FOREIGN TECHNOLOGY COLLOBORATIONS PAYMENTS –ROYALTY PAYMENTS

Royalty and Foreign Technical collaboration payment are governed by the RBI circular AP ( DIR Series) Circular No 5 dated 21 July 2003. Earlier ,only wholly owned subsidiaries are allowed to pay royalty to offshore parent companies abroad without any restriction on the duration of payment under the automatic route.

Earlier, under  liberalized  the foreign technology collaboration agreement policy through Press Note No 2 (2003 Series) dated 24 -06-2003 , irrespective of who have entered into foreign technology collaboration agreements were  permitted on the automatic approval route to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of royalty payments.

 

Can shares be issued against Lumpsum Fee, Royalty and ECB?

 An Indian company eligible to issue shares under the FDI policy and subject to pricing guidelines as specified by the Reserve Bank from time to time, may issue shares to a person resident outside India :

     i.        being a provider of technology / technical know-how, against Royalty / Lumpsum fees due for payment; and

    ii.        against External Commercial Borrowing (ECB) (other than import dues deemed as ECB or Trade Credit as per RBI Guidelines).

Provided, that the foreign equity in the company, after the conversion of royalty / lumpsum fee / ECB into equity, is within the sectoral cap notified, if any.

RBI has delegated the powers, to make payments for royalty, lumpsum fee for transfer of technology and payment for use of trademark/brand name in terms of the foreign technology collaboration agreement entered by the Indian company with its foreign partners, to the AD banks subject to compliance with the provisions of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

Foreign / technical Collaboration / technology transfer – Royalty or technology transfer fees

Automatic route:

The Government of India has reviewed the extant policy vide the press note no 8 (2009  series ) dated 16th December 2009 and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route without any limit as stated in the following table  i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

PROCEDURE FOR MAKING ROYALTY PAYMENTS

For making Royalty payment following activities to be completed.

1.     TDS @10% ( to be updated with the necessary rates) has to be paid on the Royalty amount and obtain challan from banker.

2.     R&D Cess @ 5% has to be paid to Reserve Bank of India and obtain proof of payment (challan copy) form the RBI.

3.     Obtain certificate from Chartered Accountant in form 15CB and submit to Income Tax Department as to TDS has been deducted and remitted to the government as per the provisions of Income Tax Act and Double Taxation Avoidance Agreement between India and "The Parent Company Country" &

4.     Obtain TCR Report from Chartered Accountant confirming that TDS and R&D Cess has been remittance to the RBI and submit to the banker to make payment.

5.     Based on the inputs given to the Income Tax department Form 15CA will be generated from the Income Tax website and submit the same to banker to make payment.

Only after completing these activities and providing these documents to the bankers payment can be effected.

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Details	With effect from 16-12.2009,  after issue of Press Note 8 (2009 series)
Lump sum payments	No limit now
Royalty payable	No limits - subject to FEMA  (Current Account Transactions) Rules, 2000
Duration of royalty payments	No Limits
Royalty limits are	Net of taxes and are calculated according to standard conditions

Procedure for Setting up a Branch Office in Singapore

Specialties of Singapore Branch Office

• The name must match that of the parent company.
• It must appoint two staff members who can be Singapore residents or foreign individuals, to act as agents to support the business administration of the Branch Office.
• It is an extension of the foreign parent company; therefore it does not have a separate legal identity.
• The foreign parent company is liable for the acts, losses and debts of its branch office.
• Foreign staff relocating to Singapore to be the agents must obtain an Employment Pass.
• The constitution of the company and its activities are directed by the foreign parent company’s Memorandum and Articles of Association.
• Must have a registered office address in Singapore

• It is considered a non-resident for tax purposes, and therefore not eligible for any tax exemptions or incentives for new start-ups in Singapore.
• It does not have separate legal identity, and therefore the foreign parent company is responsible for all its debts, losses and liabilities.
• The foreign parent company is required to submit annual report and audited accounts within two months of the Branch Office's annual general meeting.
•  

Minimum Requirements for Setting up a Branch Office in Singapore

 

If you choose to set up a Singapore Branch Office, you will need to take the following steps:

1. Register a Singapore Branch Office.
2. Appoint two resident agents to represent the company in accordance with the Singapore Companies Act. The agents can be Singapore residents or appointed staff members from the foreign company who have secured the Employment Pass.

