FOREIGN EXCHANGE MANAGEMENT (REMITTANCE OF ASSETS) REGULATIONS, 2016

[Mr. M. GOVINDARAJAN]

Introduction

Reserve Bank of India (‘RBI’ for short) framed ‘Foreign Exchange Management (Remittance of Assets) Regulations, 2000 vide notification No. FEMA/13/2000-RB, dated 03.05.2000 in respect of remittance outside India by a person whether resident in India or not, of assets in India.  These regulations came into effect from 01.06.2000. 

These regulations were superseded by a new regulation made by RBI called as ‘Foreign Exchange Management (Remittance of Assets) Regulations, 2016 (‘Regulation’ for short) vide Notification No. G.S.R. 388 (E), dated 01.04.2016 which came into effect from 01.04.2016.

Remittance of Assets

Regulation 2(v) defines the expression ‘remittance of assets’ as remittance outside India of funds representing a deposit with a bank or a firm or a company, provident fund balance or superannuation benefits, amount of claim or maturity proceeds of Insurance policy, sale proceeds of shares, securities, immovable property or any other asset held in India in accordance with the provisions of the Act or rules or regulations made there under.

Prohibition

Regulation 3 prohibits remittance outside India of assets held in India.  No person, whether resident in India or not, shall make remittance of any asset held in India by him or by any other person.  The RBI may, for sufficient reasons, permit any person to make remittance of any asset held in India by him or by any other person.

Permission

The following regulations provide for getting permission for remittance of assets-

• Regulation 4 - permission for remittance of assets in certain cases;
• Regulation 5 - permission to an Indian entity to remit funds in certain cases;
• Regulation 6 - permission for remittance of assets on closure or remittance of winding up proceeds of branch office/liaison office (other than project office).

Remittance of assets in certain cases

i. Person of Indian origin

The expression ‘person of India Origin’ (PIO) is defined under Regulation 2(iv) having the same meaning assigned under the Foreign Exchange Management (Deposit) Regulations, 2016.  Regulation 2(x) of FEM(Deposit) Regulations, 2016 defines the expression ‘person of India Origin’ as a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions-

1. Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
2. Who belonged to a territory that became part of India after the 15th day of August, 1947; or
3. Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
4. Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c).

The expression ‘Person of Indian Origin’ includes an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.

Regulation 4 provides that a citizen of foreign state, not being a Person of Indian origin (PIO) or a citizen of Nepal or Bhutan, who-

• has retired from an employment in India, or
• has inherited the assets from a person; or
• is a widow/ widower resident outside India and has inherited assets of the deceased spouse who was an Indian citizen resident in India, may remit through an authorized dealer an amount, not exceeding USD 1,000,000 per financial year on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter;

if the remittance is made in more than one installment, the remittance of all installments shall be made through the same authorized dealer;

for the purpose of arriving at annual ceiling of remittance, the funds representing sale proceeds of shares and immovable property owned or held by the citizen of foreign state on repatriation basis in accordance with the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2018 and Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 made under the Act, shall not be included;

• had come to India for studies/ training and has completed his studies/ training, may remit the balance available in his account, provided such balance represents funds derived out of remittances received from abroad through normal banking channels or rupee proceeds of foreign exchange brought by such person and sold to an authorized dealer or out of stipend/ scholarship received from the Government or any Organization in India.

ii. Amount of remittance

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit through an authorized dealer an amount, not exceeding USD 1,000,000  per financial year-

1. out of the balances held in the Non-Resident (Ordinary) Accounts (NRO accounts) opened in terms of Foreign Exchange Management (Deposit) Regulations, 2016/ sale proceeds of assets/ the assets acquired by him by way of inheritance/ legacy on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter;
2.  under a deed of settlement made by either of his parents or a relative (relative as defined in Section 2(77) of the Companies Act, 2013) and the settlement taking effect on the death of the settler, on      production of the original deed of settlement.

Where the remittance under Clause (i) and (ii) above is made in more than one installment, the remittance of all installments shall be made through the same Authorized Dealer.  Where the remittance is to be made from the balances held in the NRO account, the account holder shall furnish an undertaking to the Authorized Dealer that the said remittance is sought to be made out of the remitter’s balances held in the account arising from his/ her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account and if such is found to be the case, the account holder will render himself/ herself liable for penal action under FEMA.

iii. Under liquidation

An authorized dealer in India may, also allow remittance out of the assets of Indian companies under liquidation under the provisions of the Companies Act, 2013, subject to the following conditions-

•  Authorized Dealer shall ensure that the remittance is in compliance with the order issued by a court in India/ order issued by the official liquidator or the liquidator in the case of voluntary winding up; and
• no remittance shall be allowed unless the applicant submits:-

• Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for;
•  Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 2013;
• In case of winding up otherwise than by a court, an auditor's certificate to the effect that there is no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.

Permission to an Indian entity

An entity in India may remit the amount being its contribution towards the provident fund/ superannuation/ pension fund in respect of the expatriate staff in its employment who is resident in India but not permanently resident therein.

The expression ‘expatriate staff’ is defined as a person whose provident/ superannuation/ pension fund is maintained outside India by his principal employer outside India.

The expression ‘not permanently resident’ is defined as a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed 3 years.

Remittance on winding up

A branch or office established in India by a person resident outside India may, for making remittance of assets on closure or remittance of its winding up proceeds, apply to the Authorized Dealer concerned supported by the following documents-

• A copy of the Reserve Bank's permission for establishing the branch/ office in India, wherever applicable;
• Auditor’s certificate-

• indicating the manner in which the remittable amount has been arrived and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;
• confirming that all liabilities in India including arrears of gratuity and other benefits to the employees etc., of the branch/ office have been either fully met or adequately provided for;
•  confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India; and
• confirming that the branch/office has complied with all regulatory requirements stipulated by the Reserve Bank of India from time to time regarding functioning of such offices in India.

• A confirmation that no legal proceedings are pending in any Court in India and there is no legal impediment to the remittance; and
• A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the office in India.

The authorized dealer may permit the remittance subject to the directions issued by the Reserve Bank in this regard, from time to time.

Permission from RBI

In respect of the following remittances the permission of RBI is highly required-

• Remittance exceeding USD 1,000,000 per financial year –

• on account of legacy, bequest or inheritance to a citizen of foreign state, resident outside India; and
•  by a Non-Resident Indian or Person of Indian Origin, out of the balances held in NRO accounts/ sale proceeds of assets/ the assets acquired by way of inheritance/ legacy.

• Remittance to a person resident outside India on the ground that hardship will be caused to such a person if remittance from India is not made.

Taxes

Any transaction involving remittance of assets under these regulations shall be subject to the applicable tax laws in India.