Deposit and Remittances

Foreign Exchange Management Act, 1999

Ghaziabad Branch || CIRC

Institute of Chartered Accountants of India
03rd June 2016

Presentation by: CA. Sudha G. Bhushan

Associate Director Taxpert Professionals
Sudha@taxpertpro.com
09769033172 || 07738892291
FEW BASIC CONCEPTS

Current and capital Account transaction

Residential Status
Authorities under FEMA
Balance Sheet and FEMA
Various Entities under FEMA
Accounts under FEMA

By Resident
Individuals

in India
currency accounts by a person resident
Foreign Exchange Management (Foreign
Foreign Currency
account in India
By other
By Person
resident in India
BY Resident
Individuals
Account
maintained
Account outside India By Others

By NRI/PIOs
By Person
resident outside Foreign Exchange Management
India (Deposit) Regulations, 2016
By others
Account
By Person resident outside India

By Resident
Individuals

in India
currency accounts by a person resident
Foreign Exchange Management (Foreign
Foreign Currency
account in India
By other
By person
resident in India
BY Resident
Individuals
Account
maintained
Account outside India By Others

By NRI/PIOs
By Person
resident outside Foreign Exchange Management
India (Deposit) Regulations, 2016
By others
Foreign Exchange Management
(Deposit) Regulations, 2016
FCNR(B) account

NRE account

NRO account

By Person resident outside Special Non-Resident Rupee

India Account (SNRR account)

Escrow Account

Unincorporated joint ventures

Deposits by companies
(UJV)
shipping or airline company
Other
incorporated outside India
For Adjustment in export and
import value
REGULATORY FRAMEWORK

Regulations FEMA 5/2000-RB on Foreign

Exchange Management (Deposit) Regulations,
2000 amended from time to time.

NRE A/C FCNR - B A/c NRO A/c SNRR A/c

Escrow A/c
SCHEDULE 1 SCHEDULE 2 SCHEDULE 3 Schedule 4
NON-RESIDENT (EXTERNAL) ACCOUNT
SCHEME (NRE ACCOUNT)

NRIs and PIOs - Rupee Savings, Current or

eligible to open Denominated fixed deposit

Can be opened by Interest lying to the

Principal and
remittance of credit of NRE
interest both -
funds in free accounts - exempt
Repatriable
foreign exchange. from tax
 PERMISSIBLE DEBITS/CREDITS

Credits Debit
Inward remittance to India in permitted currency local disbursements
proceeds of account payee cheques, demand transfer to other NRE / FCNR accounts of person
drafts / bankers' cheques, issued against eligible to open such accounts,
encashment of foreign currency remittance outside India,
transfers from other NRE / FCNR accounts investments in shares / securities/commercial
sale proceeds of FDI investments paper of an Indian company, etc.
interest accruing on the funds held in such
accounts
interest on Government securities/dividends on
units of mutual funds purchased by debit to the
NRE/FCNR(B) account of the holder, certain types
of refunds, etc.
NON RESIDENT (ORDINARY) RUPEE
ACCOUNT

Rupee Savings, Current or

NRIs and PIOs
Denominated Fixed Deposit

Can be opened NON Interest lying to the

jointly with Repatriable* credit of NRO
residents accounts is taxable
*repatriable subject to conditions
 PERMISSIBLE DEBITS/CREDITS

Credits Debit

Proceeds of remittances from outside India through
normal banking channels received in any permitted
currency.
Any foreign currency, which is freely convertible,
tendered by the account holder during his temporary
visit to India.
Transfers from rupee accounts of non-resident banks.
Legitimate dues in India of the account holder. This
includes current income like rent, dividend, pension,
interest, etc.
Sale proceeds of assets including immovable property
acquired out of rupee / foreign currency funds or by way
of legacy /inheritance.
Resident individual may 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 shall 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
All local payments in rupees including payments for
investments in India subject to compliance with the
relevant regulations made by the Reserve Bank.
Remittance outside India of current income like rent,
dividend, pension, interest, etc. in India of the account
holder.
Remittance up to USD one million, per financial year
(April- March), for all bona fide purposes, to the
satisfaction of the Authorised Dealer bank.
Transfer to NRE account of NRI within the overall
ceiling of USD one million per financial year subject to
payment of tax, as applicable
FOREIGN CURRENCY NON RESIDENT
(BANKS) ACCOUNT

