FEMA - Summary Notes
FEMA - Summary Notes
FEMA - Summary Notes
No one studies this chapter; everyone regrets not studying this chapter!
With liberalization of Indian economy in 1991, the flow of foreign exchange into India increased thus increasing
the Foreign Exchange Reserve (FER) substantially. This act enables management of FER for the country.
Sec 1: Applicability
This Act extends to whole of India. It also applies to all BOA outside India owned or controlled by PRI
Sec 2: Definition
Authorised Person [Sec 2(c)] means an:
Authorised Money Off-shore Other person auth. u/s 10
Dealer (AD) Changer banking unit to deal in Forex or Forse
Foreign Currency [Sec 2(m)] means any currency other than Indian Currency
Note – BOA generally do not have an independent status separate from their owners but in FEMA, they have
been defined as persons. So, the US branch of Tata Motors is also a person under FEMA.
A person residing in India for more than 182 days during the course of the any person or body
preceding FY but does not include: corporate registered
(A) a person who has gone out of India or who stays outside India, in either or incorporated in
case: India
a. for or on taking up employment O/S India, or
b. for carrying on O/S India a business or vocation outside India, or
c. for any other purpose, in such circumstances as would indicate his any BOA in India
intention to stay outside India for an uncertain period; owned or controlled by
a person resident
(B) a person who has come to or stays in India, in either case. outside India
However, if such person has come to or stays in India for any of the
following purpose, he shall be considered as PRI (subject to stay of > 182
days in preceding FY):
a BOA outside India
a. for or on taking up employment in India, or
owned or controlled by
b. for carrying on in India a business or vocation in India, or
a person resident in
c. for any other purpose, in such circumstances as would indicate his
India
intention to stay in India for an uncertain period;
Section 2(w) – “Person Resident outside India” means a person who is not Resident in India
2. If in FY 2019-20, a person resides in India for 200 days. On 1st June 2020, the person leaves India for
employment o/s India. Determine whether PRI or PROI? – For the period 1st April 2020 to 1st June 2020,
such person shall be PRI and from 2nd June 2020 onwards, he will be a PROI (irrespective of the fact that he
resides for more than 182 days in preceding FY)
3. Mr. S comes to India on 1st June 2019 for visiting his parents. However, his parents fall sick and he is certain
that he will not be able to return for an year. He ends up staying with them till 31st July 2020. Is he a PRI in
FY 20-21? – No, in FY 20-21, Mr. S will be considered as PROI. Even though he resided in India for more than
182 days in FY 19-20, he has not come for any of the 3 purpose (employment, business or uncertain period)
and hence he is not a PRI in FY 20-21
4. Residential status is not for a year. It’s on a particular date. (Unlike Income Tax Act, 1961)
5. Is it mandatory for a person to reside in India for more than 182 days to be considered as PRI? – YES!
6. Where a student is leaving India for higher studies, RBI has clarified that they shall be treated as PROI
majorly because of their intention to stay outside India for an uncertain period and the fact that they start
working there to take care of their expenses
*Where any such payment is received without corresponding inward remittance, it shall be deemed to be
received through person other than AP
Note –
1. For this section – Financial transaction means:
o payment to/credit of any person or
o receiving payment for or on behalf of any person or
o to draw/issue/negotiate any BoE or
o trf. security or acknowledge debt
2. The purpose of this section is to regulate inflow and outflow of Forex in regulated manner and through APs
only.
Read examples given in Pg. 1.13 of Study mat! (Only during first revision. Not thereafter)
Note: RBI cannot, on its own, impose any restriction on current account transaction. Restrictions can be imposed
only by CG (in consultation with RBI)
Examples of CUAT:
1. Import in India of machinery for installation in factory from a UK vendor by payment in cash
2. Import in India of machinery for installation in factory from a UK vendor on credit for 3 months (this is
CUAT because short term banking and credit facilities covered as CUAT)
Note –
In case of Import, the credit period can be upto 6m. For credit period in excess of 6m, it will be considered
as loan. In case of Export, the period of realization is upto 9m.
