01 FEMA Regular

Chapter 1 FEMA, 1999
Foreign Exchange
01 Management
Act, 1999
Structure of FEMA, 1999
CHAPTERS NAME OF CHAPTER SECTIONS

I Preliminary 1–2
II Regulation and Management of Foreign Exchange 3–9
III Authorised Person 10 – 12
IV Contravention and Penalties 13 – 15
V Adjudication and Appeal 16 – 35
VI Directorate of Enforcement 36 – 38
VII Miscellaneous 39 – 49
CA CS Darshan Khare For Concept Query only 8530902666 1.1

Sec on Structue
1.2 For Concept Query only 8530902666 CA CS Darshan Khare

Basics ”of FEMA and History

Concept of FEMA
Exporter Importer
GOODS/ ` GOODS/
SERVICES ` SERVICES
Consideration
$ Consideration
$
Government Foreign
Exchange Reserve
Important Note: FEMA is made

1) For conservation and management of foreign exchange in India;
2) Also to manage foreign trade & business;
3) To prohibit use of foreign exchange for unnecessary purpose.
History
1991-1993
1947 1991 Liberalisation in India &

Removal of Trade barriers
FERA Commenced Foreign exchange Liberalisation
Problem of Balance reserve had fallen earned foreign exchange
of Payment occured to $ 1.1bn in India.
for British
FERA Restructured FEMA was enacted Effect of FEMA

Converted in in 1999 Foreign exchange
rigorous framework reserve increased
a stringent law to $ 314.74 Bn.
1973 1999 2011

The difference between FERA and FEMA are as follows

Headings FERA, 1973 FEMA,1999
Offence
Under Law
Names of
transactions
Permission on
transaction
Rigid / Liberal
Rigidity
regarding
Provisions
Features
Quantum
of Penalty

FEMA : Authority Structure
Central Government / Union Government
&
Ministry of Finance Ministry of Home Affairs / Foreign Affairs
Administration Judicial
Assistant Director / Deputy Director
RBI
Director General (DG)
(Deal in $)
Authorised Person
^|
Foreign Exchange Manager
ICICI
Appellate Tribunal (FEMAT)
AXIS J.W.MARRIOTT
^|
High Court (HC-24)
^|
Supreme Court (SC-1)

Sec 1: Preamble,
Chapter 1 FEMA,Extent,
1999 Applica on and Commencement of FEMA, 1999
A) Preamble: This Act aims to consolidate and amend the law relating to foreign exchange with the objective of
i) facilitating external trade and payments and
ii) for promoting the orderly development and maintenance of foreign exchange market in India.
B) Extent and Application:

a) FEMA, 1999 extends to the whole of India.
b) In addition, it shall also apply to all branches, offices and agencies outside India owned or controlled by a
person resident in India and
c) also to any contravention there under committed outside India by any person to whom this Act applies.
d) Accordingly, FEMA does not apply to citizens of India who are outside India unless they are resident of
India.
e) The scope of the Act has been further extended to include branches, offices and agencies outside India.
f) The scope is thus wide enough because of the emphasis is on the words “Owned or Controlled”. Even
contravention of the FEMA committed outside India by a person to whom this Act applies will also be
covered by FEMA.
C) Commencement:
The Act, 1999 came into force with effect from 1stJune, 2000 vide Notification G.S.R. 371(E), dated
1.5.2000.
Important Note:
1) Applicable to PRI in India exchanging foreign currency
2) Applicable to PRI outside India
3) Applicable to branch office or agency of PRI outside India
4) Applicable to PROI in India

Branch, Office, Agency

$
$
`
$
`
FEMA

” Sec 2: Definitions
"Adjudicating Authority” [Sec. 2(a)]
means an officer authorised under sub-section (1) of section 16(1)
"Appellate Tribunal” [Sec.2(b)]

means the Appellate Tribunal for Foreign Exchange established under section 18
"Currency” [Sec.2(h)]
includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques,
letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may
be notified by the Reserve Bank.
“Currency Notes” [Sec.2(I)]
means and includes cash in the form of coins and bank notes
“Foreign currency” [Sec.2(m)]
Foreign Currency means any currency other than Indian currency.

2(q) “Indian Currency” means currency which is expressed or drawn in Indian rupees but does not include special
bank notes and special one rupee notes issued under section 28A of the Reserve Bank of India Act, 1934.
In world there 196 countries but of which 50 countries do not have their own currency (Tiwan is considered as
separate country which is disputed). Which means in world there are 146 currencies. Which means 145 currencies
in word are foreign currency for India.
3 Costly Currency 3 Cheapest Currency

Name Currency Name Currency
"Foreign exchange” [Sec. 2(n)]

Foreign Exchange means foreign currency and includes-
i) deposits, credits and balances payable in any foreign currency,
ii) drafts, traveller's cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but
payable in any foreign currency,
iii) drafts, traveller's cheques, letters of credit or bills of exchange drawn by banks, institutions or persons
outside India, but payable in Indian currency.

For drafts, traveller's cheques, letters of credit or bills of exchange

Head Case 1 Case 2 Case 3 Case 4
Expressed or
Drawn
Payable in
Status
"Foreign security”[Sec.2(o)]
Foreign Security means
1) any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or
expressed in foreign currency
and
2) includes securities expressed in foreign currency, but where redemption or any form of return such as interest
or dividends is payable in Indian currency.
For shares, stocks, bonds, debentures or any other instrument

Head Case 1 Case 2 Case 3 Case 4
Expressed or
Denominated
Redemption
Return in
Status
“Security” [Sec.2(za)]
means shares, stocks, bonds and debentures, Government securities as defined in the Public Debt Act, 1944 ,
savings certificates to which the Government Saving Certificates Act, 1959 applies, deposit receipts in respect of
deposit of securities and units of the Unit Trust of India established under sub-section (1) of section 3 of the Unit
Trust of India Act, 1963 or of any mutual fund and includes certificates of title to securities, but does not include
bills of exchange or promissory notes other than Government promissory notes or any other instruments which
may be notified by the Reserve Bank as security for the purposes of this Act
Derivative [Sec.2(da)]
(da) 'Derivative' means a financial contract, to be settled at a future date, whose value is derived from one or
more financial, or non-financial variables.
“Transfer” [Sec. 2 (ze)]

includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title,
possession or lien.

