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Clarifications about Current Account Transactions under Foreign Exchange
Management Act, 1999
Attention
of authorised dealers is invited to the Government of India Notification No. GSR
381(E) dated 3rd May 2000 notifying the Foreign Exchange Management
(Current Account Transactions) Rules, 2000 in terms of which drawal of exchange
for certain current account transactions has been prohibited and restrictions
have been placed on certain other transactions.
2.
Government of India has now issued Notification
No. S.O.301 (E) dated March 30, 2001 amending their Notification GSR 381(E)
dated 3rd May 2000. The authorised dealers may carefully study the
changes introduced by the amendment.
3.
The synopsis of the changes brought about by the amendment are given
below:
A. Schedule II
(a) Remittances by any State Government or
its Public Sector Undertakings require prior approval from the Ministry of
Finance (DEA) for advertisement abroad in print media for any purpose other than
for promotion of tourism, foreign investment and for international bidding
(exceeding US$ 10,000) {cf: item 2}.
(b)
The restrictions imposed under item 10 and 11 of the Schedule or
remittances for securing Insurance for health from a company abroad and for
membership of P&I Club respectively will be applicable even though
remittance is made out of funds held in EEFC account.
B. Schedule III
(a) Gift remittance exceeding US$ 5,000 per
remitter/ donor per annum and Donation exceeding US$5,000 per remitter/ donor
per annum, respectively will require prior approval of the Reserve Bank. The
restriction would be applicable even in cases where the remittance is being made
out of funds held in EEFC account. Therefore, authorised dealers may ensure that
no person is allowed to make remittance of Gift/ Donation exceeding US$5,000 in
a year, without prior approval of the Reserve Bank. (cf: items 3 and 4)
(b)
Restrictions imposed under item 11 and 16 of the Schedule on payment of
commission for sale of immovable property and on remittance for use and/ or
purchase of trade mark/ franchise in India would also be applicable to the
remittances made out of funds held in EEFC account,
(c) The ceiling of US$5,000 per year on
remittances to close relatives residing abroad as contained in item 7 of
Schedule lll will not be applicable in case of foreign nationals (other than
Pakistani nationals), who are resident but not permanently resident in India,
(d) The remittances exceeding US $ 100,000
per project for any consultancy services procured from outside India will
require prior approval of the Reserve Bank. This restriction will also apply to
such remittances made out of funds held in EEFC accounts, (cf: item 15)
(e) All remittances exceeding US$100,000
for reimbursement of pre-incorporation expenses will also require prior
permission from the Reserve Bank (cf: item 17).
4.
Authorised dealers may bring the contents of the circular to the notice
of their constituents concerned.
5.
The directions contained in this circular have been issued under Section
10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of
1999). Any contravention or non-observance of these directions is subject to the
penalties prescribed under the Act.
Notification
dated 30th March 2001
S.O.
301(E) � In exercise of the powers conferred by section 5 and sub-section
(1) and Clause (a) of sub-section (2) of section 46 of the Foreign Exchange
Management Act, 1999 (42 of 1999) and in consultation with the Reserve Bank, the
Central Government having considered it necessary in the public interest, makes
the following amendments in the Foreign Exchange Management (Current Account
Transactions) Rules, 2000, namely: -
1.
(i) These Rules may be called the
Foreign Exchange Management (Current Account Transactions) (Amendment) Rules,
2001.
(ii) They shall come into force with
immediate effect.
2.
In the Foreign Exchange Management (Current Account Transactions) Rules,
2000 (hereinafter referred to as �the said Rules�).
A. In rule 4 and rule 5, in the
proviso, the words �or Exchange Earners� Foreign Currency (EEFC) account,�
shall be deleted;
B.
After rule 5, the following rule shall be inserted namely: -
�6(1)
Nothing contained in rule 4 or rule 5 shall apply to drawal made out of funds
held in Exchange Earners� Foreign Currency (EEFC) account of the remitter.
2.
Notwithstanding anything contained in sub-rule (1), restrictions imposed under
rule 4 or rule 5 shall continue to apply where the drawal of foreign exchange
from the Exchange Earners Foreign Currency (EEFC) account is for the purpose
specified in items 10 and 11 of Schedule ll, or item 3, 4, 11, 16 & 17
Schedule lll as the case may be.�
C. In Schedule ll to the said rules,
for item No. 2 and the entries relating thereto, the following shall be
substituted namely: -
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�2.
Advertisement in foreign print media for the purposes other than promotion
of tourism, foreign investments and international bidding (exceeding
US$10,000) by a State Government and its Public Sector Undertakings.
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Ministry
of Finance, Department of Economic Affairs.�
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D. In Schedule lll to the said
Rules, -
(a)
for item 3, the following item shall be substituted, namely:-
�3.
Gift remittance exceeding US$ 5,000 per remitter/ donor per annum.�
(b)
for item 4, the following item shall be substituted, namely:-
�4.
Donation exceeding US$ 5,000 per remitter/ donor per annum�
(c)
for item 7, the following item shall be substituted, namely:-
�7.
Remittance for maintenance of close relatives abroad,
(i)
exceeding net salary (after deduction of taxes, contribution to provident fund
and other deductions) of a person who is resident but not permanently resident
in India and is a citizen of a foreign state other than Pakistan.
(ii)
Exceeding US$ 5,000 per year per recipient, in all other cases.
Explanation:
For the purpose of this item, a person resident in India on account of his
employment of a specified duration (irrespective of length thereof) or for a
specific job or assignment; the duration of which does not exceed three years,
is a resident but not permanently resident�.
(d)
In Item 10, after the letters and figures �US$ 30,000� the words �per
academic year� shall be inserted;
(e)
For Item 15, the following item shall be substituted, namely:
�15.
Remittance exceeding US$ 100,000, per project, for any consultancy service
procured from outside India,�;
(f)
after item 16, the following item shall be inserted, namely:-
�17.
Remittance exceeding US$100,000, by an entity in India by way of reimbursement
of pre-incorporation expenses.�
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