The Foreign Exchange

16 Management Act, 1999

Exercise on Person Resident in India
Q-1 Mr. A had resided in India during the financial year 1999-2000 for less than 183 days. He had
come to India on April 1, 2000 for employment. What would be his residential status during the
financial year 2000-2001?
Sol As per Section 2 (v) of FEMA, “Person resident in India” means:
(i) a person residing in India for more than one hundred and eighty-two days during the
course of the preceding financial year but does not include—
(A) a person who has gone out of India or who stays outside India, in either case—
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay
outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in
India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside
India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in
India;
Section 2 (w) “Person Resident Outside India” means a person who is not resident in India

Mr. A had come to India for taking up employment. Thus w.e.f. 1st April 2000, he would be
considered as PRII, as he came with specific purpose of employment.
Q-2 Mr. X had resided in India during the financial year 1999-2000 for less than 183 days. He had
come to India on April 1, 2000 for business. He intends to leave the business on April 30, 2001
and leave India on June 30, 2001. What would be his residential status during the financial year
2000-2001 and during 2001-2002 up to the date of his departure?
Sol Mention definition of PRI and PROI

In given case, Mr. X had resided in India during the financial year 1999-2000 for less than 183
days. He had come to India on April 1, 2000 for business.
Chap. 16 The Foreign Exchange Management Act, 1999 319
He intends to leave the business on April 30, 2001 and leave India on June 30, 2001

Thus, his residential status for

2000-01-W.e.f. 1st April 2000, he shall be PRII as came for specified purpose i.e. Business

2001-02-Since he stays in India for more than 182 days during F.Y. 2000-01, thus upto the date
of departure, he is PRII, however w.e.f. 1st July 2001, he shall be PROI.
Q-3 Mr. Z had resided in India during the financial year 1999-2000. He left India on 1st August,
2000 for United States for pursuing higher studies for 3 years. What would be his residential
status during financial year 2000-2001 and during 2001-2002?
Sol Mention definition of PRI and PROI

Mr. Z had resided in India during financial year 1999-2000 for more than 182 days.

Further, he has gone to USA for higher studies. In other words, he has not gone out of, or stayed
outside India for or on taking up employment, or for carrying a business or any other purpose, in
not circumstances as would indicate his intention to stay outside India for an uncertain period.

Accordingly, he would be ‘person resident in India’ during the financial year 2000-2001.

For the financial year 2001-2002, he would not have been in India in the preceding financial
year (2000-2001) for period exceeding 182 days. Accordingly, he would not be ‘person resident
in India’ during the financial year 2001-2002.
Q-4 Toy is a Japanese company having several business units all over the world. It has arobotic unit
with its head quarter in Mumbai and has a branch in Singapore. Headquarter at Mumbai
controls the branch of robotic unit. What would be the residential status of robotic unit in
Mumbai and that of the Singapore branch?
Sol Toy being a Japanese company would be a person resident outside India. [Section 2(w)].
Section 2(u) defines ‘person’. Under clause (viii) thereof person would include any agency,
office or branch owned or controlled by such ‘person’. The term such ‘person’ appears to refer
to a person who is included in clauses (i) to (vi).
Accordingly robotic unit in Mumbai, being a branch of a company, would be a ‘person’.
Section 2(v) defines ‘person resident in India’. Under clause (iii) thereof ‘person resident in
India’ would include an office, branch or agency in India owned or controlled by a person
resident outside India. Robotic unit in Mumbai is owned or controlled by a person ‘resident
outside India’. Hence, it would be ‘person resident in India’.
However, robotic unit in Mumbai, though not ‘owned’ controls Singapore branch, which is a
person resident in India. Hence prima facie, it may be possible to hold a view that the Singapore
branch is ‘person resident in India’.
Q-5 Miss Lizza is an airhostess with the British Airways. She flies for 12 days in a month and
thereafter a break for 18 days. During the break, she is accommodated of ‘base’, which is
normally the city where the airways are head quartered. However, for security considerations,
she was based on Mumbai. During the financial year, she was accommodated at Mumbai for
more than 182 days. What would be her residential status under FEMA?
Sol Miss Lizza stayed in India at Mumbai ‘base’ for more than 182 days in the preceding financial
year. The issue here is whether staying can be considered ‘residing’. FEMA emphasizes
‘residing’. ‘Stay’ is a physical attribute, while ‘residing’ denotes permanency.
Thus, while Miss Lizza may have stayed in India for more than 182 days, it is doubtful whether
320 The Foreign Exchange Management Act, 1999 Chap. 16
she can be said to have ‘resided’ in India for more than 182 days.
Further under section 2(v)(a), she would become resident only if she has come to or stayed in
India for employment. It would be doubtful and debatable, whether by staying at Mumbai base
during the break, Miss Lizza can be said to have come to stay in India for or on taking up
employment. Hence Miss Lizza would continue to be non-resident.
Q-6 ‘Printex Computer’ is a Singapore based company having several business units all over the
world. It has a unit for manufacturing computer printers with its Headquarters in Pune.It has a
Branch in Dubai which is controlled by the Headquarters in Pune.What would be the residential
status under FEMA, 1999 of printer units in Pune and that of Dubai branch?
Sol According to section 2(w), every person other than a person resident in India is a person
resident outside India.
Within the definition of ‘Person Resident in India’, Printex Computer being a Singapore based
company would be person resident outside India.
Section 2(V) of FEMA, 1999 defines the term “person resident in India”. According to this
section, all business units in India will be “resident in India” even though these units are owned
or controlled by a person resident outside India. Therefore, its headquarter in Pune become sa
person resident in India.
Similarly, according to section 2(V)(iv), all business units outside India will be ‘resident in
India’ provided the business units are either owned or controlled by a person resident in India.
In the given case, Dubai Branch though not owned is controlled by Print unit in Pune which is a
person resident in India. Hence, by virtue of section 2(V)(iv) Dubai Branch is a person resident
in India.
Q-8 Examine whether the following branches can be considered as a 'Person resident in India' under
Foreign Exchange Management Act, 1999:
(i) ABC Limited, a company incorporated in India established a branch at London on 1st
January, 2003.
(ii) M/s XYZ, a foreign company, established a branch at New Delhi on 1st January, 2003.
The branch at New Delhi controls a branch at Colombo.
Sol The term ‘Person Resident in India’ has been defined under section 2(V). Clause (iii) and
(iv) provide as under –
(iii) any branch, office or agency in India owned or controlled by a person resident
outside India
(iv) any branch, office or agency outside India owned or controlled by a person
resident in India
(i) By virtue of section 2(V)(iv) London branch of a company incorporated in India is a person
resident in India.
(ii) By virtue of section 2(V)(iii), New Delhi branch of XYZ, a foreign company, is a person
resident in India and Colombo branch, being under control of New Delhi office, becomes a
person resident in India.
Q-9 Mr. Ram, citizen of India, left India for employment in U.S.A. on 1stJune, 2002. Mr. Ram
purchased a flat at New Delhi for `15 lakhs in September, 2003. His brother, Mr. Gopal
employed in New Delhi, also purchased a flat in the same building in September, 2003 for `15
lakhs. Mr. Gopal’s flat was financed by a loan from a Housing Finance Company and the loan
was guaranteed by Mr. Ram.
Examine with reference to the provision of Foreign Exchange Management Act, 1999 whether
purchase of flat and guarantee by Mr. Ram are Capital Account transactions and whether these
transactions are permissible.
Sol Section 2(e) of Foreign Exchange Management Act, 1999 states that 'capital account
transactions' means (a) a transaction which alters the assets or liabilities, including contingent
Chap. 16 The Foreign Exchange Management Act, 1999 321
liabilities, outside India of person's resident in India (b) a transaction which alters assets or
liabilities in India of persons resident outside India and includes transactions referred to in
Section 6(3).
According to section 6(3) all capital account transactions are prohibited unless specifically
permitted. RBI is empowered to issue regulations in this regard. Permissible capital account
transactions by persons resident outside India are given in Schedule II to Foreign Exchange
Management (Permissible Capital Account Transactions) Regulations, 2000. According to the
said regulations both the purchase of immovable property by Mr. Ram and guarantee by Mr.
Ram are permissible.
Q-10 State whether there are any restrictions in respect of the following transactions:
(i) Drawal of Foreign Exchange for payments due on account of amortization of loans in
ordinary course of business.
(ii) Purchase by a person resident outside India of shares of a company in India engaged in
plantation activities.
Sol According to section 2(e) of the Foreign Exchange Management Act, 1999 (FEMA) “Capital
Account Transaction” means a transaction which alters (a) the assets and liabilities, including
the contingent liabilities, outside India of persons resident in India or (b) the assets and
liabilities in India of persons resident outside India.