Person [Sec 2. (u)]

Universal Definition As per FEMA
1) Includes:
(I) An individual,
2)
(ii) A Hindu undivided family,
3) (iii) A company,
4) (iv) A firm,
(v) An association of persons or a body of
5) individuals, whether incorporated or not,
(vi) Every artificial juridical person, not falling
6)
within any of the preceding sub-clauses, &
7) (vii) Any agency, office or branch owned or
controlled by such person.
"Person resident in India" (PRI) [Sec 2. (v)]

/ "Person Resident outside India" (PROI) [Sec 2. (w)]
Person resident in India Means:
1) 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-
I) For or on taking up employment outside India, or

II) For carrying on a business or vocation outside India, or
III) 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-
I) For or on taking up employment in India, or
II) For carrying on a business or vocation in India, or
III) For any other purpose, in such circumstances as would indicate his intention to stay in India for an
uncertain period;
2) Any person or body corporate registered or incorporated in India,
3) An office, branch or agency in India owned or controlled by a person resident outside India,
4) An office, branch or agency outside India owned or controlled by a person resident in India

Analysis of Definition of PRI/PROI
SP - Specified Purpose
Chapter 1
Important Note : Individual

1) Residence > 182 days can only be PRI (PY) NSP - Non Specified Purpose
2) Going out for SP = PROI (CY)
3) Coming in for SP = PRI (CY)
4) Coming in or Going out for NSP = last status Residence in India < 182 days in PFY
carry forward
Without any further question person will be considered as PROI in
FEMA, 1999
If not In case of NSP

Residence in India > 182 days in PFY
Person goes out of
CA CS Darshan Khare
Person comes to
India in CFY India in CFY
Carry In case of SP
Forward Carry
Forward
In case Job Business

of NSP
In case of SP
was residing in India
For Concept Query only

> 182 days in P.Y.
Business Job
8530902666 1.11
Space for Classwork

Unit 2 1
Chapter Definitions
FEMA, 1999
1) In PY R < 182 days & in CY:
SP SP SP
2) In PY R > 182 days & in CY:
SP SP SP SP SP
SP NSP
SP SP NSP
SP NSP NSP
SP SP NSP NSP
8) In PYR > 182 days & in CY:
SP NSP NSP SP NSP NSP
SP NSP SP
SP SP NSP SP
1/4/2024 1/4/2025 31/3/2026 31/3/2027
2.SP
1. R>182 3. Status?
4. Assuming R>182
days days

General Reading
There are three limbs in the definition. The first limb prescribes the number of days stay. Then there are two limbs
which are exceptions to the first limb.
First limb – It states that a person who is in India for more than 182 days in the “preceding year” will be a Person
Resident in India. Thus, at the threshold or basic level, one has to consider the period of stay during the preceding
year.
Example 1: If a person resides in India for more than 182 days during FY 2020-21, then for the FY 2021-22, the
person will be an Indian resident. For FY 2020-21, one will have to consider residence during FY 2019-20, and so
on.
There are two exceptions provided in clauses (A) and (B). Clause (A) is for persons going out of India. Clause (B)
is for persons coming into India. Exceptions carve out situations that do not fall under the main body of a section,
even though they satisfy the criteria. This means that even if a person is an Indian resident based on the test
provided in the first limb, the person will be a “Person Resident Outside India (PROI) if he falls within limb (A) or
limb (B).
Clause (A) – second limb – It states that if a person leaves India in any of the THREE PURPOSES we saw above,
he will not be a PRII. He will be a PROI.
Thus, in the example given for the first limb above, if a person leaves India on 1st November 2021, he will be a
non-resident from 2nd November 2021 – even though his number of days in India was more than 182 days in FY
2020-2021. Similarly, if a person goes and stays out of India for carrying on any business, he will be a PROI from
that date. For FY 2021-2022 the person will be a PRII till 1st November 2021. He will then be a PROI. From 1st
April 2022, the person will continue to be a PROI as long as he stays out of India for employment.
An example for clause (iii) can be a person who has a green card in the USA. The green card entitles a person to
stay in the USA and eventually become a US citizen. If a person goes abroad and starts staying in the USA, he will
be a non-resident from that date as his stay abroad indicates that he is going to stay there for an uncertain
period.
Clause (B) – third limb – This is a complex clause as first limb read with third limb has two exceptions. Limb one
uses the phrase “but does not include”. Third limb uses the phrase “otherwise than”. Use of two exceptions make
it complex reading.
It states that if a person has come to India for any reason otherwise than for -employment, business or
circumstances which indicate his intention to stay for uncertain period – he will be a non-resident. This will be so
even if the person has stayed in India for more than 182 days in the preceding year.
For example, if a person comes to India on 1st June 2021 for visiting his parents. However, his parents fall sick
and he stays till 31st March 2022. Thereafter he continues to stay in India. It is however certain that he will leave
India in next 6 months when his parents recover. His stay in India is neither for employment, nor for business, nor
for circumstances which show that he will stay in India for an uncertain period. In such a case, even if he has
resided in India for more than 182 days in FY 2021-2022, he will continue to be a non-resident from 1st April 2022
also. In FY 2021-2022, he is of course a PROI as he did not reside in India for more than 182 in FY 2020-2021.
If a person comes to India on 1st June 2021 for employment, business or circumstances which indicate his
intention to stay in India for an uncertain period, he will be a PRII from 1st June 2021.

Residential status is not for a year. It is from a particular date. This is different from income-tax law. Under
income-tax law, a person has to pay tax in respect of the income of the previous year. Therefore, it is possible to
look at a complete year for determining residential status under the Income Tax Act, 1961. FEMA is a regulatory
law. One has to know the person’s status at the time of undertaking a transaction. If for example, a person comes
to India for employment, and if his status can be known only when the year is completed, how will he and other
people enter into commercial transactions with each other? If he is considered as a PROI till the year is over, then
people will not be able to enter into transactions with him. This is the reason why the residential status is not for a
year but from particular date.
It is understood that this condition applies only to individuals. It will not apply to HUF, AOP or artificial juridical
person as they cannot get employed, cannot go out of India or come to India. Hence, they do not come within the
ambit of the second and third limbs. These entities like HUF and AOP are not required to be registered or
incorporated like corporate entities nor the definition can be far stretched to cover by applying the criteria of
‘owned or controlled’. Hence legally the definition for HUF, AOP, BOI fail. Practically if the HUF, AOP etc. are in
India, they will be considered as Indian residents.
Person or Body corporate: Any person or body corporate registered or incorporated in India, will be considered
a PRII. This definition too, does not apply to AOP, BOI etc.
Office, branch or agency: Any agency, branch or agency outside India but owned or controlled by PRII will be
considered as person resident in India (PRII). Thus, one cannot set up a branch outside India and attempt to
avoid FEMA provisions. Any agency, branch or agency in India but owned or controlled by a person resident
outside India (PROI) will be considered as a person resident in India. This is relevant as Indian residents can deal
with such branch in India without considering FEMA. If such branch is considered as a PROI then it will be difficult
to undertake several transactions.