Application for an Employment Pass for the appointed staff member to relocate to Singapore can only be submitted after the successful registration of the Branch Office.

Subsidiary Company vs Singapore Branch Office

A Singapore Branch Office is considered a non-resident company for tax purposes. Non-resident companies are not eligible for tax incentives for new start up or resident companies; and therefore most foreign companies prefer to set up a Subsidiary Company rather than a Branch Office. 

R.V.Seckar

rvsekar2007@gmail.com

919848915177

FOR INCORPORATING A WHOLLY-OWNED SUBSIDIARY IN GERMANY

For incorporation of a GmbH in Germany, one should  have to adhere the guideline prescribed by the Company Register under whose jurisdiction your GMBH would be formed in Germany. Also, German law would govern incorporation issues.

From the Reserve Bank of India perspective, this is an instance of Overseas Direct Investment (ODI) and you would have to follow guidelines laid down by RBI.

First check whether the overseas investment is under automatic route or approval route. 

If under automatic route,

·         The Indian party (investing co.) is eligible to invest in WOS up to 100% of net worth as per last audited balance sheet without prior approval of RBI.

·         But this ceiling of 100% of Net worth is not applicable if investment is out of funds raised thru ADR/GDR, or balances in Exchange Earners' Foreign Currency account of the Indian party. 

·         Reporting is to be done within 30 days of investment to the AD Category - I bank in Form ODI (part I and II) with prescribed enclosures after which you will be granted a Unique Identification Number (UIN). Forms shall be submitted in physical form and your AD will submit the same through online.

If under approval route:

·         Prior approval of RBI would be required

·         For this purpose, application together with necessary documents should be submitted in Form ODI through their Authorised Dealer Category – I banks.

·         Reserve Bank would, inter alia, take into account the following factors while considering such applications:

a) Prima facie viability of the JV  / WOS outside India;

b) Contribution to external trade and other benefits which will accrue to India through such investment;

c) Financial position and business track record of the Indian party and the foreign entity; and

d) Expertise and experience of the Indian party in the same or related line of activity of the JV / WOS outside India.

From Company Law Point of View

As far as Companies Act, 1956 is concerned ensure compliance with Sec.372A as the investment should be within the limit. 

Kindly note that it can be inferred from reading of sec .372 A, that investment in other body corporate for the purpose of "making "it a wholly owned subsidiary is not exempted form applicability of sec. 372A because the exemption is for investment in wholly owned subsidiary. So needless to say that there must be status of wholly owned subsidiary before the proposal of investment in a company.

Every inter corporate investment/loan/guarantee/security falling within section 372A (even within limit) must be sanctioned by a resolution of the board passed at its meeting. Such decision can not be taken by circular resolution nor can it be delegated by the Board.

If investment is beyond limit, then follow provisions of Sec 372A by taking approval of shareholders in General meeting.

R.V.Seckar

rvsekar2007@gmail.com

919848915177

PURCHASE OF PROPERTIES BY NRI / PIO IN INDIA

Under the general permission available, the following categories can freely purchase immovable property in India:

i)             Non-Resident Indian (NRI)- that is a citizen of India resident outside India

ii)            Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

1.     at any time, held Indian passport, or

2.     who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 

 The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land / plantation property / farm house in India. 

Whether agricultural land/ plantation property / farm house in India can be purchased by an NRI / PIO ?

No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.

Whether an NRI / PIO has to report to RBI after purchase of property in India?

