Beginners Study Course on Foreign Exchange Management Act Presented - PowerPoint PPT Presentation

Beginners Study Course on Foreign Exchange Management Act Presented by : CA Haresh Chheda Western India Regional Council of The ICAI 1

T opics Covered Acquisition and Transfer of Immovable Property in India  Acquisition and Transfer of Immovable Property outside  India. Borrowing and Lending in Rupees (Loans)  Borrowing and Lending in Rupees (Deposits)  Liberalised Remittance Scheme for Resident Individual (LRS)  Remittance of Assets under USD 1 million facility for Non  Residents Borrowing and Lending in Foreign Exchange  2 10th May, 2013

T opics Covered Acquisition and Transfer of Immovable Property in India  Acquisition and Transfer of Immovable Property outside  India. Borrowing and Lending in Rupees (Loans)  Borrowing and Lending in Rupees (Deposits)  Liberalised Remittance Scheme for Resident Individual (LRS)  Remittance of Assets under USD 1 million facility for Non  Residents Borrowing and Lending in Foreign Exchange  10th May, 2013 3

Acquisition and Transfer of Immovable Property in India by Person Resident Outside India Statutory Provisions:  RBI being the regulatory authority prohibits, restricts or regulates acquisition or transfer of immovable property in India, other than a lease not exceeding 5 years , by a person resident outside India - Section 6 (3)(i) and Section 47 (2)  RBI Notification No FEMA 21/2000-RB dated 3.5.2000, as amended from time to time. A permissible class of capital account transaction of a person  resident outside India – Schedule II to RBI Notification No FEMA 1/2000-RB dated 3.5.2000, as amended from time to time. 10th May, 2013 4

Regulations Cover  Person resident outside India who is a citizen of India  Person resident outside India who is a person of Indian origin  Person resident outside India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan  Person resident outside India who is a citizen of a country other than 8 countries referred to above  Person resident outside India who has established a place of business in India with special or general permission of RBI  Foreign Embassies / Diplomats / Consulate Generals 10th May, 2013 5

„Person of Indian origin‟ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), i. who at any time, held Indian passport; or ii. who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955) 10th May, 2013 6

Parameters of Comparison The broad analysis of Acquisition and Transfer of Immovable Property shall be on the following criteria:  Acquisition of Immovable Property  Purchase  Gift  Inheritance • Transfer of Immovable Property  Sale  Gift 10th May, 2013 7

Acquisition by person resident outside India who is a - Citizen of India(PROI-C) and - Person of India Origin (PIO) Acquisition by way of Purchase A. For PROI-C A PROI-C is permitted to acquire by way of Purchase any Immovable  Property in India Except Agricultural Land, Plantation Property and Farmhouse  from a person resident in India or  from a person resident outside India who acquired immovable property  in accordance with the provisions of the foreign exchange law in force at the time of acquisition or the provisions of FEMA. For PIO A PIO is permitted to acquire by way of Purchase any Immovable Property in  India Except Agricultural Land, Plantation Property and Farmhouse  from a person resident in India or  from a person resident outside India who acquired immovable  property in accordance with the provisions of the foreign exchange law in force at the time of acquisition or the provisions 10th May, 2013 8 of FEMA.

Acquisition by way of Gift B. For PROI-C any immovable property, other than agricultural property, plantation, or a farm house,  from a person resident in India or  from a person resident outside India who acquired immovable property in accordance with the provisions of (i) the foreign exchange law in force at the time of acquisition or (ii) the provisions of FEMA. For PIO any immovable property, other than agricultural property, plantation, or a farm house, From Person resident in India  From PROI-C  From PIO  CARE : Seek prior approval of RBI for acquisition by way of gift from a foreign national of non-Indian origin. 10th May, 2013 9