Special Cases
1) Whether citizenship is important for determining the residential status under FEMA?
Ans: Citizenship is not the criteria for determining whether or not a person is resident in India.
2) Miss 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 headquartered. 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?
Ans: Miss 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 emphasises ‘residing’. ‘Stay’ is a physical
attribute, while ‘residing’ denotes permanency. Thus, while Miss may have stayed in India for more than 182
days, it is doubtful whether 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 can be said to
have come to stay in India for or on taking up employment. Hence Miss would continue to be non-resident.
24 Hrs.
Round Trip
AI
MB
MU
3) What is the meaning of Intention to stay for uncertain period?

Ans: The situation can be explained with an example. If there is a lady accompanying her husband who is NRI
she will go abroad but not for any employment or business or vocation; she is just going with her husband as
family. If question is raised that when she will come back, then answer will be uncertain. Then in such case her
intention is to stay outside for uncertain period.

Unit 2 1
Chapter Definitions
FEMA, 1999
Indian woman marries with NRI

and leaves India
Residential status of Artificial Person
1) Registered or incorporated (Commenced) in India = PRI;

Registered or incorporated (Commenced) outside India = PROI
2) Branch, office or agency in India owned or controlled by PROI = PRI
3) Branch, office or agency outside India owned or controlled by PRI = PRI
Analysis
1. In case if a person goes out for Education what will be his residential status?
Ans: Education is Non Specified Purpose. Thus the answer will be as follows.
F.Y. 10-11
F.Y.11-12 F.Y.12-13
F.Y.13-14
F.Y.14-15
F.Y.15-16
F.Y.16-17
F.Y.17-18
F.Y.18-19

2) What will be residential status of the person going outside India for Education & Job Together?
Ans: As per RBI the person who goes out of India for Job & Education purpose together have status of PROI
3) Whether Minor have residential status in FEMA?

Ans: He will have normal residential status as per definition
4) What will be status of the unregistered partnership firm?

Ans: Its status will be as per definition
Example
PRI
PROI
Unregistered
PROI
Commencement of Business
Incorporated
In
Definition of PRI [2(v)] & PROI [2(w)]
Short
For Individual Residential Status :
Normal Points:
1) Citizenship is irrelevant
2) In P.Y. Residence > 182 days, in C.Y. can only be PRI
3) In P.Y. Residence > 182 days, in C.Y. Going out for SP = PROI
4) In P.Y. Residence > 182 days, in C.Y. Coming in for SP = PRI
5) In P.Y. Residence > 182 days, in C.Y. Coming in or Going out for NSP = last status carry forward
Special Points :
1) Air Hostes staying in India in P.Y. more than 182 days because of some problem will not be PRI in C.Y.
2) Intention to stay outside India for uncertain period can be defined with example of a wife accompanying her
NRI husband outside India.
3) Going abroad for education will be PROI from 1st year itself as RBI and ICAI.
For Artificial Person
1) Registered or incorporated (Commenced) in India = PRI; Registered or incorporated (Commenced) outside
India = PROI
2) Branch, office or agency in India owned or controlled by PROI = PRI
3) Branch, office or agency outside India owned or controlled by PRI = PRI

Residential Status
Answer Writing Points

”
Section 3 : Regulation & management of Foreign Exchange
Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special
permission of the Reserve Bank,
no person shall-
a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised
person
b) make any payment to or for the credit of any person resident outside India in any manner
c) receive otherwise through an authorised person, any payment by order or on behalf of any person
resident outside India in any manner.
Explanation— For the purpose of this clause, where any person in, or resident in, India receives any
payment by order or on behalf of any person resident outside India through any other person (including an
authorised person) without a corresponding inward remittance from any place outside India, then, such
person shall be deemed to have received such payment otherwise than through an authorised person
d) enter into any financial transaction in India as consideration for or in association with acquisition or
creation or transfer of a right to acquire, any asset outside India by any person.
Explanation— For the purpose of this clause, “financial transaction” means making any payment to, or for
the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing,
issuing or negotiating any bill of exchange or promissory note, or transferring any security or
acknowledging any debt.
Example
This section imposes blanket restrictions on the specified transactions. This section applies to residents and
non-residents. Consider following examples:
i) Example pertaining to clause (a) -Dealing in foreign exchange – A non-resident comes to India and
would like to sell US$ 1,000 to his friend who is resident in India. The friend offers him a rate better
than the banks. This cannot be done as it would amount to dealing in foreign exchange.
ii) Example pertaining to clause (b) – NRI brother has an insurance policy in India. He requests his
Indian brother to pay insurance premium. This will amount to payment for the credit of non-resident.
This is not permitted.
iii) Example pertaining to clause (c) – A foreign tourist comes to India and he takes food at a restaurant.
He would like to pay US$ 20 in cash to the restaurant. The restaurant cannot accept cash as it will be a
receipt otherwise than through Authorised Person. The restaurant will have to take a money changers
license to accept foreign currency.
iv) Example pertaining to clause (d) –Transactions covered by this sub-section are known as Hawala
transactions. An Indian resident gives Rs. 70,000 in cash to an Indian dealer. For this transaction, the
brother in Dubai will get US$ 1,000 from a Dubai dealer. The two dealers may settle the transactions
later. However for the two brothers this transaction is not permitted.

Section 4: Holding of foreign exchange

Except as provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any
foreign exchange, foreign security or any immovable property situated outside India.
This section prevents Indian residents to acquire, hold, own, possess or transfer any foreign exchange, foreign
security or immovable property abroad. Then through separate notifications, acquisition of these assets has
been permitted subject to certain conditions and compliance rules.
Example
If an Indian resident receives bank balance of US$ 10,000 from his NRI uncle in London, the Indian resident
cannot hold on to the foreign funds. He is supposed to bring back the funds as provided in section 8.
Concept of Authority (for knowledge only)

1) What is authority? Whether it is required in every law?
Income Tax Banking Regulation Insurance Act, Competition Act,

Act, 1961 Act, 1949 1938 2002
CBDT Banks Councils

DG/AD/DD/JD
AO
2) What are the points to be considered for 3) What are the points for removal of authority?
appointment of authority?
1. Public Interest Soc. / Environment
2. Beneficiary Interest Benefit Contraven on of any one of them
3. Compliance of Law is enough for removal
4. Compliance of Condi on & Direc ons.
a) Authorisation on compliance of all ;

b) Revocation on Contravention of any one;
c) OOBH for revocation of Authorisation.