No.  An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.

IS THERE ANY RESTRICITION FOR NRI / PIO TO PURCHASE ANY PROPERTY IN INDIA?

There are no restrictions on the number of residential / commercial properties that can be purchased.

WHETHER AN INDIAN RESIDENT CAN GIFT A PROPETY TO A NRI / PIO?

Yes, NRIs and  PIOs can freely acquire immovable property by way of gift either  from

i) a person resident in India or
ii) an NRI  or
iii) a PIO.

However, the property can only be commercial or residential. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Sale and purchase of foreign exchange derivatives and commodity derivatives abroad

Under Liberalized Exchange Scheme and as per recent master circular , a resident in India is allowed to invest in the following segments:

What is allowed 

Both capital account and current account transactions are allowed under this scheme. The capital account transactions that can be made under this scheme range from buying stocks in overseas markets to acquiring property and trading in stock/commodity futures overseas. The scheme allows Indian residents to make the following capital account transactions: 

Investment in foreign securities 

Acquisition and transfer of immovable property outside India by an Indian resident 

Maintenance of foreign currency accounts outside India 

Taking out an insurance policy from a foreign insurance company on an Indian resident 

Loans and overdrafts given to a person resident outside India, and 

Sale and purchase of foreign exchange derivatives and commodity derivatives abroad

 

 As per recent master circular , investment in foreign commodity derivatives is allowed under general permission of RBI and not prior approval of RBI is needed now.

INDIAN RESIDENTS ARE NOW PERMITTED TO ENTER INTO CURRENCY FUTURES OR CURRENCY OPTIONS

As per recent RBI master circular , a person resident in India may enter into currency futures or currency options on a stock exchange recognized under section 4 of the Securities Contract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may be set forth in the directions issued by the Reserve Bank of India from time to time.”

General Permission to deal in Currency Future or Currency Option

i) Currency option contracts are permitted in US Dollar - Indian Rupee spot rate, or any other currency pairs, as may be approved by the Reserve Bank from time to time.

(ii) Only ‘persons resident in India’, as defined in section 2(v) of the Foreign Exchange Management Act, 1999 (Act 42 of 1999) are permitted to buy or sell exchange traded currency options to hedge an exposure to foreign exchange rate risk or otherwise.

Features of currency option contracts

 

Standardized exchange traded currency options shall have the following features: 

a) The underlying for the currency option shall be US Dollar – Indian Rupee (USD-INR) spot rate.  
 
b) The options shall be premium styled European call and put options.
 
c) The size of each contract shall be USD 1000.
 
d) The premium shall be quoted in Rupee terms. The outstanding position shall be in USD.
 
e) The maturity of the contracts shall not exceed twelve months. 
 
f)  The contracts shall be settled in cash in Indian Rupees.
 
g) The settlement price shall be the Reserve Bank’s Reference Rate on the date of expiry of the contracts.

PROCEDURE FOR OPENING A BRANCH OFFICE / LIAISON OFFICE IN ABROAD

No prior permission of Reserve Bank is required to open offices (trading or non-trading) abroad or post representatives abroad by Indian firms/companies.

The Indian firm/companies should submit applications to their bankers (authorized dealers) in form OBR along with the particulars of their turnover duly certified by their auditors and also a declaration to the effect that they have not approached/would not approach any other authorized dealer for the facility being applied for. The application form OBR needs to be filled in with necessary details along with supporting documents.  After which the foreign exchange is released by the authorized dealer (bank).

Foreign Exchange released by the Bank Authorized dealers may release exchange towards initial expenditure as also for recurring expenses of the office as under, provided the applicant fulfils the following conditions:

	Category	Initial Expenditure	Recurring Expenditure (per annum)
(a)	EEFC Account(Exchange Earners’ Foreign Currency account)	No limit for remittances out of EEFC funds.	No limit for holders remittances out Of EEFC funds.
(b)	Firms/companies not having EEFC accounts or not having sufficient funds EEFC accounts.	Up to 15% of the average annual sales / income or turnover during the last two financial years or up to 25% per cent of the net worth, whichever is higher.	Up to 10% of their average annual sales/income turnover during last two years.

