RBI done away 5% limit on the Issue of shares under the Employees Stock Options Scheme or sweat equity shares to its employees who are resident outside India

 

RBI done away 5% limit on the Issue of shares under the Employees Stock Options Scheme or sweat equity shares to its employees who are resident outside India

 

 

RBI has issued a notification dated 16th July 2015 wherein it has done away with the 5% limit on the issue of shares under the Employees Stock Options Scheme or sweat equity shares to its employees who are resident outside India. Instead the company has to comply with all the applicable regulations of SEBI/ MCA / RBI in this regard.

 

The relevant portion of the said notification is reproduced below:

 

On a review, it has been decided that an Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/directors or employees/directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, provided that :

 

• The scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013, as the case may be.

 

 

• The “employee’s stock option”/ “sweat equity shares” issued to non-resident employees/directors under the applicable rules/regulations are in compliance with the sectoral cap applicable to the said company.
•  
• Issue of “employee’s stock option”/ “sweat equity shares” in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

1. Issue of “employee’s stock option”/ “sweat equity shares” under the applicable rules/regulations to an employee/director who is a citizen of Bangladesh/Pakistan shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

The issuing company is also required to furnish a return in form ESOP within 30 days of the issue to the RBI.

Requirement for obtaining prior approval of RBI in cases of acquisition/ transfer of control of Non-Banking Financial Companies (NBFCs)

Requirement of prior approval of Reserve Bank (i) Henceforth, prior written permission of the Reserve Bank shall be required for taking-over or acquiring NBFC.

• Any takeover or acquisition of control of an NBFC, which may or may not result in change of management;

• Any change in the shareholding of an NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 per cent or more of the paid up equity capital of the NBFC. Prior approval would, however, not be required in case of any shareholding going beyond 26% due to buyback of shares/ reduction in capital where it has approval of a competent Court. The same is however required to be reported to the Reserve Bank not later than one month from its occurrence;
• Any change in the management of the NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors. Prior approval would not be required for those directors who get re-elected on retirement by rotation.

 

(ii) Notwithstanding clause (i), NBFCs shall continue to inform the Reserve Bank regarding any change in their directors/ management as required in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and Systemically Important Non-Banking Financial (Non-Deposit Accepting Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

 

3. Application for prior approval.

 

(i) NBFCs shall submit an application, in the company letter head, for obtaining prior approval of the Bank under paragraph 2, along with the following documents:

1. Information about the proposed directors/ shareholders as per the Annex;
2. Sources of funds of the proposed shareholders acquiring the shares in the NBFC;
3. Declaration by the proposed directors/ shareholders that they are not associated with any unincorporated body that is accepting deposits;
4. Declaration by the proposed directors/ shareholders that they are not associated with any company, the application for Certificate of Registration (CoR) of which has been rejected by the Reserve Bank;
5. Declaration by the proposed directors/ shareholders that there is no criminal case, including for offence under section 138 of the Negotiable Instruments Act, against them; and
6. Bankers’ Report on the proposed directors/ shareholders.

(ii) Applications in this regard may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located.

4. Requirement of Prior Public Notice about change in control/ management

i. A public notice of at least 30 days shall be given before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, whether with or without sale of shares. Such public notice shall be given by the NBFCs and also by the other party or jointly by the parties concerned, after obtaining the prior permission of the Reserve Bank.
ii. The public notice shall indicate the intention to sell or transfer ownership/ control, the particulars of transferee and the reasons for such sale or transfer of ownership/ control. The notice shall be published in at least one leading national and in one leading local (covering the place of registered office) vernacular newspaper.
5. The directions contained above are applicable with immediate effect, i.e., the same will apply on any takeover or acquisition of control, any change in the shareholding or any change in the management occurring after the date of this circular.
6. Any violation of the aforementioned directions would result in adverse regulatory action including cancellation of CoR

NOW , FC-TRS has to be filed through online only through e-Biz platform only

NOW , FC-TRS has to be filed through online only through e-Biz platform  only

RBI has modified online filing of form FC-TRS on the e-Biz platform vide RBI notification dated 21st August, 2015.