Section 3 & 4: Regulation & management of Foreign Exchange and Holding of Foreign Exchange

”
Types of Transactions in FEMA
FEMA
Transaction
Capital Account Sec. 6 & 2(e) Current Account Sec. 5 & 2(j)
(Assets & Liabilities / Balance (Income & Expenses / Profit &
sheet Items) Loss Items)
PRI's forign A/L Prohibited CUT (Sch I & Rule 3)
PROI's Indian A/L CUT with CG approval (Sch II & Rule 4)
Permissible CAT (as per Schedules CUT as per LRS (Sch III & Rule 5)
to Capital account transaction Freely permissible CUT.
Rules, 2000)
Prohibited CAT
Current account Transaction (Sec 5 & 2(j))
Defini on
Sec 2(j): "Current account transaction" means a transaction other than a capital account transaction and
without prejudice to the generality of the foregoing such transaction includes:
i) payments due in connection with foreign trade, other current business, services, and short term
banking and credit facilities in the ordinary course of business,
ii) payments due as interest on loans and as net income from investments,
iii) remittances for living expenses of parents, spouse and children residing abroad, and
iv) expenses in connection with foreign travel, education and medical care of parents, spouse and
children
Prohibited Permissible with Particulars Schedule Rule

Transactions approval of CG.
Rule 3 Read with Rule 4 read with
Prohibited I 3
Sch I. Sch II.
Permissible with Transaction Centrel

Government II 4
approval of RBI. Does not
Rule 5 read with require any RBI III 5
Sch III approval.

Prohibited CUT [Rule 3 read with Schedule I]
Important Note Prohibited Current Account Transactions.

1. Whether prohibited current account transactions are illegal?
Ans:
1-Relating to Nepal and Bhutan:
I. Payment for travel to Nepal and Bhutan. Reason : Indian currency is freely accepted in
ii. Payment for any transaction with person of Nepal Nepal and Bhutan. Thus there is no need to
and Bhutan. withdraw foreign currency for the same.
` `
2-Lottery, Racing/ Riding, Banned magazines & others :
Ÿ Remittance out of income from winnings: The government does not supports lottery and
1. Lottery Winnings. gambling activities. In addition to this it is luxury
2. Racing/Riding or any other hobby. transaction which will not only create the loss of
Ÿ Remittance for purchase of: foreign currency but also situation like
1. Lottery Tickets unemployment. And as the foreign exchange is
2. Banned/Prescribed magazines, scares resource we cannot use it for luxury or hobby
3. Football pools, sweepstakes, etc. transaction like lottery.
00
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00
0,
`1
` `
BE
TT
IN
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3-Payment of commission on export: Export under Rupee State Credit Route
For understanding the "Rupee State Credit Route" you have to go back to end of 90's and early 2000 where the
Indian government was obliged to export goods and services worth 4,000 crore every year to Russia to
discharge India's outstanding loan. But since the exports from India were in excess of the demand in Russia, the
Russian government auctioned Indian rupees at an average 15 per cent discount through the Vneshconom
bank, or the Bank of Foreign Economic Affairs of the Russian Federation (BFEA) to Russian importers. The
Russian government helped the importer in that country, who had bid collectively with others, to establish
letters of credit at this discounted rate. The Indian exporter was not paid in cash, but only through letters of
credit, to be honoured by the negotiating (Indian) banks. For the Indian exporter to encash them here through
the RBI as advising bank, the èxport' had to be shown. So in nutshell the Indian Govt. or RBI paid the exporters
who exported the goods to Russia in Rupees and hence the name Rupee State Credit Route.
Payment of commission on export of only 2 goods are allowed with the 10% of invoice value of Export. One is
TEA and second TOBACCO
T
EN
AG
4-Payment of Commission for Export made towards equity investment in

joint venture / Wholly owned subsidiaries abroad of Indian Companies.
Indian companies are allowed to make equity investments in foreign subsidiary / JV by sale of goods and no
commission can be paid on the same. For ex. A ltd. an Indian Company wishes to take equity in B Ltd.(UK). Now
instead of sending money as equity A Ltd. (manufacturer of goods and machines) sends the goods & machines
and books the following entry:
Investment A/c --------- Dr
To, Sales A/c --------------Cr
(Being exports sales vide invoice no. XXXX made in lieu of equity participation in B Ltd.)

5- Remittance of Devidend
Remittance of dividend by company to which the requirements of Dividend balancing is applicable.
FMCG
6-Payment Related to 'Call Back Services' of telephone
In order to use a callback service, a subscriber is allocated a unique number in, for example, the US, which must
first be dialled in order to trigger a return call. This is known (in the US) as a Direct Inbound Dialling (DID) number,
or in the UK as a Direct Dial-In (DDI) number. In this case the person in India does not incur any charges of calling
such number as such call does not get connected on given number. Then in fraction of time the return call comes
from same number. The user shall then pick call and dial # and required person’s number and call will get
connected through server. This facility does not generate bill of Indian telecom company but it generated bill in
foreign exchange from foreign server which is need to be paid by user. Now as per TRAI (Telecom Regulatory
Authority of India) such service will damage Indian telecom sector & Also creates unnecessary foreign exchange
expenses for India. So TRAI decided to declare such service as banned and void in India.

7-Remittance of interest income on funds held in Non-

Residential Special Rupee (Account) Scheme.
When India faced the balance of payment difficulty in 1991 / 92, RBI introduced this new NRI account with a view to
increase our foreign exchange reserves albeit with a higher rate of interest. The account is a term deposit (fixed
deposit) account maintained in rupee.
However, money should be remitted from abroad for opening the account. The funds held in the account were
originally exempted from CRR / SLR requirements and the banks were offering very high rate of interest (as much
as 18%) initially in 1993.
The balance in the account is not reparable. Reserve Bank has withdrawn this scheme since April 1, 2002. Hence,
new accounts cannot be opened after April 2002. Further as part of relaxation in convertibility of rupee, Reserve
Bank now permitted to allow repatriation of funds including interest amount, out of this account.
RBI

Sec 5: Current Accounts Transaction


Transaction Permissible with approval of CG:

[Rule 4 read with Schedule II]
Important Note: Current Account Transactions CG approval.
1) Why CG approval when the RBI is apex authority in FEMA?

Ans :
1) Approving Authority Transaction

Ministry of Human Resource Development Approval for Cultural Tours for any
(Department of Education and Culture) amount of expenditure.
2) Ministry of Advertisement in foreign print media by State Government or its PSU Exceeding
US$ 10,000. No restriction or approval required for:
Finance
i. promotion of tourism,
(Department of ii. foreign investment and
Economic Affairs) iii. international bidding
3) Ministry of Surface a. Remittance of freight of any vessel chartered by PSU.