NRIs and PIOs are Denominated in Only in the form of

eligible to open Foreign Currency term deposit

Accounts can be
Risk of foreign
opened by remittance
Repatriable exchange fluctuations
of funds in free
borne by Bank
foreign exchange.
 PERMISSIBLE DEBITS/CREDITS FCNR
(B) A/C

Credits Debit
Inward remittance to India in permitted currency local disbursements
proceeds of account payee cheques, demand transfer to other NRE / FCNR accounts of person
drafts / bankers' cheques, issued against eligible to open such accounts,
encashment of foreign currency remittance outside India,
transfers from other NRE / FCNR accounts investments in shares / securities/commercial
sale proceeds of FDI investments paper of an Indian company, etc.
interest accruing on the funds held in such
accounts
interest on Government securities/dividends on
units of mutual funds purchased by debit to the
NRE/FCNR(B) account of the holder, certain types
of refunds, etc.
Special Non-Resident Rupee Account -
SNRR account

Any person resident

Non Interest Debits and credits
outside India having
Bearing specific to the
business interest in
business
India

Transactions subject
NEW Schedule 4 Repatriable
to Taxes
ESCROW ACCOUNT

Foreign Inward
Non resident or remittance through Operational for 6
Resident together Normal Banking months
with non resident channel

Repatriable
NEW Schedule 5 Non interest bearing (exchange risk to be
born by Non
resident)
LOAN AGAINST THE DEPOSIT
LOAN AGAINST DEPOSIT IN NRE A/C

To the account
permitted
Holder
In INR
To third party Permitted
In India
To the account
Permitted
holder
In Foreign
Currency
loan To third party Permitted

To the account
Permitted
holder
Outside India
To third party Permitted
LOAN AGAINST DEPOSIT IN FCNR(B)

To the account
Holder permitted
In INR
To third party Permitted
In India
To the account
holder Permitted
In Foreign
Currency
loan To third party Permitted

To the account
holder Permitted
Outside India
To third party Permitted
LOAN AGAINST DEPOSIT IN NRO A/C

Permitted subject
To the account Holder
to extant Rules

In INR

Permitted subject
To third party
to conditions

In India

To the account holder Not Permitted

In Foreign Currency

loan To third party Not Permitted

To the account holder Not permitted

Outside India

To third party Not Permitted

PURPOSE OF LOAN IN CASE OF NRE A/C
AND FCNR (B) A/C

i) Personal purposes or for carrying on business activities*

To the
ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of
Account
Indian firms / companies
holder
iii) Acquisition of flat / house in India for his own residential use.

To
Fund based and / or non-fund based facilities for personal purposes or for carrying on business
Third
activities *.
Party

Abroad Fund based and / or non-fund based facilities for bonafide purposes.

*The loans cannot be utilised for the purpose of on-lending or for carrying on agriculture or plantation
activities or for investment in real estate business.
PURPOSE OF LOAN NRO ACCOUNT

To the Personal requirement and / or business

account
purpose.*
* The loans cannot be
holder utilised for the purpose
of on-lending or for
carrying on agriculture
or plantation activities or
for investment in real
estate business.
To third Personal requirement and / or business
party purpose*

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.
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;
A Comparison

NRE Account is meant for foreign

exchange earned outside India and
transferred to India

NRO Account are meant to keep the

money earned in India before or after
becoming an NRI
Bank Accounts by Residents
REGULATION