In the case of newly established 100% EOUs or Units in EPZs and Hardware/Software Technology Parks, exchange may be released as per their estimated requirements for initial as well as recurring expenses on verification of suitable documentary evidence during the first two years of their operation. From third year onwards, exchange may be released as per item (a) or (b) above. Thus for first two years such units can get more foreign exchange released than the limits for other Indian companies.

The recurring (expenditure) remittance facilities are allowed initially for a period of two years only, after obtaining confirmation form the applicant that they have completed all legal and other formalities in India and abroad in connection with the opening of trading/non-trading office or for posting a representative abroad. The renewal of remittance facility after two years may be granted provided proper accounts of utilisation of foreign exchange released are furnished to the authorized dealer.

You may note that if you are a new Company you may not be able to get the approval of Authorized Dealer to open offices aboard.

The general terms and conditions for opening the offices abroad normally are:

1. The overseas office should not create any financial liabilities contingent or otherwise for the head Office in India.

2. Exchange released by the authorized dealer should be strictly utilized for the purpose(s) for which it is released. They unused exchange may be repatriated to India under advice to the authorized dealer.

3. The details of bank account opened in the overseas countries should be promptly reported to the authorized dealer.

4. The approval granted for the purpose should be made valid for 6 months from the date thereof, within which time the applicant should open its overseas office or post representative abroad. In case the overseas office is not opened or the representative is not posted abroad within this period, intimation in writing to the effect should be sent to the authorized dealer immediately after expiry of 6 months period. Fresh application for release of exchange should be submitted to the authorized dealer as and when the overseas office is desired to be opened.

5. Profits, if any, earned by the overseas office/s should be repatriated to India.

6. The following statements should be submitted by the applicant to the authorized dealer:

1. A statement showing details of initial expenses incurred together with suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.

2. Annual account of trading/non-trading office abroad duly certified by statutory Auditors/Chartered Accountants.

Temporary Site/Project Offices Abroad

Indian firms/companies executing contracts/projects abroad with the approval of the appropriate authority are permitted under a general permission granted by Reserve Bank to set up site/project offices abroad provided that such offices are maintained out of project receipts and remittances from India are not required. These offices are required to be closed down and surplus foreign exchange earnings repatriated to India after completion of the project.

Credit facilities for overseas trading offices of Indian companies

Reserve Bank considers, on merits, request from Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses to avail of fund based/non-fund based facilities for their trading offices abroad from overseas banks. Application in such cases should be made to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Export Division), Mumbai together with full particulars of the exchange facilities availed of for maintenance of the overseas office concerned, full details of terms and conditions subject to which the facilities are being extended by the overseas bank and the need for availing of the credit facilities by the overseas trading office.

Application for permission to post a representative 

Establish office/branch overseas

·         The application is to be made in form OBR to the Bank with supporting documents.

·         The estimates of foreign exchange expenditure should be given in units of foreign currency and the appropriate rupee equivalent furnishing the exchange rate applied.

Documents to be submitted along with the Form OBR

Correspondence, if any, in original together with photocopies regarding the arrangement made in foreign country for posting of representative/establishment of branch/office.

Bank certificates, in form BCX (certificate of export), together with photocopies thereof for the immediately preceding four calendar half years in support of export realizations.

R.V.Seckar

rvsekar2007@gmail.com

919848915177

PROCEDURE FOR INVESTING IN WOS IN ABROAD

INITIAL COMPLIANCE'S -

1. Board Resolution under Section 292(1) (d) & S.372A for investment and incorporation of Wholly Owned Subsidiary.
   
   
2. Form ODI – Part I (i. e. details of JV/ WOS, Indian Parties and the financing pattern of the overseas entity) is required to be filed by Investing Indian Company with Designated Authorised Dealer Bank. Certificate by the Statutory Auditor for compliance of FEMA is also required to be submitted along with ODI form.
   