Transport b. Payment for import through ocean transport by
(Chartering Wing) Government Dept/PSU on CIF basis.

4) Director General of Shipping.
a. Remittance for Multi model Transport operators making remittance to their agents abroad.
b. Remittance for container detention charges exceeding the rates prescribed by

Director General of Shipping
5) Ministry of Information & Broadcasting, Remittance of Hiring Charges of Transponders.

Ministry of Communication & Information a. TV Channels
Technology. b. Internet Service providers.

6) Ministry of Human Remittance of prize money or sponsorship of sports

Resource activity abroad exceeding US$ 100,000.
Development No restriction and approval if payment is made by:
(Department of Youth a. International sports bodies; or
Affairs and Sports) b. National level sports bodies; or
c. State level sports bodies.
7) Ministry of Finance Remittance for

membership of P & I
(Insurance Division)
club.
THE SAILOR CLUB
NOTE: the above transaction (Except last one) does not require the CG approval if the payment is made
out of the funds held in Resident Foreign Currency (RFC) Account of the remitter or funds are drawn out
of funds held in Exchange Earner’ Foreign Currency (EEFC) account of the remitter.

CUT with approval of CG
In
Chapter 1
Authority
Short
Human Resource Ministry of surface Director general of Ministry of Informa on
1.32 For Concept Query only

Ministry of Finance
Development transport shipping and Broadcas ng
FEMA, 1999
Adver sement Import Container Hiring charges Hiring charges

cultural Sports Freight on Mul Model for for
in foreign P&I through Deten on
Tour Ac vi es Vessel Transport transponders transponders
print Media ocean Charges TV Channels internet services
8530902666
Any >$ Any Any Any Any Any
Amount > $ 1 Lakh Any - CIF > Rate by
Amount 10,000 Amount Amount Amount Amount Amount
basis DGS
Any person
Except
International State State State
Any sports bodies
Any Any Any Any Any
Person Government Government Government
Person National level Person Person Person Person Person
sports bodies & PSU & PSU & PSU
CA CS Darshan Khare
State level
sports bodies
Audio/ Visual
Tourism
All Time
Foreign Approval
No No up to the No No
Exemp on < $ 1 Lakh Investment (Except - Air, Land Air, Land
Exemp on Transac on
Exemp on rate given Exemp on Exemp on
Interna onal transport transport
from RFC by DGS
Bidding
Others A/c.)
Person
Cut with Approval of CG


Transaction requiring the RBI’s approval: [Rule 5 Read with Schedule III]
In
Short
RBI Approval Transac on Liberalised Remi ance
Schedule III Rule 5 + Scheme (ICAI)
LRS Limit < $ 2.5 Lakhs Amount >$ 2.5 Lakhs
CUT + CAT < $ 2.5 Lakhs (PRI) RBI Approval
Prohibited CUT / CAT- Not Allowed &

Approval of CG- Not Allowed Per Transac on RBI Approval
Approval Of RBI & other CAT allowed 1) Commission On Real Estate
5% or $ 25,000
Higher
Individual PROI & 2) Pre Incorpora on Exp - Refund
Individual
Any ar ficial 5% or $ 1,00,000
PRI
person Higher
LRS LRS or
Actual Exp
1) Gi
whichever is lower
2) Dona on
3) Private visit 3) Consultancy Services
4) Business/ conferance
5) Medical treatment Private Infrastructure
6) maintain close rela ve $ 1mn $10mn
7) Employment 4) Donor Employment
8) Emigra on 1% of Last 3 years FE Earning
9) Educa on or US $ 5mn
whichever is lower
5) Proba ones - PROI (Deputa on)
Net salary A er Taxes/
Statutory Dues

Transac on Permissible under LRS Chapter 1
2) Dona on
FEMA, 1999
CA CS Darshan Khare
7) Emigra on
For Concept Query only

8) Close Rela on
9) Study
10) Employment
8530902666 1.35
Separate Limit Transactions
Commission on Real Estate
LE
SA
RE
AL
ES
Higher of. TA
TE
5% of inward remi ance; or US$ 25,000
Commission per transac on,
to agents abroad for sale of the residen al flats /
commercial plots in India.
Remi ance by personal deputa on in India

Separate
Limit
Transactions
Charts $
If the person is resident and not permanently resident in India.

a. The person is ci zen of foreign country other than Pakistan.
b. The person is ci zen of India on deputa on to office of branch or subsidiary or
JV in India of such foreign company.
Can remit net salary a er deduc on of Taxes and PF and other statutory dues
Remi ance by an en ty in India by way of reimbursement of

pre-incorpora on expenses.
Higher of –
a. 5% of investment brought in India or
b. US$ 100,000


Remi ance for consultancy services produced from outside India.
US$ 1,000,000 per project
Remi ance for consultancy service produced from outside India

in respect of Infrastructure projects.
Infrastructure projects means:
1. Power 2. Telecommunica on
3. Railways 4. Roads and bridges
5. Industrial park 6. Sea port and airport
7. Water supply, sanita on & sewage.
Separate
Limit
Transactions
Charts
US$ 10,000,000 per

project.
Dona ons by corporate

a. Crea on of Chairs in reputed educa onal
ins tu ons
b. To funds (not being investment fund)
promoted by educa onal ins tutes; and
c. Technical ins tu on or body or associa on in the field
of ac vity of the donor employment.
AS
ADGE
AN A
M AN
JA PH
OR Lower of –
a. 1% of the foreign Exchange earnings
during the previous 3 financial years of the
corporate.
b. US$ 5,000,000


Liberalised Remittance Scheme

Applicability:
Only Resident Individual can avail the facility. The facility is not available for Corporates, partnerships firms, HUF,
Trust, etc.
Facility: Facility is for making the remittance up-to US$ 250,000 per FY without any approval of RBI for:
1. Current Account transaction (CUT).
2. Capital Account Transaction (CAT).
3. Combination of both.
Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep
stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management
(Current Account Transactions) Rules, 2000.
Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.
Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.
Remittance for trading in foreign exchange abroad.
Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force
(FATF) as “non- cooperative countries and territories”, from time to time.
Remittances directly or indirectly to those individuals and entities identified as posing significant risk of
committing acts of terrorism as advised separately by the Reserve Bank to the banks.
Non Applicability: In short the facility is not available for prohibited transactions and transaction requiring the
approval of the CG.
Remittances made ‘Non-cooperative countries and territories’ by Financial Action Task Force (FATF) viz. Cook
Islands, Egypt, Guatemala, Indonesia, Myanmar, Neuru, Nigeria, Philippines and Ukraine.
Transactions for Individual Requiring RBI Approval

