Fema update

Circular Date & No.

September 15, 2011 & A.P. (DIR Series) Circular No. 12, 13 & 15

Subject Matter

Liberalization in Operations of Resident, NRE, FCNR(B), EEFC and RFC Account

Amendment

As many of you may be aware that joint operation of resident account with NRI, NRE, FCNR(B), EEFC and RFC account is not permitted as per existing provisions of FEMA.

As part of linearization and develop operational convenient especially after demise of first holder, the following amendments has been made with regard joint operations;

Resident SB Account: Pursuant to this amendment, individual resident in India is permitted to include non-resident close relative(s) as joint holder in the resident Savings bank account on ‘former or survivor’ basis. 

NRE / FCNR(B) Account: Non-Resident Indian (NRI) is permitted to open NRE / FCNR (B) with their resident close relatives on ‘former or survivor’ basis.

EEFC / RFC Account: Individual resident in India is permitted to include resident close relative(s) as joint holders in their EEFC / RFC account on ‘former or survivor’ basis.

In all the above three cases,

·         Joint holder shall not be eligible to operate the account during the life time of first account holder.

·         For this purpose close relative means as defined under the Companies Act, 1956.

·         In case of NRE / FCNR (B) Account, the resident close relative shall be eligible to operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account holder.

Circular Date & No.

September 15, 2011 & A.P. (DIR Series) Circular No. 14

Subject Matter

Transfer of security by way of Gift

Amendment

As many of you may be aware that as per existing regulations, when the value of securities to be transferred by way of gift by resident to non-resident (close relatives) exceeds USD 25000 per financial year, then its required prior approval from Reserve bank of India.

Vide APDIR Circular No.14, the limit has been enhanced to USD 50000 per financial year.

Circular Date & No.

September 16, 2011 & A.P. (DIR Series) Circular No. 17

Subject Matter

Gift in rupee by resident to NRI relatives

Amendment

Now, resident individual is permitted to make a rupee gift to a NRI/PIO who is a close relative of the resident individual by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) account of the NRI / PIO. The gift amount would be within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for a resident individual.

It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances under the LRS during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.

Circular Date & No.

September 16, 2011 & A.P. (DIR Series) Circular No. 18

Subject Matter

Loan in rupee by resident to NRI

Amendment

Now, resident individual is permitted to lend in rupee to a NRI/PIO who is a close relative of the resident individual subject to the following conditions;

·         Lending only for any personal purpose or business activities other than agricultural/plantation activities or real estate or relending business.

·         The loan amount should be credited to the NRO account of the NRI /PIO.

·         The loan is free of interest and the minimum maturity of the loan is one year.

·         The loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 200,000 per financial year.

·         The loan shall be utilized for meeting the borrower's personal requirements or for his own business purposes in India.

·         The loan amount shall not be remitted outside India.

·         Repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO) /  Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.

·         The loan can be utilized only for permitted business activities in India as prescribed in FEMA.

Circular Date & No.

September 16, 2011 & A.P. (DIR Series) Circular No. 19

Subject Matter

Repayment of loans on behalf of NRI

Amendment

As per existing provisions, rupee loan obtained by NRI can be repaid by his close relatives in India. However, it is restricted to only housing loan.

Now, Vide this circular, any rupee loans obtained by NRI can be repaid by his close relatives in India through normal banking channel.