3. Gift (say $1,000) by a PRI to PROI (note: Gift is given in FC)
4. Gift (say Rs. 1,000) by a PRI to PROI in India – This will be a CAT and not CUAT as this results in alteration
of asset of the PROI in India. However, although it is a CAT, such gifting is permitted as per Rules.
General Rule:
CUAT is freely permitted unless specifically restricted.
[i.e., if any of the above remittance/payments is to be done by a PRI to a PROI, the PRI cannot go to AP and
draw $s because these are prohibited]
Schedule II – Transactions which require prior approval of GoI for drawal of forex
Remittance of container detention charges > the rate prescribed Ministry of Surface transport (Director
by Director General of Shipping General of Shipping)
Remittance of prize money / sponsorship of sports activity Ministry of Human resources Development
abroad by a person other than International/National/State (Department of Youth Affairs and Sports)
Level sports bodies, if the amt. involved > US$ 100,000
(Now - Mo Youth Affairs and Sports)
Remittance for membership of P & I Club (protection and Ministry of Finance (Insurance Division)
indemnity insurance)
Schedule III – Transactions which in excess of limits require prior approval of RBI for drawal of forex:
[Liberalised Remittance Scheme]
1. Individuals – Avail forex facility for the following purpose within limit of USD 2,50,000 only. Additional
remittance beyond limit shall require prior approval of RBI:
a. Private visits to any country (except Nepal and Bhutan)
b. Gift or donation
c. Going abroad for employment
d. Emigration (permanently settling in a country)
e. Maintenance of close relatives abroad
f. Travel for:
o business, or
o attending a conference or
o specialized training or
o For meeting expenses of medical treatments/check-up abroad, or
o for accompanying as attendant to a patient going abroad for medical treatment/check-up.
g. Expenses in connection with medical treatment abroad
h. Studies abroad
i. Any other current account transaction
Provided, for (d), (g) and (h), individual may avail forex facility in excess of $2,50,000 if it so required by
country of emigration, medical institute offering treatment or the university, respectively
Provided further that, where individual “Remits” any amount under this scheme in a FY, the applicable limit
shall be reduced from $250K by such amount remitted (i.e., the limit of $250,000 is aggregate in FY)
Provided also that for a PRI 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 India) to the office or branch of a foreign co. or subsidiary
or JV in India of such foreign co.,
may make remittance up to his net salary (after deduction of taxes, PF, etc.)
Explanation: For this schedule, A PRI 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 is not > 3 years, is
a resident but not permanently resident.
2. Facilities for person other than individuals: Following shall require prior approval of RBI:
Particulars Purpose Limit
Additional Note:
1. Procedure for Drawal/remittance of Forex under Sch III shall be same as applicable under LRS
2. Approval for transaction under Sch II and III shall not be required where remittance is made from RFC
Account.
3. Approval for transaction under Sch II (except for remittance for membership of P&I club) and Sch III
(except for commission/pre-incorp) shall not be required where drawal is made out of funds held in EEFC
A/c of Remitter
4. If a person is on visit abroad, he can incur expenditure stated in Sch III if he incurs it through
International Credit Card (ICC)
Note – If a transaction is not listed in any of the three schedule, it can be freely undertaken.
o AD-1 may allow remittance for making payments for imports after ensuring:
All requisite details are made available by Importer
Remittance is for bona fide trade transaction
In terms of sec 10(6) – Person acquiring Forex is permitted to use it either for:
Purpose declared with AP or
Any other purpose for which Forex Acq is permissible.
Normal imports –
Remit within 6m of date of shipment (except where payment held as guarantee for performance)
[For COVID – Payment can be done upto 12m if import done before 31st July, 2020]
Delayed payments?
AD-1 banks may permit due to financial difficulties or dispute etc. However, interest on delayed
payment shall only be paid upto 3 years from date of shipment.