It also includes the transactions as provided under section 6(3) of FEMA

(i) Amortisation of Loans:
Under provisions of FEMA, 1999 subject to Foreign Exchange Management (Permissible
Capital Account Transactions) Regulations, 2000 all capital account transactions are
prohibited unless permitted by proviso to section 6(2) of FEMA. The proviso specifically
permits drawal of foreign exchange for payments due on account of amortisation of loans in
ordinary course of business. Hence, there is no restriction in FEMA in this regard.
(ii) Purchase of Shares of Company engaged in Plantation activities:
Under Section 6(2) of FEMA, 1999 the Reserve Bank of India is empowered to specify in
consultation with the Central Government, the classes of capital account transactions which
are permissible and the limits upto which the foreign exchange shall be admissible for such
transactions. Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000 prohibits certain capital account transactions.
One such transaction is foreign investment in India in any company, firm or proprietary concern
engaged in or proposed to be engaged in agriculture or plantation activities. Hence, purchase by
a person resident outside India of shares of a company in India engaged in plantation activities
in not permitted.
Q-11 Mr. Kishore resided in India during the Financial Year 2009-2010 for less than 182 days. He
came to India on 1 April, 2010 for business. He closed down his business on 30th April, 2011
and left India on 30th June, 2011 for the purpose of employment outside India. Decide the
residential status of Mr. Kishore during the Financial Years 2010-2011 and 2011-2012 under
the provisions of the Foreign Exchange Management Act, 1999.
Sol
322 The Foreign Exchange Management Act, 1999 Chap. 16

Q-12 Mr. Sekhar resided in India for a period of 150 days during the financial year2007-2008 and
thereafter went abroad. He came back to India on 1st April, 2008 as an employees of a business
organization. What would be his residential status under Foreign Exchange Management Act,
1999 during the financial year 2008-2009.
Sol

Q-13 Examine with the reference to the provisions of the Foreign Exchange Management Act, 1999
the residential status of the branches mentioned below:
(i) MKP Limited, an Indian company having its Registered office at Mumbai, India
established a branch at New York U.S.A. on 1st April, 2004
(ii) WIP Ltd., a company incorporated and registered in London established a branch at
Chandigarh in India on 1st April 2004.
(iii) WIP Ltd.’s Singapore branch which is controlled by its Chandigarh branch.
Sol Term ‘Person Resident in India’ has been defined under section 2(V), which provides that all
branches and offices in India under the control and ownership of a person resident outside India
are persons resident in India. Similarly, all branches and offices outside India under the control
or ownership of a person resident in India are also Persons Resident in India.
Keeping in mind these provisions, questions can be answered as under –
(i) As per section 2(v)(iv) any branch or agency or office outside India under the control or
ownership of a person resident in India will always be regarded as a person resident in
India. Therefore, New York branch of MKP Ltd. will be treated as ‘Person Resident in
India’.
(ii) As per section 2(v)(iii) any branch or agency or office in India under the ownership or
control of a person resident outside India will also be a person resident in India.
Therefore, Chandigarh branch of WIP Limited will be treated as a person resident in
India.
(iii) As per section 2(v)(iv) any branch or agency or office of a person resident in India will
also be treated as a person resident in India. In the given case, the Singapore branch of
WIP Ltd. is controlled by its Chandigarh Branch which is a “Person resident in India”.
Therefore, the residential status of the Singapore branch of WIP Ltd. shall be that of a
“Person resident in India”.
Q-14 Mr. F, an Indian National desire to obtain foreign exchange for the following purpose:
(i) Payment of US$10,000 as commission on exports under Rupee State Credit Route.
(ii) US$ 30,000 for a business trip to U.K.
(iii) Remittance of US$ 2,00,000 for payment as prize money to the wining team in a Hockey
Tournament to be held in Australia.
Advise him, if he can get the Foreign Exchange and under what conditions.
Sol By virtue of powers under section 5, the Central Government has framed the Foreign Exchange
Management (Current Account Transactions) Rules, 2000.
 Schedule I of the said Rules contains transactions for which drawal of foreign exchange
is prohibited,
Chap. 16 The Foreign Exchange Management Act, 1999 323
 Schedule II contains transactions for which drawal of foreign exchange requires prior
approval of the Central Government and
 Schedule III contains transactions for which drawal of foreign exchange requires prior
approval of the Central Government.
Keeping in view these provisions, questions can be answered as under --
(i) In respect of item No. (i), i.e., payment of commission on exports under Rupee State Credit
Route, such payment is prohibited and the same is included in First Schedule to the Foreign
Exchange Management (Current Account Transactions) Rules, 2000.

