fema updates

MEETING OF MEDICAL EXPENSES OF NRIs CLOSE RELATIVES BY RESIDENT INDIVIDUALS ALLOWED
A.P. (DIR SERIES) CIRCULAR NO. 20, DATED 16-9-2011

Attention of Authorised Dealer (AD) banks is invited to para 2 of the Notification No. FEMA 16/RB-2000 dated May 3, 2000 viz. Receipt from and Payment to, a Person Resident Outside India, as amended from time to time, in terms of which a resident may make payment in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India.
2. The Committee to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999 has in its Report recommended that the ambit of FEMA Notification No.16/RB-2000 dated May 3, 2000 may be expanded to include permission to residents to bear medical expenses of visiting NRIs/PIOs.
3. The extant position has been reviewed and it has been decided that where the medical expenses in respect of NRI close relative (relative as defined in section 6 of the Companies Act, 1956) are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may be covered under the term "services related thereto" under Regulation 2(i) of Notification No. FEMA 16 /2000- RB dated May 3, 2000, ibid.
4. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

REPAYMENT OF LOANS OF NON-RESIDENT CLOSE RELATIVES BY RESIDENTS ALLOWED
A.P. (DIR SERIES) CIRCULAR NO. 19, DATED 16-9-2011

Attention of the AD banks is invited to Regulation 8(d) of the FEMA Notification No.4/2000- RB, dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000, as amended from time to time, in terms of which the housing loan provided to a non-resident Indian or a person of Indian origin resident outside India by an authorised dealer or a housing finance institution in India approved by the National Housing Bank for acquisition of a residential accommodation in India, may be repaid by any relative of the borrower in India by crediting the borrower's loan account through the bank account of such relative (relative as defined in section 6 of the Companies Act, 1956). Thus, repayment of loan by close relative in respect of loan in rupees availed by NRI is restricted to housing loans only.
2. The Committee to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999 has in its Report recommended that resident individuals may be granted general permission to repay loans availed of from banks in Rupees in India by their NRI close relatives as defined under section 6 of the Companies Act.
3. The extant provision has now been reviewed and it has been decided that where an authorised dealer in India has granted loan to a non-resident Indian in accordance with Regulation 7 of the Notification No. FEMA 4/2000-RB, ibid, such loans may also be repaid by resident close relative (relative as defined in section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower's loan account through the bank account of such relative.
4. The necessary amendments to the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 are being issued separately.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

LOANS IN RUPEES BY RESIDENT INDIVIDUALS TO NRI CLOSE RELATIVES ALLOWED
A.P. (DIR SERIES) CIRCULAR NO. 18, DATED 16-9-2011

Attention of the Authorised Dealer (AD) banks is invited to Regulation 7 of the Notification No. FEMA 4/2000, dated May 3, 2000, viz. Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000, as amended from time to time, in terms of which an authorised dealer in India may grant loan in rupees to a non-resident Indian.
2. The Committee to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999 has in its Report recommended that resident individuals may be granted general permission to lend in Rupees to their non-resident close relative (means relative as defined in section 6 of the Companies Act, 1956) for any personal purpose or business activities other than agricultural/plantation activities or real estate or relending business.
3. The extant position has been reviewed and it has been decided to permit a resident individual to lend to a Non resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [means relative as defined in section 6 of the Companies Act, 1956] by way of crossed cheque/electronic transfer, subject to the following conditions:
(i) the loan is free of interest and the minimum maturity of the loan is one year;
(ii) the loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 200,000 per financial year available for a resident individual. It would be the responsibility of the lender to ensure that the amount of loan is within the Liberalised Remittance Scheme limit of USD 200,000 during the financial year;
(iii) the loan shall be utilised for meeting the borrower's personal requirements or for his own business purposes in India;
(iv) the loan shall not be utilised, either singly or in association with other person, for any of the activities in which investment by persons resident outside India is prohibited, namely;
(a) the business of chit fund, or
(b) Nidhi Company, or
(c) agricultural or plantation activities or in real estate business, or construction of farm houses, or
(d) trading in Transferable Development Rights (TDRs).
Explanation : For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential/commercial premises, roads or bridges.
(v) The loan amount should be credited to the NRO a/c of the NRI/PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c;
(vi) the loan amount shall not be remitted outside India; and
(vii) repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/Non-resident External (NRE)/Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.
4. The necessary amendments to the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 and Foreign Exchange Management (Deposit) Regulations, 2000 are being issued separately.
5. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

GIFT IN RUPEES BY RESIDENT INDIVIDUALS TO NRI CLOSE RELATIVES ALLOWED
A.P. (DIR SERIES) CIRCULAR NO. 17, DATED 16-9-2011

Attention of the Authorised Dealer (AD) banks is invited to A.P. (DIR Series) Circular No. 24, dated December 20, 2006 and A.P. (DIR Series) Circular No. 9, dated September 26, 2007 in terms of which the remittances towards gift and donation by a resident individual was included in the Liberalised Remittance Scheme.
2. The Committee to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999 has in its Report recommended that the ambit of FEMA Notification No.16/RB-2000, dated May 3, 2000 may be expanded to include permission to residents making gifts to and bearing medical expenses of visiting NRIs/PIOs.
3. The extant position has been reviewed and it has been decided to permit a resident individual to make a rupee gift to a NRI/PIO who is a close relative of the resident individual [close relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque/electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI/PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances under the LRS during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.
4. The necessary amendments to the Foreign Exchange Management (Deposit) Regulations, 2000 and Notification No. FEMA 16/RB-2000, dated May 3, 2000 viz. Receipt from and Payment to, a Person Resident Outside India are being issued separately.
5. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.


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With regards,
Manoj Pandey
FEMA & Tax Consultancy Services
Wisdom Management Consultancy Private Limited
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