Report above extension in IDPMS as per message “BOE Extension” and the date up to which extension is
granted will be indicated in “Extension Date” column.
o Import of Forex/INR:
Except as otherwise provided in Regulation, no person shall, w/o prior permission of RBI, bring any
FC into India
RBI may allow person to bring INR subject to T&C as RBI may stipulate
Where the service importer is: No guarantee exceeding the below amount shall
be issued:
Other than Public Sector co. / Dept of CG or SG $500,000
Public Sector co. / Dept of CG or SG $100,000 (w/o prior approval of MoF)
1. Subject to (2), a person may sell or draw forex to/from AP for CAT [Generally permissible]
Provided that, RBI or CG shall not impose restriction on drawal of forex for:
o Payment due on a/c of amortization of loans or repayment of loans
o Depreciation of direct investment in OCOB
Subsection (2A):
CG (+RBI) specify:
o Class of CAT, not involving debt instruments, which is permissible
o Limits for such permissible transactions
o Conditions placed on such transactions
Author’s Note:
CAT can be of two kinds – (a) For Debt instruments and (b) For non-debt instruments (such as equity).
The power to regulate both kinds of CAT initially lied with RBI. But w.e.f. 15/10/2019, the power to regulate
CAT relating to non-debt instrument has been transferred to CG and the power to regulate CAT relating to
debt instruments still lies with RBI.
The primary motive behind such a move was to enable the CG to exercise greater control on capital flows
such as equity.
Even after above changes, RBI still holds the responsibility of monitoring the foreign exchange related to
non-debt instruments.
3. Omitted
4. PRI may hold, own, transfer or invest in:
FC
Forse
IP situated o/s India
Provided that it was
acquired, held or owned by such person when he was PROI, or
inherited from a PROI
As per RBI Clarification:
The following transaction are covered u/s 6(4):
1. FC accounts opened and maintained by PRI when he was PROI
2. Income from employment/business/vocation when o/s India taken up when he was PROI, or from
investment when he was PROI or from gift/inheritance received when he was PROI
3. Forex held o/s India by a PRI acquired by way of inheritance from PROI
4. PRI may freely utilize eligible assets abroad or income/sales proceed therefrom after their return to
India for making payment/fresh investments abroad without approval of RBI.
Provided that, cost of investments is met completely out of eligible assets.
In this case, the PROI or his successor shall not repatriate outside India the sales proceeds of such IP,
except with prior approval of RBI
In event of sale of IP other than agricultural land/farm house/plantation property in India by a PROI who
is citizen or person of Indian Origin, AD may allow repatriation (i.e., RBI approval not needed) provided:
1. IP was acquired in accordance with FEMA law
2. Amount to be repatriated does not exceed:
a. Acq. cost of IP in forex received through banking channel or out of funds in FC NR A/C, or
b. FC equivalent of the amt paid where payment was out of funds in NR External A/C
3. In case of residential prop, repatriation of sales proceed is restricted to not > 2 such properties.
In the event of failure in repayment of ECB availed by PRI, AD may permit overseas lender/security
trustee to sell the secured IP and repatriate the sales proceeds towards o/s dues in respect of such loan
and not any other loan!
CAT is broadly split into following categories as per FEM(Permissible CAT) Regulations 2000:
Permissible Transaction for PRI [Schedule I] [SLAP CG in CID style that O2 kamm pad jaye]
FC Loans raised in Guarantees issued by a
Investment by PRI in Acq./Transfer of IP
India and abroad by a PRI in favour of a
forSe o/s India by a PRI
PRI PROI
Remittance outside
Loans and Overdrafts Undertake Derivative
India of Capital assets
by a PRI to a PROI contracts
of a PRI
Note - A PRI may draw forex from AP not > $250,000 per FY or such amt as decided by RBI for CAT specified
in Sch I
Note – Drawal of forex as per Sch III (Facilities for individual) of FEM(CUAT) Rules, 2000 shall be subsumed
within the above limit. (i.e., Sch I + Sch III = Max $250K)
Provided further that no part of the forex of $ 250,000 drawn above shall be used for remittance to countries
notified as non-co-operative countries and territories by Financial Action Task Force (FATF)
Permissible Transaction for PROI [Schedule II] [IPC ke baad GD doge to Achi Co. Degi offer]
Explanation:
For the purpose of this regulation, 'real estate business' shall not include:
a. development of townships,
b. construction of residential/commercial premises, roads or bridges and
c. registered REITs.