(ii) Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended
by Foreign Exchange Management (Current Account Transactions) Amendment Rules, 2015-
As per Schedule III- Individuals can avail of foreign exchange facility for the purposes
specified for activities in Schedule III within the limit of USD 2,50,000.
Any additional remittance in excess of the said limit for the shall require prior approval of the
Reserve Bank of India
Conclusion- Travel for business outside India is within the activities as prescribed in
Schedule-III and thus drawal upto $2,50,000 shall be allowed

(iii) This type of payment is covered under Schedule II to the Foreign Exchange Management
(Current Account Transactions) Rules, 2000 and for remitting of prize money exceeding US$
1,00,000 for sports activity abroad other than International, National or State level body will
require the prior permission of the Central Government.
Since the amount involved in item No. (iii) of the question is more than US$1,00,000 and Mr. F
is not an international, National or State level body, he has to obtain the permission of the
central Government before remitting the prize money of US$ 2,00,000.
Q-17 Mrs. Kamala, a resident in India is likely to inherit an immovable property in U.S.A. from her
father, who is a resident outside India. Advise Mrs. Kamla about the restrictions, if any, in this
regard under the Foreign Exchange Management Act, 1999 explaining the relevant provisions
of the Act.
Sol Acquisition of immovable property situated outside India and foreign securities by a person
resident in India are regulated by Sections 4 and 6 of the Foreign Exchange Management Act,
1999.
According to Section 4 of FEMA 1999 no person resident in India shall acquire, hold, own,
possess or transfer any foreign exchange, foreign security of any immovable property situated
outside India, except as provided in the Act.
Section 6(4) provides that a person resident in India may hold, own, transfer or invest in foreign
currency foreign security or any immovable property situated outside India if such currency
security or property was inherited from a person who was resident outside India.

Further, RBI is empowered to frame regulations relating capital account transactions in

consultation with the Central Government.

Accordingly a person resident in India may acquire immovable property outside India by way
of gift or inheritance from a person who was resident outside India without approval of RBI.

In the light of these provisions there are no restrictions with regard to inheritance of immovable
property situated outside India. Such inheritance does not require approval of RBI.
Q-18 Examine whether the following transactions are permissible or not under the above act as
Capital Account transactions:
324 The Foreign Exchange Management Act, 1999 Chap. 16
(i) Investment by person resident in India in Foreign Securities.
(ii) Foreign currency loans raised in India and abroad by a person resident in India.
(iii) Export, import and holding of currency / currency notes.
(iv) Trading in transferable development rights.
(v) Investment in a Nidhi Company.
Sol Meaning of Capital Account Transactions
According to section 2(e), capital account transaction means a transaction which alters the
assets or liabilities, including contingent liabilities, outside India of persons resident in India or
assets or liabilities in India of the persons resident outside India and includes transactions
covered under sub-section (3) of section 6.
The Reserve Bank of India has framed Foreign Exchange Management (Permissible Capital
Account Transactions) Regulations, 2000. The provisions of these regulations are as under:

Categories of Capital Account Transactions:

As per these regulations, capital account transactions may be classified under the following
heads.
(1) Permissible capital account transactions of persons resident in India (schedule 1)
Foreign Exchange Management (Permissible Capital Account Transactions) (Third
Amendment) Regulations, 2015.
"PROVIDED that –
(a) subject to the provisions of the Act or the rules or regulations or directions or orders
made or issued thereunder, a resident individual may, draw from an authorized person
foreign exchange not exceeding USD 250,000 per financial year or such amount as
decided by Reserve Bank from time to time for a capital account transaction specified
in Schedule I.
Explanation: Drawal of foreign exchange as per Schedule III to Foreign Exchange
Management (Current Account Transactions) Rules, 2000 shall be subsumed within the
limit under proviso (a) above.
(b) Where the drawal of foreign exchange by a resident individual for any capital account
transaction specified in Schedule I exceeds USD 250,000 per financial year, the limit
specified in the regulations relevant to the transaction shall apply with respect to such
drawal.
(2) Permissible Capital transactions of persons resident outside India (schedule II).
(3) Prohibited capital account transactions.

