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Forex Facilities for Residents (Individuals)

Rahul Bansal (Finalist) (35929 Points)

06 January 2010

Forex Facilities for Residents (Individuals)

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Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

Introduction:

The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Act, freedom has been granted for buying and selling of foreign exchange for undertaking current account transactions. The Government has issued Foreign Exchange Management (Current Account Transactions) Rules,2000 which have been notified vide Notifications GSR. 381(E) dated May 3, 2000, S.O. 301(E) dated March 30, 2001 and GSR.608(E) dated September 13, 2004 as amended from time to time. The last amendment to the G.S.R is vide Notification No., G.S.R. No.412 (E) dated July 11, 2006.

Under the Foreign Exchange Management Act, 1999 (FEMA) [which replaced FERA], which has come into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as Capital or Current Account transactions. All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. In terms of Section 5 of the FEMA, persons resident in India are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by Central Government, vide its Notification referred to above.

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Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

I. Guidelines on Travel Related Matters

1. Who is a resident?

A 'person resident in India' is defined in Section 2(v) of FEMA, 1999 as:

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 -

for or on taking up employment outside India, or

for carrying on outside India a business or vocation outside India, or

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 –

for or on taking up employment in India, or

for carrying on in India a business or vocation in India, or

for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

any person or body corporate registered or incorporated in India,

an office, branch or agency in India owned or controlled by a person resident outside India,

an office, branch or agency outside India owned or controlled by a person resident in India;

That is to qualify as a resident the person concerned will have to fulfill the criterion regarding (a) the duration of stay and (b) the purpose of stay.

The term Person Resident Outside India is defined in the Act as a person who is not a person resident in India.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

2. From where one can buy foreign exchange?

Foreign exchange can be purchased from any authorised dealer. Besides authorised dealers, full-fledged money changers are also permitted to release exchange for business and private visits.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

3. Who is an authorized dealer?

An authorized dealer is normally a bank specifically authorized by the Reserve Bank under Section 10(1) of FEMA,1999, to deal in foreign exchange or foreign securities

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

4. How much exchange is available for a business trip?

Authorized dealers can release foreign exchange up to USD 25,000 for a business trip to any country other than Nepal and Bhutan. Release of foreign exchange exceeding USD 25,000 for a travel abroad (other than Nepal and Bhutan) for business purposes, irrespective of period of stay, requires prior permission from Reserve Bank. Visits in connection with attending of an international conference, seminar, specialised training, study tour, apprentice training, etc., are treated as business visits.

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Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

5. Can one obtain additional foreign exchange for medical treatment outside India?

Authorized dealers may release foreign exchange upto USD 100,000 or its equivalent to resident Indians for medical treatment abroad on self declaration basis of essential details, without insisting on any estimate from a hospital/doctor in India/abroad. A person visiting abroad for medical treatment can obtain foreign exchange exceeding the above limit, provided the request is supported by an estimate from a hospital/doctor in India/abroad. This release of foreign exchange of USD 100,000 is to meet the expenses involved in treatment and it is in addition to the amount of USD 25,000 released for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

6. How much exchange is available for studies outside India?

Authorized dealers may release foreign exchange for an amount of USD 100,000 per academic year or the estimate received from the institution abroad, whichever is higher. Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA. In addition, they can receive remittances up to USD 100,000 from close relatives (as defined in Section 6 of the Companies Act,1956) from India on self-declaration, towards maintenance, which could include remittances towards their studies also. Educational and other loans availed of by students as resident in India can be allowed to continue. There is no dilution in the existing remittance facilities to students in regard to their academic pursuits.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

7. How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?

In connection with private visits abroad, viz., for tourism purposes, etc., foreign exchange up to USD10,000, in any one financial year may be obtained from an authorised dealer on a self-declaration basis. The ceiling of USD10,000 is applicable in aggregate and foreign exchange may be obtained for one or more than one visit provided the aggregate foreign exchange availed of in one financial year does not exceed the prescribed ceiling of USD10,000 {The facility was earlier called B.T.Q or F.T.S.}. This limit of USD10,000 per financial year can be availed of by a person along with foreign exchange for travel abroad for any purpose, including for employment or immigration or studies. However, no foreign exchange is available for visit to Nepal and/or Bhutan for any purpose

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

8. How much foreign exchange is available to a person going abroad on employment?

Person going abroad for employment can draw foreign exchange up-to USD100,000 from any authorised dealer in India on the basis of self-declaration.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

9. How much foreign exchange is available to a person going abroad on emigration?

Person going abroad on emigration can draw foreign exchange upto USD100,000 on self- declaration basis from an authorized dealer in India. This amount is only to meet the incidental expenses in the country of emigration. No amount of foreign exchange can be remitted outside India to become eligible or for earning points or credits for immigration. All such remittances require prior permission of the Reserve Bank.

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Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

10. Is there any category of visit which requires prior approval from the Reserve Bank or Govt. of India?

In case of dance troupes, artistes, etc., who wish to undertake cultural tours abroad, they should obtain prior approval from the Ministry of Human Resources Development, Government of India, New Delhi.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

11. How much foreign exchange can be purchased in foreign currency notes while buying exchange for travel abroad?

Travellers are allowed to purchase foreign currency notes/coins only up to USD 2000. Balance amount can be taken in the form of travellers cheque or banker’s draft. Exceptions to this are (a) travellers proceeding to Iraq and Libya can draw foreign exchange in the form of foreign currency notes and coins not exceeding USD 5000 or its equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States can draw entire foreign exchange in the form of foreign currency notes or coins.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

12. Do same Rules apply to persons going for studies abroad?

For the purpose of studies abroad, exchange for maintenance expenses is released in the form of (i) currency notes up to USD 2,000, (ii) the balance foreign exchange may be taken in the form of travellers cheques or bank draft payable overseas.

Rahul Bansal (Finalist) (35929 Points)
Replied 06 January 2010

13. How much in advance one can buy foreign exchange for travel abroad?

The foreign exchange acquired for any purpose has to be used within 180 days of purchase. In case it is not possible to use the foreign exchange within the period of 180 days, it should be surrendered to an authorised person.