Note – PROIs are restricted from investment in business of Chit Funds but may be eligible to subscribe to
such chits provided approval of Registrar of chits or officer of SG concerned is sought and in compliance
with RBI T&Cs
2. ECB comes with 2 configuration - Foreign Currency ECB (FCY ECB) and Indian Currency ECB (INR ECB)
Eligible Borrowers (to All entities eligible to receive FDI. a) Entities eligible to raise FCY ECB
raise ECBs) Port Trusts; (as mentioned in left); and
Units in SEZ; b) Registered entities engaged in
SIDBI; and micro-finance activities, viz.,
EXIM Bank of India. registered NPO companies,
registered societies/trusts/
cooperatives and NGOs.
Recognised lenders Resident of FATF or IOSCO compliant countries, or
Multilateral and Regional Financial Inst. where India is a member country
(WHO, World Bank, etc.)
Individuals only if they are foreign equity holders (of borrower) or for
subscription to bonds/debentures listed abroad
Foreign branches / subsidiaries of Indian banks (only for FCY ECB, except
FCCB, FCEBs) subject to applicable prudential norms.
Minimum Average MAMP = 3 years
Maturity Period Call/Put options on ECB not to be exercised prior to completion of MAMP
(MAMP) For specified cases, separate MAMP:
Category MAMP (in yrs)
ECB raised by mfg. co. < $50 Mn per FY 1
ECB raised from foreign eq. holder for WCP, GCP or
5
repayment of Rupee loans
ECB raised for: (i) WCP or GCP
10
(ii) on-lending by NBFCs for WCP or GCP
ECB raised for:
i. repayment of Rupee loans availed domestically for capex 7
ii. on-lending by NBFCs for capex
ECB raised for:
(i) repayment of domestic Re. loans availed for purpose other
10
than capex
(ii) on-lending by NBFCs for other than capex
For (b) to (e) above, ECB cannot be raised from foreign branches / subsidiaries of
Indian banks
All-in-cost ceiling per Benchmark rate + 450 bps spread. (i.e., 4.5% spread)
annum
Other costs Prepayment charge/ Penal interest, if any, for breach of covenants, not > 2 % over
and above the contracted rate of interest on the o/s principal amount and will be
outside the all-in-cost ceiling.
End-uses (Negative ECB proceeds cannot be utilized for the following:
list) a) Real estate activities.
b) Investment in capital market.
c) Equity investment.
d) WCP , except in case of ECB mentioned at v(b) and v(c) above.
e) GCP, except in case of ECB mentioned at v(b) and v(c) above.
f) Repayment of Rupee loans, except as mentioned in v(d) and v(e) above.
g) On-lending to entities for the above activities, except as per v(c), (d) & (e)
Exchange rate (for Rate prevailing on date of agreement For conversion to Rupee, the exchange
change of currency for such change or rate less than the rate shall be the rate prevailing on the
date of settlement.
3. Issuance of Guarantee by Indian Banks, AIFI or NBFC w.r.t., ECB is not permitted. Further, Indian banks,
AIFI or NBFCs shall not invest in FCCBs or FCEBs.