Conclusion:-Among five capital account transaction of question first three i.e. (i), (ii) and (iii)
are permissible capital account transactions. A resident individual may, draw from an
authorized person foreign exchange not exceeding USD 250,000 per financial year or such
amount as decided by Reserve Bank from time to time
Rest two i.e., (iv) and (v) are prohibited capital transactions.
Q-19 Examine with reference to the provisions of the Foreign Exchange Management Act, 1999, the
residential status of the branches mentioned below:
(i) NNM Ltd. an Indian Company having its registered office at Mumbai, India established a
branch at New York USA on 1st April, 2005.
(ii) DDI Ltd. a company incorporated and registered in London established a branch at Kanpur
in India on 1st April, 2005.
(iii) DDI Ltd. has a branch office at Singapore which is controlled by its Kanpur branch
Sol (i) Section 2(V)(ii), all companies registered or incorporated are persons resident in India and
according to section 2(V)(iv) every branch or office or agency outside India under the
Chap. 16 The Foreign Exchange Management Act, 1999 325
control or ownership of a person resident in India is also treated as a person resident in
India. Therefore, NNM Limited is a person resident in India and its New York Branch is
also a person resident in India.
(ii) According to section 2(V)(iii) every branch or agency or office in India, under the control
or ownership of a person resident outside India, is a person resident in India. Therefore,
Kanpur branch of DDI Limited, a company registered in London, is a person resident in
India.
(iii) As per section 2(v)(iv) any branch or agency or office outside India, of a person resident in
India will also be treated as a person resident in India. In the given case, the Singapore
branch of DDI Ltd. is controlled by its Kanpur Branch which is a “Person resident in
India”. Therefore, the residential status of the Singapore branch of DDI Ltd. shall be that of
a “Person resident in India”.
326 The Foreign Exchange Management Act, 1999 Chap. 16
Q-20 Mr. Sane, an Indian National desire to obtain Foreign Exchange for the following purposes.
(i) Remittance of US Dollar 50,000 out of winnings on a lottery ticket.
(ii) US Dollar 1,00,000 for sending a cultural troupe on a tour of U.S.A.
(iii) US Dollar 50,000 for meeting the expenses of his business tour to Europe. Advise him
whether he can get Foreign Exchange and if so, under what conditions?
Sol By virtue of powers under section 5, the Central Government has framed the Foreign Exchange
Management (Current Account Transactions) Rules, 2000.
Schedule I of the said Rules contains transactions for which drawal of foreign exchange is
prohibited,
Schedule II contains transactions for which drawal of foreign exchange requires prior approval
of the Central Government and
Schedule III contains transactions for which drawal of foreign exchange requires prior approval
of the Central Government.
(i) Under Schedule I of the said Rules, remittance out of lottery winnings is prohibited. Hence
Mr. Sane cannot withdraw Foreign Exchange for this purpose.
(ii) According to Schedule II to the Foreign Exchange Management (Current Account
Transactions) Rules, 2000, foreign Exchange for meeting expenses of cultural tour can be
withdrawn by any person after obtaining permission from Government of India. Hence, Mr.
Sane can draw the Foreign Exchange after obtaining such permission.
(iii) As per third schedule to the Foreign Exchange Management (Current Account
Transactions). Rules, 2000 As amended by Foreign Exchange Management (Current Account
Transactions) Amendment Rules, 2015.
Individuals can avail of foreign exchange facility for the purposes specified in Schedule III
within the limit of USD 2,50,000 only. Any additional remittance in excess of the said limit
shall require prior approval of the Reserve Bank of India.
Schedule III include the transactions such as travel for business or attending a conference or
specialized training or for meeting expenses for meeting medical expenses, or check-up abroad,
or for accompanying as attendant to a patient going abroad for medical treatment/ check-up.
Conclusion:—Thus drawal of foreign exchange exceeding US Dollar 25,000 for a business tour
irrespective of period of stay abroad is allowed since it is within the limit of $ 2,50,000
Q-21 Mr. Basu desires to draw foreign exchange for the following purposes:
(i) Payment related to “Call back services” of telephones
(ii) USD 1,20,000 for studies abroad on the basis of estimates given by the foreign university.
(iii) USD 25,000 for sending a cultural troupe on a tour of Europe.
Advise him, whether he can get foreign exchange and, if so, under what conditions
Sol By virtue of powers under section 5, the Central Government has framed the Foreign Exchange
Management (Current Account Transactions) Rules, 2000.
ScheduleIofthesaidRulescontainstransactionsforwhichdrawalofforeign exchange is prohibited,
Schedule II contains transactions for which drawal of foreign exchange requires prior approval
of the Central Government and
Schedule III contains transactions for which drawal of foreign exchange requires prior approval
of the Central Government.
Keeping in view these provisions the questions can be answered as under –
(i) Payment related to ‘call back services’ of telephone is totally prohibited under Schedule I
of Foreign Exchange Management (Current Account Transaction) Rules. Therefore, Mr.
Basu cannot draw forex for this.
(ii) As per third schedule to the Foreign Exchange Management (Current Account
Transactions). Rules, 2000 As amended by Foreign Exchange Management (Current
Account Transactions) Amendment Rules, 2015.
Chap. 16 The Foreign Exchange Management Act, 1999 327
Individuals can avail of foreign exchange facility for the purposes specified in Schedule III
within the limit of USD 2,50,000 only. Any additional remittance in excess of the said
limit shall require prior approval of the Reserve Bank of India.
Remittance of Foreign Exchange for studies abroad is covered under Schedule III of the
said Rules. Foreign Exchange may be released for studies abroad up to an overall limit of
USD 2,50,000 or the estimates from the institution abroad, whichever is higher. Above this
limit RBI’s approval is required.
(iii) Cultural troupe is covered is covered under Schedule II of the said Rules. Irrespective of
the amount involved prior approval of Central Government, Ministry of HRD (Dept. of
Education and Culture) is required.
Q-22 A Company incorporated in United Kingdom established a branch at Chennai. What is the
residential status of the Chennai branch? The Chennai branch proposes to purchase some
immovable property at Chennai for the purpose of its business. Is it a ‘Capital Account
Transaction’ within the meaning of Section 2(e) of the Foreign Exchange Management Act,
1999? Are there any restrictions under the Foreign Exchange Management Act, 1999 in respect
of such acquisition?
Sol According to Section 2(v)(iii) of FEMA, 1999, person resident in India inter alia means an
office, branch, or agency in India owned or controlled by a person resident outside India.
The company incorporated in U.K is a person resident outside India [Section 2(v)(ii) read with
Section 2(w) of the FEMA] as it is not a body corporate registered or incorporate in India.
As the Chennai branch is branch in India is owned and controlled by the U.K Company is
resident outside India, the Chennai branch is resident is India under Section 2(v)(iii) stated
above.
Capital account transaction
In the case of a resident in India, capital account transaction means a transaction which alters
the assets or liabilities outsides India. The Chennai branch (is resident in India) acquires
immovable property at Chennai (is in India). Hence this acquisition is not a capital account
transition within the meaning of Section 2(e) of FEMA.
Section 6(3) empowers RBI to restrictor regulate the acquisition of immovable property in India
by a person resident outside India. Hence there is no restriction in acquisition of immovable
property in India by Chennai branch.
Q-23 Pamtop is a London based company having several business units all over the world. It has a
manufacturing unit called Laptop with headquarters in Bengaluru. It has a branch in Seoul,
South Korea which is controlled by the headquarters in Bengaluru. What would be the
residential status under the FEMA, 1999 of Laptop in Bengaluru and that of Seoul branch?
Sol The term ‘Person Resident in India’ has been defined under section 2(V). Clause (III) and (IV)
provide as under –