   
3. Under Automatic Route, in case of new proposals, immediately after effecting remittance, the Designated Authorised Dealer Bank will forward Form ODI – Part I along with Part II (i. e. Remittance Report) to RBI for obtaining Unique Identification Number.
   
   
4. On receipt of the Form from the AD bank, RBI will allot an Unique Identification Number to each JV/ WOS, which is required to be quoted in all the future correspondence by AD Bank/ Indian Company.

How Much Quantum can be Invested:

Under automatic route , up to 100% net worth of investing company in its foreign subsidiary or JV Company.

If your Indian Company net worth is say Rs 1 Crore , you can invest up to 1 Crore under automatic route in the WOS / JV company in foreign country.

How Much can be invested in WOS / JV by an Indian Listed Company  ?

As per RBI guidelines , if  there is no JV or WOS , Listed Indian companies can invest up to 50 % of their net worth as on the date of the last audited Balance Sheet in overseas companies, listed on a recognized stock exchange, or by way of rated debt securities issued by such companies by way of portfolio investment.

Prohibitions

Indian parties are prohibited from making investment in a foreign entity engaged in real estate (meaning buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges) or banking business, without the prior approval of the Reserve Bank.

POST INVESTMENT COMPLIANCE'S -

1. An Indian Company which has made direct investment abroad is under obligation to receive share certificate or any other document as an evidence of investment, and submit the documents / Annual Performance Report to the Reserve Bank, in accordance with the provisions specified in Regulation 15 of the Notification. The share certificate or any other document as evidence of investment has to be submitted to and retained by the designated AD Category - I bank, who is required to monitor the receipt of such documents and satisfy themselves about the bonafides of the documents. A certificate to this effect should be submitted by the designated AD category – I bank to the Reserve Bank along with the APR (Part III of Form ODI). 
   
   
2. Annual Performance Report (APR) should be submitted, through the designated AD Category-I bank, every year within 3 months of the closing of the annual accounts of the WOS i. e. on or before 30.06.2010
   
   
3. A JV / WOS set up by the Indian party as per the Regulations may diversify its activities / set up step down subsidiary / alter the shareholding pattern in the overseas entity . The Indian Company should report to the Reserve Bank through the AD Category - I bank, the details of such decisions within 30 days of the approval of those decisions by the competent authority of the JV / WOS concerned in terms of local laws of the host country and include the same in the Annual Performance Report (APR—Part III of form ODI) required to be forwarded to the AD Category-I bank.
   
   

   R.V.Seckar

    

   rvsekar2007@gmail.com

   
   

   919848915177

TRADE CREDITS FOR IMPORTS INTO INDIA

Trade Credits’ (TC) refer to credits extended for imports directly by the overseas supplier, bank and financial institution for maturity of less than three years.

Depending on the source of finance, such trade credits include suppliers’ credit or buyers’ credit. Suppliers’ credit relates to credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside
India for maturity of less than three years. It may be noted that buyers’ credit and suppliers’ credit for three years and above come under the category of External Commercial Borrowings (ECB) which are governed by ECB guidelines.

a) Amount and Maturity

AD banks are permitted to approve trade credits for imports into India up to USD 20 million per import transaction for imports permissible under the current Foreign Trade Policy of the DGFT with a maturity period up to one year (from the date ofshipment). 

For import of capital goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date ofshipment). 

No roll-over/extension will be permitted beyond the permissible period.

AD banks shall not approve trade credit exceeding USD 20 million per import
transaction.

b) All-in-cost Ceilings
The current all-in-cost ceilings are as under :
Maturity period                                     All-in-cost ceilings over 6 months LIBOR*

Up to one year
More than one year but less                               200 basis points
than three years

* for the respective currency of credit or applicable benchmark

The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any.