4. ECB proceeds are permitted to be parked abroad as well as domestically in the manner given below:
Parking abraod: Parking Domestically:
ECB proceeds meant only for FC exp. can be ECB proceeds meant for Re. expenditure should
parked abroad pending utilisation in following be repatriated immediately to AD-1 bank.
liquid assets:
Allowed to park in unencumbered term deposits
(a) deposits or other products offered by with AD-I banks for max. 12m cumulatively.
banks rated > AA (-) by S&P/Fitch IBCA or Aa3
W.e.f., April 07, 2021, unutilised ECB proceeds
by Moody’s;
drawn down on/before Mar 01, 2020 can be
(b) T-bills and other inst. (1 year maturity) parked in term deposits with AD-1 banks in
having min. rating as indicated above and India prospectively, for an additional period up
(c) deposits with foreign branches/subsidiaries to March 01, 2022 (i.e., for more than 12
of Indian banks abroad months)
6. Reporting Requirements:
Loan Registration Number (LRN): Draw down of ECB allowed only after obtaining LRN from RBI.
Changes in terms and conditions of ECB: Any changes in T&C of ECB (incl. reduced repayment by mutual
agreement) to be reported to DSIM, RBI through revised Form ECB at the earliest (not later than 7 days
from the changes effected)
Monthly Reporting of actual transactions: Borrower to report actual ECB transactions in Form ECB 2 Return
via AD-I bank on monthly basis so as to reach DSIM in 7 working days from close of month. Changes in ECB
parameters to be incorp. in Form ECB 2 Return (in addition to revised Form ECB above)
Form ECB 2/Form ECB Beyond 3 years from submission/drawdown INR 100,000 per year
LSF to be paid via DD in favor of RBI
Action to be undertaken by Designated AD-1 bank w.r.t., UE: [FFAWE - Form Fresh Auto Writeoff ED]
File Revised Form ECB, if required, and last Form ECB 2 Return w/o certification from co. with ‘UE’
written in bold on top. The O/S amount of ECB will be treated as written-off from external debt liability
of country but may be retained by lender in books for recovery through judicial, etc. means;
No fresh ECB application by the entity should be examined/processed by the AD bank;
ED should be informed whenever any entity is designated ‘UE’; and
No inward remittance or debt servicing will be permitted under auto route. (i.e., block incoming funds)
Further, the following can also be undertaken under the automatic route:
AD-I bank can be changed subject to obtaining NoC from the existing AD-I bank.
Cancellation of LRN: Designated AD-I banks may directly approach DSIM for cancellation of LRN
provided that no draw down against the said LRN has taken place + monthly ECB-2 returns till date w.r.t,
allotted LRN have been submitted to DSIM.
e) If ECB Borrower has availed of other credit facilities from the Indian banking system, including
foreign branches/subsy of Indian banks, comply with applicable prudential guidelines;
f) Consent of other lenders, if any, to the same borrower is available or at least information regarding
conversions is exchanged with other lenders of the borrower.
g) Exchange rate prevailing on the date of the agreement for such conversion, or any lesser rate can be
applied with a mutual agreement with the ECB lender.
Note - The fair value of the eq. shares to be issued to be worked out w.r.t, date of conversion only.
Once the above conditions are met, the AD-I bank may permit creation of charge subject to following:
1. Creation of Charge on Immovable Assets:
a. Subj. to FEM (Acq. and Trf. of IP in India) Reguln, 2017
b. Permission not to be construed as permission to acquire IP in India, by the lender/sec trustee.
c. In the event of enforcement of the charge, the IP will have to be sold only to a PRI and the sale
proceeds shall be repatriated to liquidate the o/s ECB (and not any other borrowings).
Encumbered mov. assets may be taken out of country subject to getting NoC from domestic lenders
3. Creation of Charge over Finsec: The arrangements may be permitted subj to following:
a. Pledge of shares of borrower co. (Eg. Jio) held by promoters (Eg. Ambani) or shares of domestic
associate cos. (Ex. Jio) of borrower is permitted.