Significant elements  are:

2. With a view to promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India (RBI), under the aegis of the e-Biz project of the Government of India has enabled online filing of the Foreign Currency Transfer of Shares (FCTRS) returns for reporting transfer of shares, convertible debentures, partly paid shares and warrants from a person resident in India to a person resident outside India or vice versa.

3. The design of the reporting platform enables the customer to login into the eBiz portal, download the reporting form (FCTRS), complete and then upload the same onto the portal using their digitally signed certificates. The Authorised Dealer Banks (ADs) will be required to download the completed forms, verify the contents from the available documents and if necessary, call for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN).

The FCTRS services of RBI will be made operational on the e-Biz platform from August 24, 2015. The user manual for this service is Annexed to this Circular.

4. It may be noted that for the present, the online reporting on the e-Biz platform is an additional facility to the Indian residents to undertake their FCTRS reporting and the manual system of reporting as prescribed in terms of A.P. (DIR Series) Circular No.6 dated July 18, 2014 would continue till further notice.

NOW , INVESTMENTS MADE BY NRIs , PIOs and OCBs WILL BE REGARDED AS INVESTMENT UNDER NON-REPATRIATION BASIS AND NO REPORTING TO RBI IS NEEDED

 

 

NOW , INVESTMENTS MADE BY NRIs , PIOs and OCBs WILL BE REGARDED AS INVESTMENT UNDER NON-REPATRIATION BASIS AND NO REPORTING TO RBI IS NEEDED

 

Review of Foreign Direct Investment (FDI) Policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs)

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to review of Foreign Direct Investment (FDI) Policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs).  Following are the amendments approved by the Cabinet to incorporated in FDI policy:

 

(i)           By amending relevant para, definition of NRI will be as under:

 

‘Non-Resident Indian' (NRI) means an individual resident outside India who is citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955. ‘Persons of Indian Origin’ cardholders registered as such under Notification No. 26011/4/98 F.I. dated 19.8.2002 issued by the Central Government are deemed to be “Overseas Citizen of India’ cardholders”.

 

(ii)   To provide that investment by NRIs on non-repatriable basis is domestic. Following new para is approved to be added:

 

‘Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.’

                   

          The decision that NRI includes OCI cardholders as well as PIO cardholders is meant to align the FDI policy with the stated policy of the Government to provide PIOs and OCIs parity with Non Resident Indians (NRIs) in respect of economic, financial and educational fields. Further the decision that NRIs investment under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment made by residents, is meant to provide clarity in the FDI policy as such investment is not included in the category of foreign investment. The measure is expected to result in increased investments across sectors and greater inflow of foreign exchange remittance leading to economic growth of the country.

 

Source - Press Information Bureau -Government of India-Cabinet dated 21  May 2015

 

Non-Repatriation investments by NRI , OCBS, PIOs will not be subject to FDI caps -

 

As per the Press Release issued by Commerce & Industry Ministry , non-repatriable investments by NRIs, OCIs and PIOs will be treated as domestic investments and will not be subject to foreign direct investment caps.


The above notification further states that investment made by NRIs under Schedule 4 of FEMA regulations will be deemed to be  domestic investment at par with the investment made by residents


As per the above notification , NRIs would also include Overseas Citizens of India (OCIs) and Persons of Indian origin (PIOs). 


Government of India's decision is expected to result in increased investments across sectors and
greater inflow of foreign exchange remittances leading to higher economic
growth.

Reserve Bank of India now relaxes its rules to remit USD 2,50,000 by individual for aggregate of certain current account transactions for travel , business trip , gifts , donations , employment , education , medical treatment ,etc.

Reserve Bank of India  now relaxes its rules to remit  USD 2,50,000 f by individual for aggregate of certain current account transactions for travel , business trip , gifts , donations , employment , education , medical treatment ,etc. 

The Reserve Bank of India ('RBI') has notified amendment to the Foreign Exchange Management (Current Account Transactions) Rules to specify an aggregate limit of USD 2, 50,000 for remittance in foreign currency for certain current account transactions, inter-alia, for private visits to any country (except Nepal and Bhutan), gifts or donations, going abroad for employment, emigration, business travels, or medical treatment abroad, etc.

