Overseas Investments by a Person Resident in India

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Liberalised Remittance Scheme:

Under the Liberalised Remittance Scheme (LRS), all resident individuals can freely remit USD $250,000 overseas in the concerned financial year (March- April) for a permissible set of current or capital account transactions or both.

Permissible and Non Permissible Investments, an individual can make outside India have been explained below:

Permissible Capital Account Transaction made outside India by a resident of India

Capital account transactions which are permissible under the LRS dated June 1, 2015 as mentioned below:

  1. Opening of foreign currency account abroad with a bank.
  2. Making investment abroad.
  3. Purchase of property abroad.
  4. Setting up of wholly owned subsidiary and Joint ventures abroad.
  5. Extending loans including loans in INR to NRI who are relatives as defined in Companies Act, 2013.

Here making an investment abroad includes acquisition and holding shares of both listed and non-listed overseas company also including setting up of wholly owned subsidiary and joint ventures (w.e.f. August 05, 2013) outside India with a bona fide interest and business taking into consideration the terms and conditions for the same by the RBI.

Permissible Current Account Transactions by a resident of India outside India

Current account transactions which are permissible within the limit of USD 250,000 without prior approval of the RBI are mentioned below:

  1. Private visit to any country (except Nepal and Bhutan)
  2. Gift or Donations
  3. Going abroad for employment
  4. Emigration
  5. Maintenance of close relatives abroad
  6. Travel for business, Conference, special training
  7. Medical Expenses, Check-up abroad, medical treatment and attending patient
  8. Studies abroad
  9. Any other.

Provided further that if an individual remits any amount as prescribed under LRS then the limit as mentioned by the RBI under the scheme shall reduced from USD 250, 000 by the amount so remitted.

TRANSACTIONS WHICH ARE PROHIBITED

A. Foreign Exchange Management (Current Account Transactions) Rules, 2000, Schedule 1:

There are eight transactions which are prohibited as provided under the schedule:

  1. Remittance out of lottery winnings
  2. Remittance of income form racing/riding etc. or any other hobby
  3. Remittance for purchase of lottery tickets, banned/proscribed, football pools, sweepstakes, etc.
  4. Payment of Commission on exports made towards equity investment in Joint Ventures/Wholly owned subsidiaries abroad of Indian companies.
  5. Remittance of dividend by any company to which the requirement of dividend balancing is applicable
  6. Payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco.
  7. Payment related to Call Back Services” of telephones.
  8. Remittance of interest income on funds held in Non- Resident Special Rupee (Account) Scheme.

B. Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.

C. Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.

C. Remittance for trading in foreign exchange abroad.

D. 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.

E. 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.

TRANSACTIONS REQUIRING PRIOR APPROVAL OF THE CENTRAL GOVERNMENT

Items restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000:

 S. No. Purpose of Remittance Ministry / Department of Govt. of India whose approval is required
 

1.

Cultural Tours Ministry of Human Resources Development, (Department of Education and Culture)
 

2.

 

Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding USD 10,000) by a State Government and its Public Sector Undertakings

 

Ministry of Finance, (Department of Economic Affairs)

 

3.

 

 

Remittance of freight of vessel chartered by a PSU

Ministry of Surface Transport, (Chartering Wing)
 

4.

 

Payment of import through ocean transport by a Govt. Department or a PSU on c.i.f. basis (i.e. other than f.o.b. and f.a.s. basis)

Ministry of Surface Transport, (Chartering Wing)
 

5.

 

 

Multi-modal transport operators making remittance to their agents abroad

Registration Certificate from the Director General of Shipping
 

 

6.

 

Remittance of hiring charges of transponders by  (a) TV Channels (b) Internet Service providers

Ministry of Information and Broadcasting Ministry of Communication and Information Technology
 

7.

 

Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping

Ministry of Surface Transport (Director General of Shipping)
 

8.

 

Remittance of prize money/sponsorship of sports activity abroad by a person other than International / National / State Level sports bodies, if the amount involved exceeds USD 100,000.

Ministry of Human Resources Development (Department of Youth Affairs and Sports)
 

9.

 

 

Remittance for membership of P&I Club

Ministry of Finance (Insurance Division)

 

 

Author: Amitosh Pareek*

Fifth Year, B.A. LL.B. (Hons.)

Amity Law School, Amity University, Rajasthan, India.

*Article forwarded by Kaden Boriss India. The Author is interning with the law firm.

 

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