Pledge on other Finsec., viz. bonds and debentures, Govt.fin, Govt. Savings Certificates, deposit
receipts of securities and units of UTI or of MF, held by borrower/promotor is also permitted.
b. Security interest over all current and future loan assets and all current assets including CCE,
including Rupee accounts of borrower with ADs in India, standing in the name of the
borrower/promoter, can be used as security for ECB. The Rupee accounts of the
borrower/promoter can also be in the form of escrow arrangement or debt service reserve
account.
4. Issue of Corp. or Personal Guarantee: The arrangement shall be subject to obtaining the following:
a. A copy of Board Resl. specifying name of officials auth. to execute guarantees.
b. Specific req. from individuals to issue personal guarantee indicating detail of ECB.
c. ECB can be guaranteed by overseas party only if they fulfil criteria of Recognised lender.
Such security shall be subject to provisions contained in the FEM (Guarantees) Regulations, 2000,
Additional Requirements: While approving changes to ECB, AD-I banks should ensure that:
a. Changes are in conformity with the appl. ceilings/guidelines and in compliance with appl. guidelines.
b. Changes are reported to DSIM and reflected in Form ECB 2 appropriately.
ECB facility for Startups - AD-I banks are permitted to allow Startups to raise ECB under automatic
route as per the following framework:
Issuance of guarantee, LoC, LoU,etc. by Indian bank, AIFO and NBFCs is not permitted.
Hedging In case of INR ECB, overseas lender will be eligible to hedge its INR exposure through
permitted derivative products with AD– I banks. They can also access domestic mkt.
through br./subsy of Indian banks abroad or br. of foreign bank with Indian presence
Note: Startups raising ECB in FC are exposed to currency risk due to exchange rate
movements and are advised to ensure having an appropriate risk management policy
Conversion In case of borrowing in INR, the FC- INR conversion will be at the market rate as on
rate the date of agreement.
Other Same as per ECB framework.
Provisions However, provisions on leverage ratio and ECB liability: Equity ratio will be NA
Further, the Start-ups can also raise ECB under the general ECB route/framework.
Borrowing entity shall inform about pendency of such IAA to AD-I bank/RBI. Accordingly, AD-I Banks/RBI
shall, while approving proposal, intimate the agencies concerned by endorsing a copy of the approval letter.
10. ECB by entities under restructuring/ ECB facility for refinancing stressed assets:
An entity which is under a CIRP can raise ECB only if specifically permitted under the resolution plan.
Eligible corporate borrowers (in Mfg./Infra Sector) who have availed Rupee loans domestically for capex and
which have been classified as SMA-2 or NPA can avail ECB for repayment of these loans under any one time
settlement with lenders. Lender banks are also permitted to sell such loans (to NR) to eligible ECB lenders.
Foreign branches/ overseas subsidiaries of Indian banks are not eligible to lend for the above purposes.
Eligible borrowers, who are participating in the CIRP under IBC, 2016 as resolution applicants, can raise ECB
from all Recognised lenders, except foreign branches/subsidiaries of Indian banks, for repayment of Rupee
term loans of the target company. Such ECB will be considered under the approval route
11. Dissemination of info.: For greater transparency, info. w.r.t, name of borrower, amount, purpose and
maturity of ECB under both Auto. and Approval routes are put on RBI’s website monthly, with 1m lag.
12. Compliance with the guidelines: The primary responsibility is of borrower concerned. Any contravention will
invite penal action under the FEMA.
The designated AD-I bank is also expected to ensure compliance with ECB guidelines by their constituents.
ODI by Resident Individuals read with FEM (Transfer/Issue of Any Foreign Security) Regulations, 2004:
Direct
Investment or FC
Indian Party (IP) JV/WOS in host Country
Definitions:
1. “Direct investment outside India" means investment by way of:
contribution to the capital or
subscription to MoA of a foreign entity (“FE”) or
purchase of existing shares of FE entity either by mkt purchase/pvt. placement/stock exch.,
but does not include portfolio investment;
3. "Joint Venture (JV)" means a FE formed/registered/incorporated as per laws of host country in which the
IP makes a direct investment;
4. "Wholly Owned Subsidiary (WOS)" means a FE formed/registered/incorporated as per laws of host country
whose entire capital is held by the IP;
5. "Indian Party" means a Company/Body created under an Act of Parliament or P. firm/LLP making investment
in a JV/WOS abroad.