Individuals can avail of foreign exchange facility for the following purposes within the limit of USD 2,50,000
only.
1. Private visits to any country (Except Nepal & Bhutan)
2. Gift or donation.
3. Going abroad for employment
4. Emigration
5. Maintenance of close relatives abroad
6. Travel for business, or attending a conference or specialised 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.
7. Expenses in connection with medical treatment abroad
8. Studies abroad
9. Any other current account transaction

Any additional remittance in excess of the said limit for the said purposes shall require prior approval of the
Reserve Bank of India.
Approval of Medical Institute or University
However, for the purposes mentioned at item numbers (iv), (vii) and (viii) above, the individual may avail
of exchange facility for an amount in excess of the limit prescribed under the Liberalised Remittance
Scheme as provided in regulation 4 to FEMA Notification 1/2000-RB, dated the 3rd May, 2000 (here in after
referred to as the said Liberalised Remittance Scheme) if it is so required by a country of emigration,
medical institute offering treatment or the university, respectively:
Further, if an individual remits any amount under the said Liberalised Remittance Scheme in
a financial year, then the applicable limit for such individual would be reduced from USD
250,000 (US Dollars Two Hundred and Fifty Thousand Only) by the amount so remitted:
Further, that for a person who is resident but not permanently resident in India and-
a) is a citizen of a foreign State other than Pakistan; or

b) is a citizen of 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).
For the purpose of this item, a person resident in India on account of his employment or deputation of a
specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of
which does not exceed three years, is a resident but not permanently resident:
Further, a person other than an individual may also avail of foreign exchange facility, mutatis mutandis, within
the limit prescribed under the said Liberalised Remittance Scheme for the purposes mentioned herein above.
Note: Liberalised Remittance Scheme (LRS):
Under the Liberalised Remittance Scheme (LRS), all resident individuals, including minors, are allowed to freely
remit up to USD 250,000 per financial year (April – March) for any permissible current or capital account
transaction or a combination of both. This is inclusive of foreign exchange facility for the purposes mentioned in
Para 1 of Schedule III of Foreign Exchange Management (CAT) Amendment Rules 2015, dated May 26, 2015.
In case of remitter being a minor, the LRS declaration form must be countersigned by the minor’s natural
guardian. The Scheme is not available to corporates, partnership firms, HUF, Trusts etc.
Consolidation of remittance of family members - Remittances under the Scheme can be consolidated in
respect of family members subject to individual family members complying with its terms and conditions.
Exception: Clubbing is not permitted by other family members for capital account transactions such as opening
a bank account/investment/purchase of property, if they are not the co-owners/co-partners of the overseas bank
account/investment/property.

Concept Analysis
Liberalised Remittance Scheme
1) State the example of LRS for individual limit and LRS limit to be used together?
Ans :
SR
1 2 3 4 Total Approval? For ? Reason ?
NO
Gi Educa on Property Dona on
1
$45,000 $1,30,000 $60,000 $10,000
Gi Educa on Property Dona on
2
$45,000 $1,30,000 $60,000 $40,000
Gi Educa on Property Employment
3
$45,000 $1,30,000 $60,000 $80,000
Gi Educa on Property Employment
4
$45,000 $1,30,000 $60,000 $1,20,000
Gi Educa on Property Investment
5
$45,000 $1,30,000 $60,000 $10,000
Gi Educa on Property Investment
6
$45,000 $1,30,000 $60,000 $30,000
7

Importance about EEFC & RFC
Execution of Scheme II (Central Government) & Scheme III (RBI)

Transaction through EEFC / RFC / AC
EEFC RFC
Totally All Transaction

For all other
1) Membership - P & L Club (MOF) Exempted Even if P & I,
Transation
2) Commission on Sale of Commission on Real Estate,
no Approval
Flat/Plots > Higher of Pre-Incorporation Expenses
is Required
5% of Inward $ 25000 Still Exempt
3) Refund of pre-Incorporation RBI

Expenses > Higher of / Actual lower
$ 1 Lakh 5% Investment
Respective Approval Required
The procedure for drawal or remit of any foreign exchange under this schedule shall be the same as applicable
for remitting any amount under the said Liberalised Remittance Scheme.
If the transaction is not listed in any three schedules, it can be freely undertaken.
Exemption for remittance from RFC Account – If any remittance has to be made for the transactions listed in
Schedule II and Schedule III above from RFC account, then no
approval is required.
Exemption for remittance from EEFC Account – If any remittance has to be made for the transactions listed in
Schedule II and Schedule III above from EEFC account, then also no approval is required. However if payment
has to be made for the following transactions, approval is required even if payment is from EEFC account:
Ÿ Remittance for membership of P & I Club.
Ÿ Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India
exceeding USD 25,000 or five per cent of the inward remittance whichever is more.
Ÿ Remittances exceeding five per cent of investment brought into India or USD 100,000 whichever is higher,
by an entity in India by way of reimbursement of pre-incorporation expenses.
Exemption for payment by International Credit Card while on a visit abroad – If a person is on a visit abroad,
he can incur expenditure stated in Schedule III if he incurs it through International credit card.
As per the Notification no. RBI/2014-15/620 A.P. (DIR Series) Circular No. 106, dated 1st June 2015,
Authorised Dealer banks may now allow remittances by a resident individual up to USD 250,000 per financial
year for any permitted current or capital account transaction or a combination of both. If an individual has
already remitted any amount under the Liberalised Remittance Scheme, then the applicable limit for such an
individual would be reduced from the present limit of USD 250,000 for the financial year by the amount already
remitted.

