e. online filing and physical filing of abovementioned forms, are available to the users.

 Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.

Banks may bring the contents of this circular to the notice of their customers / constituents concerned. They are advised to extend necessary guidance/ assistance to their constituents for uploading the abovementioned forms on the e-Biz platform.

The directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Ref: RBI/2015-16/303 A.P. (DIR Series) Circular No. 40 Date: February 01, 2016