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Liberalised Remittance Scheme of USD 75,000 for Resident Individuals

Under this Scheme, Authorised Dealers may freely allow remittances by resident individuals up to USD 75,000 per financial year (April-March) for any permitted current or capital account transactions or a combination of both.

·         The facility is available to all resident individuals including minors.

·         Remittances under the facility can be consolidated in respect of family members subject to individual family members complying with the terms and conditions of the Scheme.

·         Remittances under the Scheme are allowed only in respect of permissible current or capital account transactions or a combination of both. All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges / overseas counter party are not allowed under the Scheme.

·         Resident individuals are free to acquire and hold immovable property or shares (of listed companies or otherwise) or debt instruments or any other asset outside India without prior approval of the Reserve Bank.

·           The limits of USD 75,000 under the Scheme also include remittances towards gift and donation by a resident individual.

·         Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.

·         The Scheme can also be used for remittance of funds for acquisition of ESOPs. The Scheme is in addition to acquisition of ESOPs linked to ADR / GDR and acquisition of qualification shares.

·         A resident individual can invest in units of Mutual Funds, Venture Capital Funds, unrated debt securities, promissory notes, etc. under this Scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme .

·         An individual who has availed of a loan abroad while as a non resident can repay the same on return to India under the Scheme as a resident.

·         The Scheme can be used for outward remittance in the form of a DD either in the resident individual’s own name or in the name of beneficiary with whom he intends putting through the permissible transactions at the time of private visit abroad, against self declaration of the remitter in the format prescribed.

·         Individuals can also open, maintain and hold foreign currency accounts with a bank outside India for making remittances under the Scheme without prior approval of the Reserve Bank. The foreign currency accounts may be used for putting through all transactions connected with or arising from remittances eligible under this Scheme.

·         Banks should not extend any kind of credit facilities to resident individuals to facilitate remittances under the Scheme.

·         The scheme is not available for remittances for any purpose specifically prohibited under Schedule I or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transaction) Rules, 2000.

·          The facility is not available for making remittances 

Precautions to be undertaken while making an application under this scheme:

All resident individuals are eligible to avail of the facility under the USD  75,000 scheme. However it is mandatory to have a PAN number to make a remittance under this scheme, and your account with any commercial bank in India must be at least 1 year old. This facility will not be available to corporate, partnership firms, HUF, Trusts, etc. Also, remittance cannot be done from any loan/overdraft account.

 It is also not permtted for remittance being made directly or indirectly to Nepal, Bhutan, Mauritius or Bhutan or to any country identified as a non-co-operative country by the Financial Action Task Force (http://www.fatf-gafi.org). Further, remittance for any payments in the nature of margin calls including for trading in foreign exchange are not permitted.

Further Clarification:

1.The facility is available to all resident individuals including minors. In case of remitter being a minor, the LRS declaration form should be countersigned by the minor’s natural guardian. Accordingly, the modified LRS application cum declaration form is enclosed;

ii. Remittances under the facility can be consolidated in respect of family members subject to individual family members complying with the terms and conditions of the scheme; and

 

iii. Remittances under the scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.

RBI/2011-12/430 March 06, 2012-A.P. (DIR Series) Circular No. 90

Investment in both Listed and unlisted shares are permitted now.

 In terms of the extant FEMA provisions LRS can be used to acquire both listed and unlisted shares of an overseas company. The Master Circular dated July 1, 2013 has been suitably modified.

Instances where more than $75000 per FY is allowed :

As per the current guidelines of LRS, only gift and donation (from the list of items under Schedule III to FEM CAT Rules, 2000), by a resident individual have been subsumed under the LRS limit. For all other purposes such as educational and medical expenses the limits of LRS and Schedule III to FEM CAT Rules 2000 are separate, distinct, mutually exclusive and over and above each other respectively.

