By Shraddha Ray Menon and Aman Ahmed
Discontinuation of Returns/ Reports under the Foreign Exchange Management Act, 1999
The Foreign Exchange Management Act, 1999 (“FEMA”) is administered through Authorised Dealers (“ADs”). Declarations and averments made to ADs by persons undertaking the activities under FEMA, is a critical method of ensuring this administration. These render critical and essential supervisory control. The degree of forthcomingness and adherence to these compliance requirements, promote review and modification of policies overviewing and regulating foreign exchange transactions under FEMA.
To this end, in September, 2018 Reserve Bank of India (“RBI”) released a Single Master Form (“SMF”) merging nine FDI related reporting forms into a single one, capable of being filled online on reporting platform FIRMS by RBI. This, significantly improved India efforts in Ease of doing Business.
This November RBI relaxed, requirements of filing certain Forms and Reports through ADs prescribed under FEMA. A Master Direction circular dated November 13, 2020 – Reporting under FEMA Act, 1999[1] was released with a similar objective as the September 2018 Master Circular. The Master Direction, in exercise of powers conferred under Sections 10(4)[2] and Section11 (2)[3] of FEMA, is meant to
- improve the ease of doing business; and
- reduce the cost of compliance.
AD banks have been directed to notify their respective constituents of the change.
In Annexures I and II the details of these relaxations can be viewed.
These changes will aid Ease of Doing Business in India by reducing the frequency, number and depth of Forms and Reports to be filed with the ADs. Most changes will-
- offer huge benefits to expats working in India, corporates with legal presence in India and the way they deal with details of filings around foreign exchange, filing thresholds have been increased, transfer of shares, leasing of commercial properties etc.;
- Onerous monthly filings have been done away with in multiple areas of corporate transactions for businesses, including office extensions;
- This is likely to encourage foreign investors to consider legal presence in India and promote appointing senior management and staff to overview the activities;
- With change in the World order, these relaxations are indicative of flexibility and willingness to do business, differently.
RBI has discontinued the following Forms and Reports. These relate to the categories listed in Annexure I:
- Category-wise transaction where the amount exceeds USD 5000 per transaction
- Category-wise, transaction-wise statement where the amount exceeds USD 25,000 per transaction
- Statement of Purchase transactions of USD 10,000 and above (including transactions of their franchisees)
- Extension of Liaison Offices (LOs)
- Extension of Project Offices (POs)
- FII/FPI daily: Daily inflow/outflow of foreign fund on account of investment by FPIs
- FII/FPI Return (Monthly): Data relating to actual inflow /outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market
- FVCI reporting: Inflows/outflows of remittances on account of investments by Foreign Venture Capital Investor (FVCIs) and Market value of Investments made by FVCIs
- Reporting of Inflow/Outflow details in respect of Mutual Fund by Asset Management Companies
- Market value of FII Investment in India on fortnightly basis
- Market value of FII Investment in India on Monthly basis
- FII holdings as percentage of floating stock
- Form DRR for Issue/transfer of sponsored/unsponsored Depository Receipts (DRs)-Hardcopy@
- ADR/GDR Movement Report- two way fungibility
- Repatriation of Sales proceeds of underlying shares represented by FCCBs/GDRs/ ADRs
- GDR/ADR underlying shares issued, re deposited and released monthly reporting
- Monitoring of disinvestments by Overseas Corporate Bodies
Annexure II sets out the details of the Forms and frequencies.
ANNEXURE I
The Master Direction objectifies the following:
REMITTANCE FACILITIES
- Authorised Money Changers (“AMC”), authorised by RBI under Section 10 of the FEMA are Full Fledged Money Changers (“FFMC”).
- Along with AD Category- I and AD Category- II, FFMC directly influence access to foreign exchange facilities to residents and tourists.
- FFMCs are authorised to purchase foreign exchange from residents and NRs visiting India; and sell foreign exchange for certain approved purposes.
- They can even appoint franchisees for the same.
- Money Transfer Service Scheme (“MTSS”), is a quick and easy way of transferring personal remittances towards family maintenance and remittance from abroad to beneficiaries in India.
- Outward remittance from India to a foreign country is not possible under MTSS.
- Under MTSS the remitter and the beneficiaries are individuals.