Master Chart Current account transaction

Master Chart Current account transaction

Sec 2(e) & Sec 6: Capital Account Transactions (CAT)
Meaning of CAT Sec 2(e)
"Capital account transaction" means a transaction which alters the assets or liabilities, including
contingent liabilities, outside India of person resident in India or assets or liabilities in India of person’s
resident outside India, and includes transactions referred to in sub-section (3) of section 6. (Omitted
w.e.f. 15.10.2019)
The section gives a liberty by providing that any person may sell or draw foreign exchange to or from an authorised
person for capital account transactions. However, the liberty to do so is subject to the provisions of sub-section
(2A), which states that the Reserve Bank may in consultation with the Central Government specify class or
classes of capital account transactions, which are permissible, and the limit upto, which the foreign exchange
shall be admissible for such transactions.
FEMA
Altera on of Assets Altera on of Assets Transac ons in 5 transac on

or Liabili es of PRI or Liabili es of PROI Sec on 6(3) prohibited for PROI

Section 6 : Capital Account Transaction
Sub-section Chart
Disclosure Custom Investment (3) (4) (5) (6) (7)

(1) (2) (2A) Deleted PRI - Foreign PROI - Indian RBI will Clarifica on
Allowed RBI + CG Put Asset Asset Regulate Debt
with CG condi on Acquired when Acquired when Opening Instrument
Approval on currency He was PROI/ He was PRI/ or closing of Instruments
of AP Restrict Admit (2A) Inherited from Inherited from any Branch/ no fied by
(1) (2) # Instrument PROI PRI office agency RBI
# Disclosure # Control CAT # Exempt # Exempt of any foreign & CG
en ty in India together
1) Subject to the provisions of sub-section (2), any person may sell or draw foreign exchange to or from an
authorised person for a capital account transaction.
2) The Reserve Bank may, in consultation with the Central Government, specify—
(a) any class or classes of capital account transactions, involving debt instruments, which are
permissible
(b) the limit up to which foreign exchange shall be admissible for such transactions
(c) any conditions which may be placed on such transactions:
Provided that the Reserve Bank or the Central Government shall not impose any restrictions on
the drawal of foreign exchange for payment due on account of amortisation of loans or for
depreciation of direct investments in the ordinary course of business.
2A) The Central Government may, in consultation with the Reserve Bank, prescribe—
(a) any class or classes of capital account transactions, not involving debt instruments, which are
permissible
(b) the limit up to which foreign exchange shall be admissible for such transactions; and
(c) any conditions which may be placed on such transactions.
3) Before 15th October 2019, Section 6(3) specified a list of capital account transactions which could be
regulated by RBI [apart from the general powers which it had under Section 6(2)]. This list has now been
deleted from 15th October 2019
4) 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.
The RBI vide A.P. (DIR Series) Circular No. 90 dated 9thJanuary, 2014 has issued a clarification on section
6(4) of the Act. This circular clarifies that section 6(4) of the Act covers the following transactions:
i) Foreign currency accounts opened and maintained by such a person when he was resident outside
India;
ii) Income earned through employment or business or vocation outside India taken up or commenced
which such person was resident outside India, or from investments made while such person was

resident outside India, or from gift or inheritance received while such a person was resident outside
India;
iii) Foreign exchange including any income arising therefrom, and conversion or replacement or accrual
to the same, held outside India by a person resident in India acquired by way of inheritance from a
person resident outside India.
iv) A person resident in India may freely utilize all their eligible assets abroad as well as income on such
assets or sale proceeds thereof received after their return to India for making any payments or to
make any fresh investments abroad without approval of Reserve Bank, provided the cost of such
investments and/or any subsequent payments received therefor are met exclusively out of funds
forming part of eligible assets held by them and the transactions is not in contravention to extant
FEMA provisions.
5) 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
a such person when he was resident in India or inherited from a person who was resident in India.
6) Without prejudice to the provisions of this section, the Reserve Bank may, by regulation, prohibit, restrict,
or regulate establishment in India of a branch, office or other place of business by a person resident outside
India, for carrying on any activity relating to such branch, office or other place of business.
7) For the purposes of this section, the term "debt instruments" shall mean, such instruments as may be
determined by the Central Government in consultation with the Reserve Bank.
Regulation on CAT
CAT
PRI PROI Permissible CAT Prohibited CAT

foreign A/L Indian A/L
PRI PROI
Sec 6 Sch.-for Clarify
2(e)- Defini on Sch I Sch II Blended
Sec on
Whether there is list of allowed
Dept FEM (PCAT) R, 2000
& prohibited transac on?
The RBI has framed Foreign Exchange Management (Permissible Capital Account Transaction) Rules, 2000.
The regulation has following three parts.
a) Transaction, which are permissible in respect of persons resident in India and outside India.
b) Transaction on which restrictions cannot be imposed; and
c) Transactions, which are prohibited.

Schedule I: Permissible CAT to PRI

T
OF
OS
M I CR 1. Investment
2. Foreign currency loans raised

INDIA
3. Transfer of immovable property
outside India
4. Guarantees issued
PROI
5. Export, Import and holding
of currency/currency notes.
6. Loans and overdrafts
7. Maintenance of foreign currency accounts
8. Taking out of insurance policy
9. Loans and overdrafts
10. Remittance outside

K
OC GE
ST HAN
C
EX
11. Undertake derivative contracts
Permissible after the regulations specified by RBI are complied.

1. Investment by a person resident in India in foreign securities.
2. Foreign currency loans raised in India and abroad by a person resident in India foreign securities.
3. Transfer of immovable property outside India by a person resident in India.
4. Guarantees issued by a person resident in India in favour of a person resident outside India.
5. Export, import and holding of currency/currency notes.
6. Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India.
7. Maintenance of foreign currency accounts in India and outside India by a person resident in India.
Currency / currency notes.
8. Taking out of insurance policy by a person resident in India from an insurance company outside India.
9. Loans and overdrafts by a person resident in India to a person resident outside India.
10. Remittance outside India of capital assets of a person resident in India.
11. Undertake derivative contracts.

Schedule II: Permissible CAT to PROI
1. Investment
FOREIGN
2. Acuisition and Transfer of
immovable property in India
3. Guarantees
4. Import & Export of currency/

currency notes into/from India.
INDIA 5. Deposits between a person resident in India
6. Foreign currency accounts in India
7. Remittance outside India

of capital assets
K
OC GE
ST HAN
EX
C 8. Undertake derivative contracts
Permissible after the regulations specified by RBI are complied.