In this context, it may be noted that under the extant guidelines under FEMA the following remittances can be made over and above the annual limit of USD 75000 permissible under LRS:

1. A resident individual can make remittances for meeting expenses for medical treatment abroad up to the estimate from a doctor in India or hospital/ doctor abroad  under general permission (without any RBI approval – Para 9 of Schedule III to FEM CAT Rules, 2000, as amended from time to time).
2. A resident individual can make remittances up to USD 25,000 for maintenance expenses of a patient going abroad for medical treatment or check-up abroad or for accompanying as attendant to a patient going abroad for medical treatment/ check-up (without any RBI approval – Para 8 of Schedule III to FEM CAT Rules, 2000, as amended from time to time).
3. A resident individual can make remittances for studies up to the estimates from the institutions abroad or USD 100,000, whichever is higher (without any RBI approval – Para 10 of Schedule III to FEM CAT Rules, 2000, as amended from time to time). This is over and above the remittance limit of USD 75,000 which can be made under the LRS route for the same.
4. A resident individual can also make all other remittances (other than donation and gifts) as stipulated under Schedules III to FEM CAT Rules, 2000, as amended from time to time. 
5. A resident individual can also carry out other permissible current account transactions (transactions which are not explicitly prohibited under Schedule I, or restricted under Schedules II and III, to FEM CAT Rules, 2000, as amended from time to time) without any limits through an AD Bank in India subject to the AD bank verifying the bonafides of the transaction (para 6 to Annex 1 of ADMA Circular No.11 dated May 16, 2000).

 
Therefore notwithstanding the revised guidelines and reduction in the LRS limit these guidelines do not affect genuine transactions. 

 Acquiring Immovable Property Abroad

Resident individuals are permitted to make remittances for acquiring immovable property within the annual limit of USD 75000 for already contracted cases, i.e. only for those contracts which were entered into on or before the date of the circular, i.e., August 14, 2013, subject to satisfaction of the genuineness of the transactions by the AD bank. Such cases should be immediately reported post facto to the Reserve Bank of India by the A D banks.

RBI/2013-14/222 A.P. (DIR Series) Circular No.32 dated 4th September 2013

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Advance Remittance – Import of services

Authorised Dealers (Category-I banks) may allow advance remittance for import of services. However, where the amount exceeds USD 500,000 or its equivalent, a guarantee from a bank of International repute situated outside India or a guarantee from an Authorised Dealer in India, if such a guarantee is issued against the counter-guarantee of a bank of International repute situated outside India, should be obtained from the overseas beneficiary. 

The Authorised Dealer should also follow up to ensure that the beneficiary of the advance remittance has fulfilled his obligations under the contract or agreement with the remitter in India.

In the case of a Public Sector Company or a Department /Undertaking of the Government of India /State  Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (US Dollars one hundred thousand only) or its equivalent is required. 

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Issue of Guarantee- Import of services

Authorised Dealer may issue guarantee on behalf of their customers importing services, provided :

a.  the guarantee amount does not exceed USD 500,000

b.  the AD Category –I Bank is satisfied about the bonafides of the transaction.

c.  the AD Category –I Bank ensures submission of documentary evidence for import of services in the normal course.

d.  the guarantee is to secure a direct contractual liability arising out of a contract between a resident and a non-resident.

In the case of a Public Sector Company or a Department /Undertaking of the Government of India /State  Governments, approval from the Ministry of Finance, Government of India for issue of guarantee for an amount exceeding USD 100,000 (US Dollars one hundred thousand only) or its equivalent is required.

In case of invocation of the guarantee, the Authorised Dealer is required to submit to the Chief General Manager-in-Charge, Foreign Exchange Department, Foreign Investments Division (EPD), Reserve Bank of India, Central Office, Mumbai- 400001 a report on the circumstances leading to the invocation of the guarantee.