(iii) any branch, office or agency in India owned or controlled by a person resident outside
India
(iv) any branch, office or agency outside India owned or controlled by a person resident in
India
(i) By virtue of section 2(V)(III) Bengaluru branch of Pamtop, a London based company, is a
person resident in India.
(ii) By virtue of section 2(V)(IV), Seoul branch, which is under the control of Bengaluru office
will also be treated as a person resident in India.
Q-24 Examine the provisions of Foreign Exchange Management Act, 1999 and advise whether the
approval of Central Govt. is needed in the following cases:
X wants to remit certain sum of money out of lottery winnings.
328 The Foreign Exchange Management Act, 1999 Chap. 16
Sol X wants to remit certain sum of money out of lottery winnings: It is a current account
transaction and prohibited as per Schedule I to the Foreign Exchange Management (Current
Account Transactions) Rules, 2000.
Q-28 Mrs. Chandra, a resident outside India, is likely to inherit from her father some immovable
property in India. Are there any restrictions under the provisions of the Foreign Exchange
Management Act, 1999 in acquiring or holding such property? State whether Mrs. Chandra can
sell the property and repatriate outside India the sale proceeds.
Sol As per sub-section 5 of section 6 of the FEMA, 1999, a person resident outside India may hold,
own, transfer or invest in Indian currency, security or any immovable property situated in India
if such currency, security or property was acquired, held or owned by such person when he was
resident in India or inherited from a person who was resident in India.
Accordingly in the problem, Mrs. Chandra, a resident outside India, may acquire or hold any
immovable property of his father in India by way of inheritance in both the conditions, firstly,
where her father, a resident outside India, had acquired the property in accordance with the
provisions of the foreign exchange law in force at the time of acquisition by him or as per the
provisions of these Regulations or secondly, where her father, a resident in India.
Repatriation of sale proceeds: A person referred to in sub-section (5) of section 6 of the Act,
or his successor shall not, except with the prior permission of the Reserve Bank, repatriate
outside India the sale proceeds of any immovable property.
Thus, accordingly Mrs. Chandra can sell the property and repatriate outside India the sale
proceeds only with the prior permission of the RBI.
Q-30 Mr. T. Raghava has secured admission in a reputed and recognized university in Germany, for
the study of higher and technical education, outside India. After arrival in Germany, he has
gone ill and wants medical treatment facility in a reputed German hospital. He desires to apply
to the Government of India for availing the additional remittance beyond the limit approved for
foreign currency exchange facility. He has already enjoyed the permitted facility of foreign
exchange for studies abroad, for the said financial year. Decide the following as to the facts
given in the question as per the provisions of the Foreign Exchange Management Act, 1999:
1. As an individual, to what extent Mr. T. Raghava may avail foreign exchange facilities
for higher and technical study in Germany.
2. Can Mr. T. Raghava avail the facility of additional remittance in foreign exchange,
beyond the limit, for the medical treatment.
Sol According to the Schedule III of the FEM (current account transactions) Rules, 2000,
Remittance of Foreign Exchange for Studies Abroad: Foreign exchange may be released for
studies abroad up to a limit of US $ 2,50,000 without any permission from the RBI. Above this
limit, RBI’s prior approval is required.
Remittance for Medical Treatment: Remittance of foreign exchange for medical treatment
abroad: - It requires prior permission or approval of RBI where the individual requires
withdrawal of foreign exchange exceeding USD 2,50,000.
According to Schedule III, for the purpose of expenses in connection with medical treatment,
the individual may avail of exchange facility for an amount in excess of the limit prescribed
under the Liberalized Remittance Scheme, if so, required by a medical institute offering
treatment.
Any such amount shall be reduced from USD 2,50,000 by the amount so remitted
Therefore, in given case, Mr. T. Raghava can draw foreign exchange exceeding USD 2,50,000
by taking prior permission/ approval of RBI.
Q-33 Mr. Bandha, a software Engineer, Indian Citizen took employment in USA. He is a resident of
USA for a long time. He desires
(i) to acquire a farm house in Munar (Kerala).
(ii) to make investment in KLJ (Nidhi) Ltd., registered as Nidhi Company.
Chap. 16 The Foreign Exchange Management Act, 1999 329
(iii) to make investment in Rose Real Estate Ltd., an Indian Company formed for the
development of township.
Mr. Unsatisfactory, brother of Mr. Bandha residing at Chennai is aggrieved by an order made
by Appellate Tribunal established under Foreign Exchange Management Act, 1999, desires to
file further appeal.
With references to the provisions of Foreign Exchange Management Act, 1999, analyse
whether there are any restrictions in respect of the transactions desired by Mr. Bandha. Also
determine the appeal procedure to Mr. Unsatisfactory on the order of Appellate Tribunal under
the said Act.
Sol (i) Acquisition of a Farm House
Mr. Bandha cannot acquire a farm house in Munnar (Kerala) because a person resident outside
India who is a citizen of India may acquire immovable property in India other than an
agricultural property, plantation, or a farm house.
(ii) Making Investments in KLJ Nidhi Limited
Mr. Bandha cannot make investment in KLJ (Nidhi) Ltd., as a person resident outside India is
prohibited from making investments in India in any form, in any Company, or partnership firm
or proprietary concern or any entity whether incorporated or not which is engaged or proposes
to engage as Nidhi Company.
(iii) Making Investments in Rose Real Estate Limited
The person resident outside India is prohibited from making investments in India in any form,
in any Company, or partnership firm or proprietary concern or any entity whether incorporated
or not which is engaged or proposes to engage in real estate business, or construction of farm
houses. However, development of townships shall not be included in the real estate business.
Thus, Mr. Bandha can make investment in Rose Real Estate Ltd.
Q-35 Mr. Manthan is deputed to India by his company to develop a software Programme for a period
of 3 years from 1st January 2016. He is paid salary to his Indian bank account. On 1st May,
2018 he wants to remit his entire salaries ended till 30th April, 2018 to his home country USA.
State in the light of relevant provision, the way the remittance of the salary may be done as per
the Foreign Exchange of Management Act, 1999.
Sol As per Schedule III of the FEM (Current Account Transactions) Rules, 2000, a person who
is resident but not permanently resident in India, who is on deputation to the office or branch of
a foreign company or subsidiary or joint venture in India of such foreign company, may make
remittance up to his net salary, after deduction of taxes, contribution to provident fund and
other deductions.
Thus, Mr. Manthan can remit the salary after payment of taxes and contributions related to
social security schemes.
Q-39 Bharat Computer Hardware Ltd. received an advance -payment for export of high-tech
hardware to a business concern in Singapore by entering into an export agreement to supply the
hardware within six months from the date of receipt of advance payment. The shipment of
hardware was made after 9 months and the documents covering the shipment were routed
through an authorized dealer through whom the advance payment was received.
Examine whether Bharat Computer Hardware Ltd. has discharged its obligation in accordance
with the provisions of the Foreign Exchange Management Act, 1999?
Is it possible to receive advance payment where the export agreement provides for shipment of
goods within 15 months from the date of receipt of advance payment? Also identify the
maximum rate of interest payable on the advance payment under the said Act.
Sol According to the Foreign Exchange Management (Export of Goods and Services)
Regulations, 2015,
Advance payment against exports:
(1) Where an exporter receives advance payment (with or without interest), from a buyer / third
330 The Foreign Exchange Management Act, 1999 Chap. 16
party named in the export declaration made by the exporter, outside India, the exporter shall be
under an obligation to ensure that—