1) Investment in India by a person resident outside India, that is to say,
i) issue of security by a body corporate or an entity in India and investment there in by a person
resident outside India; and
ii) Investment by way of contribution by a person resident outside India to the capital of a firm or a
proprietorship concern or an association of persons in India.
2) Acquisition and transfer of immovable property in India by a person resident outside India.
3) Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India.
4) Import and export of currency/currency notes into/from India by a person resident outside India.
5) Deposits between a person resident in India and a person resident outside India.
6) Foreign currency accounts in India of a person resident outside India.
7) Remittance outside India of capital assets in India of a person resident outside India.
8) Undertake derivative contracts

Prohibited CAT
Monetary Prohibi on Transac ons Prohibi on
CUT + CAT - PRI Individual

Prohibited only to PROI
Amount < $ 2,50,000 per year 1) Investment Chit funds
outgoing. (` $) 2) Investment Nidhi
3) Agriculture & Planta on
Above $ 2,50,000 4) Real Estate Development / Invest
RBI Approval construction of farm houses
Liberalized Remi ance Scheme 5) Invest in TDR
On certain transactions, the Reserve Bank of India imposes prohibition.

a) no person shall undertake or sell or draw foreign exchange to or from an authorised person for any capital
account transaction,
provided that-
i) 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 item number 1 of Schedule III to Foreign Exchange
Management (Current Account Transactions) Rules, 2000 dated 3rd May 2000 as amended from time
to time, shall be subsumed within the limit under proviso (a) above.
ii) 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, or as decided by Reserve Bank from
time to time as the case may be, the limit specified in the regulations relevant to the transaction shall
apply with respect to such drawal.
Provided further that no part of the foreign exchange of USD 250,000, drawn under proviso (a) shall be
used for remittance directly or indirectly to countries notified as non-co-operative countries and
territories by Financial Action Task Force (FATF) from time to time and communicated by the Reserve
Bank of India to all concerned.
b) 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:
i) In the business of chit fund;
Ü Registrar of Chits or an officer authorised by the state government in this behalf, may, in consultation
with the State Government concerned, permit any chit fund to accept subscription from Non-resident
Indians.
Ü Non- resident Indians shall be eligible to subscribe, through banking channel and on non-
repatriation basis, to such chit funds, without limit subject to the conditions stipulated by the Reserve

Bank of India from time to time

ii) As Nidhi company
iii) In agricultural or plantation activities
iv) In real estate business, or construction of farm houses
v) In trading in Transferable Development Rights (TDRs)
Explanation: In “real estate business” the term shall not include development of townships,
construction of residential /commercial premises, roads or bridges and Real Estate Investment
Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.
c) No person resident in India shall undertake any capital account transaction which is not permissible in
terms of Order S.O. 1549(E) dated April 21, 2017, as amended from time to time, of the Government of
India, Ministry of External Affairs, with any person who is, a citizen of or a resident of Democratic
People’s Republic of Korea, or an entity incorporated or otherwise, in Democratic People’s Republic of
Korea, until further orders, unless there is specific approval from the Central Government to carry on
any transaction.
d) The existing investment transactions, with any person who is, a citizen of or resident of Democratic
People’s Republic of Korea, or an entity incorporated or otherwise in Democratic People’s Republic of
Korea, or any existing representative office or other assets possessed in Democratic People’s Republic
of Korea, by a person resident in India, which is not permissible in terms of Order S.O. 1549(E) dated
April 21, 2017, as amended from time to time, of the Government of India, Ministry of External Affairs
shall be closed / liquidated / disposed /settled within a period of 180 days from the date of issue of this
Notification, unless there is specific approval from the Central Government to continue beyond that
period.”]
Analysis
1) What is REITS & TDR?
Ans :
Real Estate Investment Trust
Public Dividend Company Return Real Estate

Return

1) The law providing for REITS was enacted by the U.S. Congress in 1960.
2) The law was intended to provide a real estate investment structure similar to the structure mutual funds
provide for investment in stocks.
3) REITs are strong income vehicles because, to avoid incurring liability for U.S. Federal income tax, REITs
generally must pay out an amount equal to at least 90 percent of their taxable income in the form of
dividends to shareholders.
4) As of August 2014, India approved creation of real estate investment trusts in the country.
5) Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of
owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy
liquidation of investments in the real estate market unlike the traditional way of disposing of real estate.

Master Chart Capital Account transaction

Master Chart Capital Account transaction

Additional Notes

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Chapter 1 FEMA, 1999

Structure of FEMA, 1999

CHAPTERS NAME OF CHAPTER SECTIONS

CA CS Darshan Khare For Concept Query only 8530902666 1.1

1.2 For Concept Query only 8530902666 CA CS Darshan Khare

Basics ”of FEMA and History

Important Note: FEMA is made

1947 1991 Liberalisation in India &

FERA Restructured FEMA was enacted Effect of FEMA

1973 1999 2011

CA CS Darshan Khare For Concept Query only 8530902666 1.3

The difference between FERA and FEMA are as follows

1.4 For Concept Query only 8530902666 CA CS Darshan Khare

FEMA : Authority Structure

Central Government / Union Government

Assistant Director / Deputy Director

Director General (DG)

CA CS Darshan Khare For Concept Query only 8530902666 1.5

B) Extent and Application:

1.6 For Concept Query only 8530902666 CA CS Darshan Khare

Branch, Oﬃce, Agency

CA CS Darshan Khare For Concept Query only 8530902666 1.7

"Appellate Tribunal” [Sec.2(b)]

“Foreign currency” [Sec.2(m)]

Foreign Currency means any currency other than Indian currency.

3 Costly Currency 3 Cheapest Currency

"Foreign exchange” [Sec. 2(n)]

1.8 For Concept Query only 8530902666 CA CS Darshan Khare

For drafts, traveller's cheques, letters of credit or bills of exchange

For shares, stocks, bonds, debentures or any other instrument

“Transfer” [Sec. 2 (ze)]

CA CS Darshan Khare For Concept Query only 8530902666 1.9

Person [Sec 2. (u)]

"Person resident in India" (PRI) [Sec 2. (v)]

I) For or on taking up employment outside India, or

II) For carrying on a business or vocation in India, or

1.10 For Concept Query only 8530902666 CA CS Darshan Khare

Important Note : Individual

If not In case of NSP

Person goes out of

In case Job Business

For Concept Query only

Space for Classwork

1.12 For Concept Query only 8530902666 CA CS Darshan Khare

1) In PY R < 182 days & in CY:

8) In PYR > 182 days & in CY:

SP NSP NSP SP NSP NSP

9) In PYR > 182 days & in CY:

1/4/2024 1/4/2025 31/3/2026 31/3/2027

CA CS Darshan Khare For Concept Query only 8530902666 1.13

1.14 For Concept Query only 8530902666 CA CS Darshan Khare

CA CS Darshan Khare For Concept Query only 8530902666 1.15

3) What is the meaning of Intention to stay for uncertain period?

1.16 For Concept Query only 8530902666 CA CS Darshan Khare

Indian woman marries with NRI

Residential status of Artiﬁcial Person

1) Registered or incorporated (Commenced) in India = PRI;

CA CS Darshan Khare For Concept Query only 8530902666 1.17

3) Whether Minor have residential status in FEMA?

4) What will be status of the unregistered partnership ﬁrm?

1.18 For Concept Query only 8530902666 CA CS Darshan Khare

CA CS Darshan Khare For Concept Query only 8530902666 1.19