- Rupee Drawing Arrangement (“RDA”), cross border remittances are received in India through Exchange Houses situated in Gulf Countries, Hong Kong, Singapore and Malaysia and other countries which are FATF compliant.
LIBERALISED REMITTANCE SCHEME
- Resident individuals can make remittance up to USD 250,000 per financial year under Current Account transactions as per the Current Account transaction Rules of the FEMA.
- ADs would furnish the information under LRS on a monthly basis.
ESTABLISHMENT OF BO/LO/PO OR ANY OTHER PLACE OF BUSINESS BY FOREIGN NATIONALS
- Annual Activity Certificate (AAC) have to be filed with the ADs.
FOREIGN INVESTMENT
- Reporting inflows.
- Reporting of issue of capital instrument FCGPR filings for Bonus or rights shares or capital instruments to person resident outside of India, sweat equity, esops or allotments under IPO or QIP.
- Annual Returns on Foreign Liabilities and Assets.
- Reporting of transfer of shares.
- Conversion of ECB to Equity.
- Reporting of ADR/GDR.
- Reporting requirements of LLPs.
- Reporting of issue and transfer of convertible notes.
- Reporting of Foreign Portfolio Investment.
- Investment by NRIs and OCIs.
- Downstream Investment.
- Investment by Foreign Venture Capital Investor.
EXTERNAL COMMERCIAL BORROWINGS (ECB)
NON RESIDENT FOREIGN ACCOUNTS
- Monthly statement of remittances made to NRO Accounts.
- Return on Non Resident deposits
IMMOVABLE PROPERTY
- Immovable property acquired by non-resident for carrying out business has to be filed with RBI.
OVERSEAS DIRECT INVESTMENT
- Overseas Investments in JVs and WOSs are important avenues of promoting global business.
- Including all movement of shares of the JVs and WOSs.
TRADE
- Export Declaration Form.
- Softex Forms.
GUARANTEES
- Statement of reporting of non-resident guarantees issued and invoked in respect of fund and non-fund based facilities between 2 persons resident in India.
COMPOUNDING
ANNEXURE II
List of Discontinued Reports
| Name of Report | Reporting Entity | Frequency |
| Category-wise transaction where the amount exceeds USD 5000 per transaction | AD Category-II | Monthly |
| Category-wise, transaction-wise statement where the amount exceeds USD 25,000 per transaction | AD Category- II | Monthly |
| Statement of Purchase transactions of USD 10,000 and above (including transactions of their franchisees) | FFMCs and AD Category- II | Monthly |
| Extension of Liaison Offices (LOs) | AD Category-I banks | As and when extension is granted |
| Extension of Project Offices (POs) | AD Category-I banks | As and when extension is granted |
| FII/FPI daily: Daily inflow/outflow of foreign fund on account of investment by FPIs | AD banks | Daily |
| FII/FPI Return (Monthly): Data relating to actual inflow /outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market | AD Category-I banks | Monthly |
| FVCI reporting: Inflows/outflows of remittances on account of investments by Foreign Venture Capital Investor (FVCIs) and Market value of Investments made by FVCIs | AD Category-I banks/Custodian banks | Monthly |
| Reporting of Inflow/Outflow details in respect of Mutual Fund by Asset Management Companies | Asset Management Companies | Quarterly |
| Market value of FII Investment in India on fortnightly basis | AD Category-I banks | Fortnightly |
| Market value of FII Investment in India on Monthly basis | AD Category-I banks | Monthly |
| FII holdings as percentage of floating stock | AD Category-I banks | Monthly |
| Form DRR for Issue/transfer of sponsored/unsponsored Depository Receipts (DRs)-Hardcopy@ | Custodian | At the time of issue/transfer of depository receipts |
| ADR/GDR Movement Report- two-way fungibility | AD Category-I banks | Monthly |
| Repatriation of Sales proceeds of underlying shares represented by FCCBs/GDRs/ ADRs | Custodian | Monthly |
| GDR/ADR underlying shares issued, re deposited and released monthly reporting | Custodian | Monthly |
| Monitoring of disinvestments by Overseas Corporate Bodies | AD banks | Monthly |
[1] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/13MDRD77DCF42C4E64B6C9A83C24EF5D4E188.PDF
[2] An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give, and, except with the previous permission of the Reserve Bank, an authorised person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorisation under this section.
[3] The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorised person to furnish such information, in such manner, as it deems fit.