(i) the shipment of goods is made within one year from the date of receipt of advance
payment;
(ii) the rate of interest, if any, payable on the advance payment does not exceed the rate of
interest London Inter-Bank Offered Rate (LIBOR) + 100 basis points and
(iii) the documents covering the shipment are routed through the authorised dealer through
whom the advance payment is received;
Provided that in the event of the exporter's inability to make the shipment, partly or fully,
within one year from the date of receipt of advance payment, no remittance towards refund of
unutilized portion of advance payment or towards payment of interest, shall be made after the
expiry of the period of one year, without the prior approval of the Reserve Bank.

(2) An exporter may receive advance payment where the export agreement itself duly provides
for shipment of goods extending beyond the period of one year from the date of receipt of
advance payment.
In the light of the provisions as enumerated above,—
(i) Since Bharat Computer Hardware Ltd. has exported the hardware within 9 months of the
date of receipt of advance payment, it has discharged its obligations within the provisions
of the Foreign Exchange Management Act, 1999.
(ii) Yes, it is possible to receive advance payment where the export agreement provides for
shipment of goods extending beyond the period of one year from the date of receipt of
advance payment.
(iii) The maximum rate of interest, if any, payable on the advance payment should not exceed
the rate of interest London Inter-Bank Offered Rate (LIBOR) + 100 basis points.
Q-40 Mr. Sugam requires every year USD 25,000 towards tuition fees and USD 30,000 for
incidental and stay expenses for studying abroad. Is it possible for Mr. Sugam to get the
required Foreign Exchange and, if so, under what conditions?
Sol According to Para I of Schedule III to Foreign Exchange Management (Current Account
Transactions), Amendment Rule, 2015
Individuals can avail of foreign exchange facility for the studies abroad within the limit of USD
2,50,000 only. Any additional remittance in excess of the said limit shall require prior approval of
the RBI.
Further proviso to Para I of Schedule III states that individual may be allowed remittances
(without seeking prior approval of the RBI) exceeding USD 2,50,000 based on the estimate
received from the institution abroad.
In this case the foreign exchange required is only USD 55,000 per academic year and hence
approval of RBI is not required.
Q-43 Due to delay in realisation of revenue, RNPLL was in financial distress, further lock-down due
to COVID-19 hit the liquidity. Outstanding dues in respect of imports are nearly USD 2.4
million. RNPLL is seeking extension for period of import settlement from the authorised dealer
with respect to one of its major import transactions (PO G-212) where the date of the invoice
was 7th April, 2020, date of shipment was 10th April, 2020, date of IGM and arrival at the port
was 14th April, 2020 and Bill of Entry was furnished on 15th April, 2020. RNPLL is hopeful
for immediate recovery as well as improvement in both top and bottom lines apart from its
financial liquidity, because the pharmacy business has a great opportunity to revive by
developing a vaccine for COVID-19.
With respect to imports made by RNPLL, please answer the following questions:-
(a) What is the time limit for settlement of import payments on account of normal imports from
Chap. 16 The Foreign Exchange Management Act, 1999 331
china?
(b) Can authorised dealer grant extension of time period in case of settlement of import
payment for PO G-212?
(c) If yes, specify the date till what extension can be granted by the authorised dealer; if no,
who can grant so?
Sol As per the Master Direction – Import of Goods and Services
(a) Remittances against imports should be completed within six months from the date of
shipment, except in cases where amounts are withheld towards the guarantee of performance,
etc.
Hence, the time limit for settlement of import payments on account of normal imports made by
RNPLL from china is 6 months respectively.

However, as per RBI circular:- RBI/2019-20/242 dated 22nd May, 2020, in view of the
disruptions due to the outbreak of COVID- 19 pandemic, it has been decided to extend the time
period for completion of remittances against such normal imports (except in cases where
amounts are withheld towards the guarantee of performance etc.) from six months to twelve
months from the date of shipment for such imports made on or before July 31, 2020.

(b) AD Category – I banks can consider granting extension of time for settlement of import
dues up to a period of six months at a time (maximum up to the period of three years)
irrespective of the invoice value for delays on account of disputes about quantity or quality or
non-fulfilment of terms of the contract, financial difficulties and cases where the importer
has filed suit against the seller.
Hence, the authorised dealer can grant extension in case of PO G-212.

(c) While considering extension beyond one year from the date of remittance, the total
outstanding of the importer does not exceed USD one million or 10 percent of the average
import remittances during the preceding two financial years, whichever is lower. If the limits
are not getting satisfied then it may be referred to the concerned Regional Office of Reserve
Bank of India.

Note – As per clarification added to master direction, date of remittance may be

considered as the date of shipment.

In the case of RNPLL, outstanding dues against imports are nearly USD 2.4 million. Hence the
authorise dealer category I bank can grant an extension upto maximum one year in case of PO
G-212 from the date of shipment i.e. 9th April, 2021 (1 year from 10th April, 2020). However,
on reference to the concerned regional office of the Reserve Bank of India, further extension
can be granted.
Q-44 TCL is famous for its office utility software, which is also in high demand at
abroad. Around 40% of the top-line is contributed by export. TCL exported one of
its software, which was transmitted over the electronic media on 30th June, 2020,
for which invoice was issued dated 25th June, 2020.By which date TCL must realise the
full export value of software and repatriate same to India with respect to export of software
which was transmitted over the electronic media?
Sol 25th March 2021
Q-45 Incase of ECB, which amongst the following is not a valid alternative available with TIL to
park the funds abroad?
(a) Deposit the funds with a foreign bank rated AA by S&P
332 The Foreign Exchange Management Act, 1999 Chap. 16
(b) Deposit the funds with a foreign bank rated AA by Moody
(c) Deposit the funds with a foreign branch of Indian bank abroad
(d) Treasury bills up-to one-year maturity rated A+ by Fitch
Sol Treasury bills up-to one-year maturity rated A+ by Fitch
Q-47 Mr. Aslam, the elder son of Mr. Abhas is settled in USA. He left India to pursue
MS in civils. Mr. Abhas deposited an annual fee of Rs.1.8 crores, as required, in
the college of Mr. Aslam. Mr. Abhas was worried as the rupee is depreciating
every now and then. From the date on which he paid fees, the rupee value got
depreciated from ` 65 to ` 71 in a span of 2 months.Decide , if any contravention
has taken place
Sol Under the Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by
resident individuals upto USD 2,50,000 per F.Y. (April-March) for any permitted current or
capital account transaction or a combination of both.

AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000
or its equivalent to resident individuals for studies abroad without insisting on any estimate
from the foreign University.

However, AD Category I bank and AD Category II may allow remittances (without seeking
prior approval of the Reserve Bank of India) exceeding USD 2,50,000 based on the estimate
received from the institution abroad.

In the given case, Mr. Abhas has payment of Rs 1.8 crores when the exchange rate was Rs. 71.
Mr. Abhas made the payment of $2,53,521 (1.8 crores/71) which exceeds the threshold limit of
$2,50,000 of LRS. However, the resident can remit more than the prescribed limit for studies
abroad if so required by the University.
Conclusion:
Mr. Abhas has not violated the provision of FEMA rules provided estimates from concerned
institution has been received.
Q-48 Differentiate between Automatic Route and Approval Route for direct investment?
MTP-Mar
20
Sol Difference between Automatic Route and Approval Route for direct investment

1. Automatic Route: An Indian Party has been permitted to make investment/ undertake
financial commitment in overseas Joint Ventures (JV)/ Wholly Owned Subsidiaries (WOS), as
per the ceiling prescribed by the Reserve Bank.
Any financial commitment (FC) exceeding USD 1 (one) billion (or its equivalent) in a financial
year would require prior approval of the Reserve Bank even when the total FC of the Indian
Party is within the eligible limit under the automatic route [i.e., within 400% of the net worth
(Paid up capital + Free Reserves) as per the last audited balance sheet.

2. Approval Route:
(i) Prior approval of the Reserve Bank would be required in all other cases of direct investment
(or financial commitment) abroad.
(ii) 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;
Chap. 16 The Foreign Exchange Management Act, 1999 333
(b) Contribution to external trade and other benefits which will accrue to India through such
investment (or financial commitment);
(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 as of the
JV / WOS outside India.
Therefore, under the approval route (proposals not covered by the conditions under the
automatic route) prior approval of the Reserve Bank would be required. For which a specific
application in Form ODI with the documents prescribed therein is required to be made through
the Authorized Dealer Category – I banks.
Q-49 Under the auspices of the Foreign Exchange Management Act, 1999, (the Act) examine
whether the given situations fall under "Current Account Transactions" or not as defined in the
Act?
(i) Mr. S, a resident in India, imports machinery from a vendor in UK for installing in his
factory.
(ii) An Indian resident, imports machinery from a vendor in US for installing in his factory on a
credit period of 3 months.
(iii) An Indian resident, transfers US$ 1,000 to his NRI brother in New York as "gift". The
funds are sent from resident's Indian Bank account to the NRI brother's Bank account in New
York.
Sol (i) An Indian resident imports machinery from a vendor in UK for installing in his factory. As
per FEMA, it does not alter (create) an asset in India for the UK vendor. It does not create any
liability to a UK vendor for the Indian importer. Once the payment is made, the Indian resident
or the UK vendor neither owns nor owes anything in the other country. Hence it is a Current
Account Transaction.