6. "Host country" means the country in which FE receiving the direct inv. from IP is registered/incorporated;
The $1Bn limit vis-a-vis the NW will not be applicable where the investment is made out of:
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3. The IP routes all the transactions relating to such investment through only 1 branch of AD.
Process: The IP should approach AD with an application in Form ODI and + Presc. Docs for effecting the
remittances towards such investments.
2. Approval route:
(i) Prior approval of RBI (in Form ODI via AD-1)required in all other cases of ODI.
(ii) RBI would, inter alia, take into account the following factors while considering such applications:
a) Prima facie viability of the JV / WOS outside India;
b) Contribution to external trade and other benefits which will accrue to India through such ODI
c) Financial position and business track record of the IP and the foreign entity; and
d) Expertise and experience of IP in same or related line of activity as of the JV / WOS outside India.
A resident individual may make ODI in the equity shares and CCPS of JV/WOS o/s India within the overall limit
prescribed by RBI under Liberalised Remittance Scheme (i.e., $250,000 per FY).
An overseas entity, having direct/indirect equity participation by an IP, shall not offer financial products linked
to INR (e.g., non-deliverable trades involving FC, Re. exchange rates, stock indices linked to Indian market, etc.)
without the specific approval of the Reserve Bank.
b. Furnish such info. to RBI as may be required to ensure realization of export proceeds
2. RBI may, to ensure realization of export proceeds, direct exporter to comply with such req. as it deems fit.
3. Exporter of service shall furnish to RBI/such auth. a declaration containing true and material part. in
relation to payment for such services.
2. ‘Export Value' w.r.t, export by way of lease/hire-purchase/similar arrangement, includes the charges payable
in respect of such arrangement;
3. 'Software' means any computer programme, database, drawing, design, AV signals, any information by
whatever name called in or on any medium other than in or on any physical medium ;
Goods Software
Form EDF Form SOFTEX
and an affirmation that the FEV is/shall be paid within specified period.
Export of Services (other than software) – No Declaration Required as no Form specified but liable to
realize and repatriate the amount to India.
Exemptions for export of goods/software i.e., Export w/o declaration: [DATE GF CSR | RBI | SEZ]
S - trade samples of goods and publicity material supplied free of payment
F - goods imported free of cost on re-export basis
E - personal effects of traveler, whether accompanied or unaccompanied
C - ship's stores, trans-shipment cargo and goods supplied for military, naval or air force requirements;
G - Gift of goods accompanied by a declaration (general declaration) by the exporter that value < = Rs. 5
lakhs
[If value of goods > Rs. 5 lakhs – Declare in Form EDF, otherwise, general declaration]
A - Aircrafts/aircraft engines/ spare parts for overhauling and/or repairs abroad subject to their reimport
into India within 6m from date of export
A - Re-export of leased aircraft/helicopter/engines/APUs re-possessed by overseas lessor and duly de-
registered by the DGCA on request of IDERA holder under Cape Town Convention or any cancellation of lease
agreement subject to permission of DGCA/MoCA [Amendment w.e.f. Nov/Dec 2021 attempt]
R - replacement goods exported free of charge as per FTP
T - goods sent outside India for testing subject to re-import into India
D - defective goods sent o/s India for repair and re-import provided accompanied by certificate from AD in
India that export is for repair and re-import
RBI - exports permitted by RBI, on application made to it, subject to T&C stipulated in permission
SEZ - Re-export of following imported goods permitted by SEZ, EHTP, STP or FTZ:
o found defective, for replacement by the foreign suppliers; or,
o from foreign suppliers on loan basis; or
o from foreign suppliers free of cost, found surplus after production operations.