Remittances in foreign currency by an individual for the following current account transactions shall be made within limit of USD 2,50,000:

a) Holiday/Private Visits abroad

b) Business trip

c) Gifts/Donation

d) Employment or education

e) Remittance for Maintenance of a close relative abroad

f) Medical treatment abroad

g) Emigration facilities

Further, it is provided that an individual can avail of foreign exchange facility of an amount exceeding the limits as prescribed above under the Liberalized Remittance Scheme ('LRS') for the purpose of emigration, education, business travel, medical treatment, etc.

However, the amount so remitted by individual under the LRS shall be reduced from the USD 250,000 by the amount so remitted under the above-mentioned rules.

References – Ministry of Finance – Notification G.S.R 426 (E) dated 26 May 2015

All about Form 49C under Income-Tax Act and its submission by liaison office in India

All about Form 49C under Income-Tax Act   and its submission by liaison office in India

The last date for filing of Form 49C is almost there and it’s 30^th May 2015 which was notified vide Notification No.5/2012 dated 6-2-2012 with effect from 1^st April 2012.

Form 49C is primarily required to be filed by Non-residents having Liaison office(s) in India. It is to be filed in pursuance of Section 285 of the Income Tax Act and in accordance with rule 114DA of the Income Tax Rules.

Section 285 of Income Tax Act, 1961 read with rule 114DA mandates that Every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in form 49C of its activities.

However, as per RBI Master Circular No. 7/2012-13, dated 2-7-2012, the AAC is required to be filed within six months from the due date of the Balance Sheet. Therefore to that extent, there seems to be inconsistency between the due date of filing of Form No. 49C and AAC, which needs to be resolved.

Reserve Bank of India requires filing of an Annual Activity Certificate (AAC) annually after getting the same duly certified by a Chartered Accountant.

AAC is required to be filed prior to filing of Form 49C as the date of filing AAC is required to be mentioned in Form 49C.

Form 49C may be verified (Digitally Signed) by a Chartered Accountant or an Authorised Signatory for the purpose of e-filing the same.

In order to file Form 49C one needs to do the following:

1. Visit www.incometaxindiaefiling.gov.in

2. Login to the respective ID.

3. Go-to “e-file” and then click on “Prepare and Submit online Form (other than ITR)”.

4. Then on the page that appears, you need to select the Form, which in this case would be 49C, then select the relevant Assessment Year and then select the Digital Signature Certificate of the person who would be verifying Form 49C.

5. Then you will enter a page wherein you will have instructions w.r.t. Form 49C, followed by Form 49C itself, followed by “Attachments” page. Thus, fill-in and you are ready to go

Kindly note that attachments, if any, attached to Form 49C should not exceed 50MB in total and should either be in pdf or zip format.

Extract of Rule 114DA of Income Tax Rules

[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 authorised in this behalf by the non-resident person, who shall be known as the Authorised 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.]

Extract of Section 285 of Income Tax Act, 1961

[Submission of statement by a non-resident having liaison office.

285. Every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in such form and containing such particulars as may be prescribed.

Information courtesy : CA Sahil Jolly – Jolly & Co. Chartered Accountants

NOW , ECB (External Commercial Borrowings ) CAN BE DENOMINATED IN INDIAN CURRENCY ALSO- UNDER AUTOMATIC ROUTE

External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) – Mobilisation of INR