(ii) An Indian resident imports machinery from a vendor in UK for installing in his factory on a
credit period of 3 months. Under FEMA, it is a liability outside India. However, under
definition of Current Account Transaction [S. 2(j)(i)], “short-term banking and credit facilities
in the ordinary course of business” are considered as a Current Account Transaction. Hence
import of machinery on credit terms is a Current Account Transaction.

(iii) An Indian resident transfer US$ 1,000 to his NRI brother in New York as “gift”. The funds
are sent from resident’s Indian bank account to the NRI brother’s bank account in New York.
As per FEMA, once the gift is accepted by the NRI, no one owns or owes anything to anyone in
India or USA, the transaction is over. Hence it is a Current Account Transaction.
Q-50 GOGU Limited, a resident company in India, has achieved a turnover of ` 20,000 crore during
the financial year 2019-20. The paid-up share capital and Free Reserves of the company as on
31st March, 2020 as per the audited financial statements was ` 1500 crore and ` 500 crore
respectively. The company is planning to make an investment of INR 7800 crore in an
Overseas Joint Venture in Singapore. The company approached you whether it can make the
desired investment under the terms of automatic route for direct investment during the financial
year 2020-21. The equivalent currency in US $ comes to around USD 1.05 billion. Referring to
the Foreign Exchange Management (Transfer of Issue of Any Foreign Security) (Amendment)
Regulations, 2004 and notifications issued by the Reserve Bank of India, decide whether there
is any restriction in the above investment.
Sol As per Regulation 6 of the Foreign Exchange Management (Transfer or Issue of Any Foreign
Security) (Amendment) Regulations, 2004, an Indian Party has been permitted to make
investment/ undertake financial commitment in overseas Joint Ventures (JV) or Wholly Owned
Subsidiaries (WOS), as per the ceiling prescribed by the Reserve Bank.
With effect from July 03, 2014, it has been decided that any financial commitment (FC)
334 The Foreign Exchange Management Act, 1999 Chap. 16
exceeding USD 1 (one) billion (or its equivalent) in a financial year would require prior
approval of the Reserve Bank even when the total FC of the Indian Party is within the eligible
limit under the automatic route [i.e., within 400% of the net worth (Paid up capital + Free
Reserves) as per the last audited balance sheet].

Here, ‘Indian Party’ includes a company incorporated in India.

As per the facts of the question and provision of law, GOGU Limited (Indian party) will require
prior approval of the Reserve Bank of India even though its total financial commitment is
within the eligible limit under automatic route [i.e. {400% of (1500+500) = ` 8,000 crore}],
because financial commitment is more than USD 1 billion.
Q-51-July- Mr. Joe, a resident in India obtained an External Commercial Borrowing of $ 25,000 from
21 foreign lender on a collateral charge of his residential property in India. Mr. Joe, however,
could not repay the loan and the lender prefers the property charged to be sold in India to any
person (resident in India or not) and repatriate the sale proceeds to him. You are required to
provide the correct legal position to the above situation in the light of the provisions of the
Foreign Exchange Management Act, 1999 and Rules made thereunder.
Sol As per the ECB Framework, AD Category I banks are permitted to allow creation of charge on
immovable assets, movable assets, financial securities and issue of corporate and/or personal
guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised/ raised
by the borrower.
Following are the requisite conditions for creation of Charge on Immovable Assets/ property:
(i) Such security shall be subject to provisions contained in the Foreign Exchange Management
(Acquisition and Transfer of Immovable Property in India) Regulations, 2017.
(ii) The permission should not be construed as a permission to acquire immovable asset
(property) in India, by the overseas lender/ security trustee.
(iii) In the event of enforcement / invocation of the charge, the immovable asset/ property will
have to be sold only to a person resident in India and the sale proceeds shall be repatriated to
liquidate the outstanding ECB.

Accordingly, in the given case, Mr. Joe, a resident in India, obtained an ECB of $ 25,000 from
foreign lender on a collateral charge of his residential property in India. He failed to repay the
loan. As of that, lender prefers the property charged to be sold in India to any person whether
resident in India or not so as to repatriate the sale proceeds to him.

Therefore, in line with the clause (iii) of the above stated provision, in the event of
enforcement of the charge, the immovable property (Residential property of the Joe) will have
to be sold only to a person resident in India and the sale proceeds shall be repatriated to
liquidate the outstanding ECB.
Q-52- Ice Slash (P) Ltd. had taken an INR denominated ECB of ₹ 10 crore from HBSG Bank, a
MTP-Nov- designated AD Category-I bank. It had last filed its Form ECB 2 Return on 5th April, 2019.
21 The bank had send over 10 remainders vide emails during the past 9 quarters to the company to
file Form ECB 2 for the month of April, 2019 and thereafter but there has been no response
from either the entity or its directors till date. Also, the company had not submitted Statutory
Auditor’s Certificate with respect to ECB transactions for F.Y. 2019-20 and F.Y. 2020-21,
respectively. During the visit by the officials of the HBSG Bank at the registered office address
of Ice Slash (P) Ltd., it was found inoperative. Accordingly, HBSG bank filed form ECB 2
Return without certification from Ice Slash (P) Ltd. with ‘UNTRACEABLE ENTITY’ written
in bold on top. The amount outstanding from the company at that time was ₹ 2 crore.
In the context of aforesaid case-scenario, please answer to the following questions:-
(i) Whether HBSG Bank can be considered to have validly treated Ice Slash (P) Ltd. as
an ‘untraceable entity’?
Chap. 16 The Foreign Exchange Management Act, 1999 335
(ii) How the outstanding amount of ₹ 2 crore shall be treated and what other actions would be
taken in respect of Ice Slash (P) Ltd.?
Sol (i) Under the ECB framework, any borrower who has raised ECB will be treated as
‘untraceable entity’, if entity/auditor(s)/director(s)/ promoter(s) of entity are not
reachable/responsive/reply in negative over email/letters/phone for a period of not less than two
quarters with documented communication/ reminders numbering 6 or more and it fulfills both
of the following conditions:
(a) Entity not found to be operative at the registered office address as per records available with
the AD Bank or not found to be operative during the visit by the officials of the AD Bank or
any other agencies authorised by the AD bank for the purpose;
(b) Entities have not submitted Statutory Auditor’s Certificate for last two years or more.