Original declaration to
RBI office
Exporter Form EDF Commissioner
(Goods) In Duplicate of Customs
Duplicate form back to AD to
Retain
Verify and
exporter for
authenticate submission to AD
Original declaration to
MoIT at RBI office
Exporter Form SOFTEX STPIs, FTZ or
(*Software) In Triplicate SEZs Duplicate form back to
AD to
exporter for Retain
*Computer software/ For submission to AD
Or A/V/TV software Certification
Triplicate - Retain
FEV must be paid through AD as per FEM(Manner of Receipt and Payment) Reg. 2000
Note – Re-import into India within the realization period shall be deemed realization of FEV
*RBI/AD may for sufficient and reasonable cause extend the period
Note – If software exported in other than physical form, Date of Export = Date of invoice
AD may accept docs after expiry of 21 days, for reasons beyond exporter’s control.
Where the payment for export is not received within the specified period (9m/15m + Extension), the RBI may
issue directions to person who has sold/entitled to sell such goods/software for the purpose of securing:
a. Payments, if goods/software is sold and
b. Sale of goods and payment thereof if goods/software is not sold, or re-import into India
Provided that omission of RBI to give directions shall not have the effect of absolving the person committing the
contravention from the consequences thereof.
If shipment not made within 1 year, no remittance towards refund of advance payment or interest shall be made
after expiry of 1 year, w/o prior approval of RBI
Note – The export agreement may itself provide for shipment of goods beyond 1 year from receipt of advance
payment and such agreement shall be valid.
Directions by RBI
In order to ensure timely realization of FEV, the RBI may, by general or special order, direct exporters:
To cover payment of exports by an Irrevocable LoC
To take prior approval of AD before submission of any declaration to specified authority
Copy of declaration to be submitted to such org. to certify the valuation of goods/software
Project Exports:
Where an export of goods/services is proposed to be made on:
o deferred payment terms or
o in execution of a turnkey project or
o a civil construction contract,
the exporter shall submit the proposal to Approving authority (EXIM bank or AD) for prior approval.
In case a guarantee is required to be given for performance, or for availing of credit facilities from bank/FI
o/s India w.r.t., execution of such project, the same may be issued by:
o an AD bank
o a PRI being an exporting company
provided that the contract/Letter of Award stipulates such requirements (of guarantee).
An Off-Shore Banking Unit (OBU) shall NOT undertake any transaction with PRI. It may undertake transaction
with any AD in India on Principal-to-Principal basis. OBU are meant to facilitate units in SEZ and may undertake
transactions in Forex with a unit in SEZ to the extent the latter is eligible to undertake such transactions
4. Arrested person to be brought before concerned AA asap within 24 hrs (excl. time travel for journey)
Provided that: If defaulter pays amt. entered in arrest warrant + cost of arresting officers – Release
immediately
6. Where person appears before AA on receipt of above notice, AA to give defaulter opportunity to Show
Cause why not civil prison?
7. Pending conclusion of inquiry – AA may order detention of such defaulter and release on furnishing security
8. Upon conclusion – AA may order detention in civil prison and arrest him (if not already arrested)
9. To give an opportunity to defaulter to make payment, AA may prior to order of detention in prison, leave
defaulter in custody of such officer for not > 15 days
10. Period of detention in civil imprisonment – Upto 3 years (if amount > Rs. 1 crore) or upto 6m (otherwise)
Section 14A: Power to recover arrears of penalty: (Note: Arrest u/s 14A runs parallelly with recovery u./s 14A)
AA may authorise officer (of ED) > = Asst. Director of ED to recover arrears of penalty and such officer shall
exercise power similar to those conferred on the IT Auth. in relation to recovery of tax.
Section 37: Officer > Rank of Asst. Director may take up investigation u/s 13
THE END