RBI/2014-15/608 A. P. (DIR Series) Circular No. 103 May 21, 2015 External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) – Mobilisation of INR Attention of Authorized Dealers Category – I (AD Cat – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA 25/RB-2000 dated May 3, 2000], as amended from time to time, A.P. (DIR Series) Circular No.63 dated December 29, 2011 and A.P. (DIR Series) Circular No. 25 dated September 3, 2014. 2. In terms of A.P. (DIR Series) Circular No. 25 dated September 3, 2014, recognised non-resident ECB lenders may extend loans in Indian Rupees subject to, inter alia, the lender mobilising Indian Rupees through a swap undertaken with an AD Cat-I bank in India. To facilitate ECB lending denominated in INR by overseas lenders, it has now been decided that such lenders may enter into swap transactions with their overseas bank which shall, in turn, enter into a back-to-back swap transaction with any AD Cat-I bank in India as per the procedure given below: (i) The recognised non-resident lender approaches his overseas bank with appropriate documentation as evidence of an underlying ECB denominated in INR with a request for a swap rate for mobilising INR for onward lending to the Indian borrower. (ii) The overseas bank, in turn, approaches an AD Cat-I bank for a swap rate along with documentation furnished by the customer that will enable the AD bank in India to satisfy itself that there is an underlying ECB in INR (scanned copies would be acceptable). (iii) A KYC certification on the end client shall also be taken by the AD bank in India as a one-time document from the overseas bank. (iv) Based on the documents received from the overseas bank, the AD bank in India should satisfy itself about the existence of the underlying ECB in INR and offer an indicative swap rate to the overseas bank which, in turn, will offer the same to the non-resident lender on a back-to-back basis. (v) The continuation of the swap shall be subject to the existence of the underlying ECB at all times. (vi) On the due date, settlement may be done through the Vostro account of the overseas bank maintained with its counterparty bank in India. (vii) All other Operational Guidelines, Terms and Conditions as contained in the annex to A.P. (DIR Series) Circular No.63 dated December 29, 2011 governing hedging of ECBs denominated in INR shall apply, mutatis mutandis. (viii) The concerned AD Cat-I bank shall keep on record all related documentation for verification by Reserve Bank.3. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers. 4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (R Subramanian) Chief General Manager

Indian Banks cannot insist for the personal presence of NRI DEPOSITOR WHEN CLOSING THE FCNR (B) DEPOSITS

 Foreign Currency (Non-Resident) Account (Banks) (FCNR (B)) Scheme

RBI/2014-15/596
A.P. (DIR Series) Circular No. 98

May 14, 2015

To
All Category – I Authorised Dealer Banks

Madam / Sir,

Foreign Currency (Non-Resident) Account (Banks) (FCNR (B)) Scheme

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 2 of the Foreign Exchange Management (Deposit) Regulations, 2000, notified vide Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time, in terms of which instructions regarding opening and maintenance of FCNR (B) deposit have been stipulated.
2. It has come to our notice that Authorised Dealer banks are insisting on different requirements at the time of closure of FCNR (B) deposits and subsequent remittance of funds as under:

1. Submission of A2 form
2. Insisting on physical presence of the account holder
3. Asking for purpose of remittance

3. In this connection it is clarified that A2 form is to be filed at the time of purchase of foreign exchange using rupee funds and hence is not applicable while remitting FCNR (B) funds. Further, banks, with the help of technology, will have to devise better alternatives/ methods for ensuring bonafides of the transaction rather than insisting on physical presence of the account holder, in order to ensure hassle free remittance of funds to the account holder.
4. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.
5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(A. K. Pandey)
Chief General Manager

Citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan Macau and Hong Kong without prior permission of the Reserve Bank for acquiring assets in India

Acquisition/transfer of immovable property – Prohibition on citizens of certain countries

RBI/2014-15/495
A.P.(DIR Series) Circular No.83

March 11, 2015

To
All Category – I Authorised Dealer Banks
Madam / Sir,

Acquisition/transfer of immovable property – Prohibition on citizens of certain countries

Attention of Authorised Dealers in Foreign Exchange is invited to Regulation 7 of Foreign Exchange Management (Acquisition and Transfer of immovable property in India) Regulations, 2000 notified vide Notification No. FEMA 21/2000-RB dated 3rd May 2000 in terms of which no person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years.
2. It has been observed that Macau and Hong Kong are the two Special Administrative Regions of China. As they are notified separately, it has been decided, in consultation with the Government of India, that citizens of Macau and Hong Kong will also be included in the list of countries which are prohibited to acquire/transfer immovable property in India in terms of Regulation 7 of FEMA ibid.
3. Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Acquisition and Transfer of immovable property in India) (Amendment) Regulations, 2015 notified vide Notification No. FEMA.335/2015-RB dated February 4, 2015 c.f. G.S.R. No.120 (E) dated February 24, 2015.
4. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.
5. 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.