Ice Slash (P) Ltd. or its directors have not responded to over 10 remainders made by HBSG
Bank during the past 9 quarters for filing returns and had not submitted Statutory Auditor’s
Certificate for
F.Y. 2019-20 and F.Y. 2020-21, respectively. Also, the company was found inoperative by the
officials of the HBSG Bank.
Thus, HBSG Bank can be considered to have validly treated Ice Slash (P) Ltd. as an
‘untraceable entity’ as all the conditions with respect to the same had been satisfied in the case
of it.

(ii) Under the ECB framework, in respect of ‘untraceable entities’, the outstanding amount will
be treated as written-off from external debt liability of the country but may be retained by the
lender in its books for recovery through judicial/ non-judicial means.
Thus, the outstanding amount of ` 2 crore shall be written-off from the external debt liability of
the country and it might be retained by the HBSG Bank for recovery.
Other actions that would be taken in respect of Ice Slash (P) Ltd. are as follows:-
(a) No fresh ECB application by Ice Slash (P) Ltd. should be examined/processed by the AD
bank;
(b) Directorate of Enforcement should be informed about Ice Slash (P) Ltd. being designated as
‘UNTRACEABLE ENTITY’; and
(c) No inward remittance or debt servicing will be permitted under auto route for Ice Slash (P)
Ltd.
Q-53- Mr. Ashok, a citizen of India, has been working in a company in Chicago, USA, since
MTP-Nov- last 8 years , and had been settled there with his family.
22 However, the said company opened its branch in India last year and Mr. Ashok has
been deputed there for a duration of 26 months from 25th April, 2020.
He remitted an amount of $ 280,000 on 20th December, 2021 to his family in USA.
The details of salary earned by him from 25th April, 2020 to 30th November, 2021
are as follows:-

Particulars $*
Gross Salary 350,000
Contribution to Provident 40,000
Fund TDS as per Income 40,000

* Amount is converted to USD from INR.

In the context of aforesaid case-scenario, determine following issues:-
336 The Foreign Exchange Management Act, 1999 Chap. 16
1. How much excess amount, if any, has been remitted by Mr. Ashok to his family in
USA?
2. Whether the company in USA in which Mr. Ashok was deputed, can be treated as
MNC under FCRA, 2010?
Sol 1. Mr. Ashok is a citizen of India working in a company in USA and has been deputed to its
branch in India for a duration of 26 months i.e. for not more than 3 years and Mr. Ashok’s stay
in F.Y. 2020-21 was more than 182 days in India, so, he would be considered as a resident but
not permanently resident in India.
Accordingly, he was allowed to remit an amount upto his net salary i.e. $ 2,70,000 ($ 3,50,000
- $ 40,000 - $ 40,000) while he has remitted an amount of $ 2,80,000 to his family in USA.
Thus, the excess amount remitted by him is $ 10,000 ($ 2,80,000 - $ 2,70,000).

2. Thus, the company in USA in which Mr. Ashok is deputed, can be treated as MNC under
FCRA, 2010 as it is carrying on business or operating in two countries i.e. USA and India,
respectively.
Q-54 Keeping in view the provisions of External Commercial Borrowing in Minds, decide
about the following [1 Marks each]
(i) ECB in form of FCY also includes preference shares (other than fully and
compulsorily convertible instruments);
(ii) Even a Non Profit Organisation can raise ECB
(iii) Foreign Parent are also allowed to lend to their Indian Subsidiary
(iv) Foreign branches / subsidiaries of Indian banks are permitted as
recognised lenders for ECB
(v) All-in-cost ceiling per annum for ECB including Penalty for Pre-Payment can
be LIBOR + 650 bps
(vi) Decide MAMP for following ECB

Case Transactions MAMP

1 ECB raised by manufacturing companies o f USD 100
million
2 ECB raised for repayment of Rupee loans availed
domestically for capital expenditure
3 ECB raised for repayment of Rupee loans availed
domestically for purposes other than capital expenditure
4 ECB raised from foreign equity holder for working
capital purpose

Pfizer: One of the world's premier biopharmaceutical companies planned to

establish its subsidiary in India, for which it also planned to infuse money both
through Equity and Loan in form of ECB. Parent would be holding 60% of shares in
its Indian Subsidiary.
Details about the some of items of its subsidiary after 1 year of incorporations are
as follow: -
Overall Share of Parent
Paid Up Share Capital 500 Cr 300 Cr
Chap. 16 The Foreign Exchange Management Act, 1999 337

Free Reserve 100 Cr 60 Cr

Loan in form of ECB 1000 Cr 1000 Cr
Other Long-Term Loans 100 Cr Nil

Now, parent company has decide to infuse further Loan in form of ECB. Decide the
extent upto which ECB can be raised from Parent now.
Sol Refer ECB Provisions
Kindly refer to Live Discussion for this Solution on you tube

Ms. Milap had resided in India for 182 days in the financial year 2019-20. She went to UK on
1st April, 2020 and returned to India on 1st July, 2021 on an employment contract in India for a
year. She completed her contract and immediately left India. Under Section 2(v) of FEMA
1999, determine the residential status of Milap for the financial years:
(i) 2020-21
(ii) 2021-22
Residential status of Milap for the financial years will be as follows :
(i) For FY 2020-2021: As in the preceding year 2019-2020, Milap resided for 182 days which is
not in compliance with the requirement of number of days of her stay (for more than 182 days).
Here, residential status of Milap is a Person resident outside India.
(ii) For FY 2021-2022: In the preceding year 2020-2021, Milap has not resided in India as she
went to UK on 1st April 2020 and returned on 1st July 2021. In this case also, the residential
status of Milap is a person resident outside India.
Ruchika got an employment opportunity in a UK based IT company. She moved to UK and
remained there for 10 years. During her tenure she purchased a small flat in UK for the
338 The Foreign Exchange Management Act, 1999 Chap. 16
residential purpose.
After returning to India, she joined another IT company and let out her flat situated in UK. The
rental income of UK flat was deposited by her in the bank account of UK. A good amount was
accumulated in her UK’ bank account, so she planned to purchase a second flat in the UK.
Based on the above facts, answer the following questions:
(i) Whether Ruchika can purchase the first flat in UK and continue to retain even after returning
to India?
(ii) Whether Ruchika can purchase second flat in UK after returning to India?
(i) Purchase of First Flat in UK

Section 6(4) of the FEMA, 1999 provides that a person resident in India may hold, own,
transfer or invest in foreign currency, foreign security or any immovable property situated
outside India if such currency, security or property was acquired, held or owned by such person
when he was resident outside India or inherited from a person who was resident outside India.

Ruchika purchased the first flat when she residing in UK and was resident outside India. After
returning to India and after becoming the resident in India, she can continue to hold such flat.

(ii) Purchase of Second Flat

After returning to India and becoming the resident in India, Ruchika cannot buy another
property in UK as mentioned in Section 6(4) of the FEMA.