C. Acquisition by way of Inheritance For PROI-C can acquire immovable property in India acquired by way of inheritance from  a person who was resident in India and hold the same. [Section 6 (5) of FEMA] CARE : Seek prior approval of RBI for acquiring and holding immovable property in India by way of inheritance from a person who was resident outside India since Section 6(5) of FEMA 1999 permits inheritance only from a resident. For PIO can acquire immovable property in India acquired by way of inheritance from  a person who was resident in India and hold the same. [Section 6 (5) of FEMA] From Person resident in India or,  From Person resident outside India who had acquired the said property,  complying with the prevalent FEMA conditions at the time of acquisition of property. 10th May, 2013 10

Transfer by person resident outside India who is - Citizen of India(PROI-C) and -Person of India Origin (PIO) Transfer by way of Gift and Sale For PROI-C A PROI-C is permitted to transfer any immovable in India(Gift and Sale) to:  person resident in India  PROI-C   PIO Except Agricultural Land, Plantation Property and Farmhouse •  Agricultural or plantation property or farm house to a person resident in India who is a citizen of India For PIO • A PIO can transfer any immovable property in India: By way of sale  To a person resident in India  By way of Gift To a person resident in India, a PROI-C or a PIO Agricultural or plantation property or farm house to a person resident in India who is a citizen of India Care : RBI permission for sale to PROI-C or a PIO 10th May, 2013 11

Payment for Acquisition by way of Purchase for PROI-C and PIO • From inward remittance of funds received in India through normal banking channels • From NRE/FCNR(B)/NRO Account • Note: Payments by way of traveler's cheque/foreign currency notes/ other method than prescribed above is not allowed . 10th May, 2013 12

Prior permission to citizens of certain countries for Acquisition and transfer of immovable property in India  A citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran Nepal or Bhutan, cannot acquire or transfer immovable property in India, without prior permission of RBI, irrespective of whether he is resident of India or outside India.  However, where the immovable property is taken on a lease for a period of 5 years or less, the above restriction is not applicable. 10th May, 2013 13

Foreign Nationals of Non Indian Origin resident outside India  Can acquire immovable property in India other then Agricultural property, Plantation or Farm House by way of inheritance, Section 6(5).  Acquisition by way of purchase or gift only with RBI permission. However, they can acquire immovable property on lease for a  period of 5 years or less. Foreign nationals of non- Indian origin, other than specified 8  countries can acquire immovable property in India by way of purchase/gift except Agricultural property, Plantation or Farm House on becoming resident in India 10th May, 2013 14

Acquisition of Immovable Property by Foreign Embassies/ Diplomats/ Consulate Generals in India  Clearance to be obtained from Government of India, Ministry of External Affairs (MEA) for Purchase/Sale (except Farmhouse/ Agricultural Land/ Plantation Property)  Consideration for acquisition to be from inward remittance of funds 10th May, 2013 15

Acquisition of Immovable Property by person resident outside India for Permitted activities A branch, office or other place of business (excluding Liaison Office) established by person resident outside India for carrying out permitted activities may: • acquire any immovable property in India, necessary or incidental to carry such activity • File declaration with RBI in form IPI (Annexure – II), stating compliance of all rules and regulations. • to be filed within 90 days from acquisition. • transfer the immovable property by way of mortgage to an AD as a security for any borrowing 10th May, 2013 16

Repatriation of Sale Proceeds of Immovable Property A. Immovable Property acquired by way of purchase. • A person acquiring immovable property when he was resident in India or inherited from a person resident in India, or his successor, can repatriate sale proceeds only with prior permission from RBI. • On the sale of Immovable Property (other than Agricultural Land/Farm House/ Plantation House) by PROI-C or PIO, Authorized Dealer (AD)shall allow repatriation of sale proceeds outside India on following conditions:  The immovable property was acquired by seller in accordance with prevalent FEMA provisions.  amount to be repatriated does not exceed amount paid for acquisition or out of funds held in Foreign Currency Non- Resident Account or foreign currency equivalent amount in NRE A/c. • In case of residential property, sale proceeds is restricted to maximum 2 properties. 10th May, 2013 17