Save as otherwise provided in the Act or rules or regulations made

thereunder, no person resident in India shall open or hold or maintain a
Foreign Currency Account:
Provided that a Foreign Currency Account held or maintained before the
commencement of these Regulations by a person resident in India with
special or general permission of the Reserve Bank, shall be deemed to be
held or maintained under these Regulations
Provided further that the Reserve Bank, may on an application made to it,
permit a person resident in India to open or hold or maintain a Foreign
Currency Account, subject to such terms and conditions as may be
considered necessary. [RBI Notification No.FEMA 10 /2000-RB dated
3rd May 2000]
Accounts
By Resident in India

in India
currency accounts by a person resident
Foreign Exchange Management (Foreign
By Resident
Individuals
Foreign Currency
account in India
By other
By person
resident in India
BY Resident
Individuals
Account
maintained
Account outside India By Others

By NRI/PIOs
By Person
resident outside Foreign Exchange Management
India (Deposit) Regulations, 2016
By others
Foreign Exchange Management (Foreign currency accounts
by a person resident in India 2016

Exchange Earners Foreign

Currency (EEFC) Account

Resident Foreign Currency

By Resident Individuals
Account

Resident Foreign Currency

(Domestic) Account
Foreign Currency account in
India A Unit in a Special Economic
Zone (SEZ)

Indian agent of a shipping or an

Diamond Dollar Accounts (DDAs) airline company incorporated
outside India
By other
ship-manning/ crew managing
Exporters
agencies

Other cases Project Offices

Indian company receiving

foreign investment

organisers of international
seminars etc
Foreign Exchange Management (Foreign currency accounts by a
person resident in India 2016

office/ branch/ representative outside

India

Exporters

External Commercial Borrowings (ECB)

Others For making Overseas Direct Investment

shipping or airline company

incorporated in India
Life Insurance Corporation of India or
General Insurance Corporation of India
Foreign Currency Account outside India
Exhibition/ Trade fair

On a visit to a foreign country

Abroad for studies

Resident
Individual
LRS

Salary
Type of Accounts

EXCHANGE
EARNERS
FOREIGN
CURRENCY
ACCOUNTS

RFRESIDENT
FOREIGN
CURRENCY
ACCOUNT

RESIDENT FOREIGN
CURRENCY
(DOMESTIC)
ACCOUNT
EXCHANGE EARNERS FOREIGN
CURRENCY ACCOUNTS

All categories of resident

Funds held in EEFC account can
foreign exchange earners
be utilised for all permissible
can credit up to 100 per cent of
current account transactions
their foreign exchange earnings
and also for approved capital
to their EEFC Account with an
account transactions
Authorised Dealer in India.

The account is maintained in

the form of a non-interest
bearing current account
 PERMISSIBLE CREDITS

Inward remittance through normal banking channels, other than remittances received on
account of foreign currency loan or investment received from abroad or received for meeting
specific obligations by the account holder;
Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in
(a) Export Processing Zone or
(b) Software Technology Park or
(c) Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area;
Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods
to a unit in the Special Economic Zone (SEZ);
Payment received by an exporter from an account maintained with an authorised dealer for the
purpose of counter trade.
Advance remittance received by an exporter towards export of goods or services;
Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and
similar other earnings received by a professional by rendering services in his individual
capacity;
Re-credit of unutilised foreign currency earlier withdrawn from the account;
Amount representing repayment by the account holder's importer customer, of loan/advances
granted, to the exporter holding such account etc.
Permissible debits

Payment outside India towards a permissible current account transaction [in

accordance to the provisions of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000]
Permissible capital account transaction [in accordance to the Foreign Exchange
Management (Permissible Capital Account Transactions) Regulations, 2000].
Payment in foreign exchange towards cost of goods purchased from a 100 percent
Export Oriented Unit or a Unit in
(a) Export Processing Zone or
(b) Software Technology Park or
(c) Electronic Hardware Technology Park
Payment of customs duty in accordance with the provisions of the Foreign Trade Policy
of the Central Government for the time being in force.
Trade related loans/advances, extended by an exporter holding such account to his
importer customer outside India, subject to compliance with the Foreign Exchange
Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.
RFC Account

Current or Savings or A person resident in

Term deposit accounts India

Free from all opened to keep foreign

restrictions regarding currency assets which
utilisation of foreign were held outside India
currency at the time of return
RFC ACCOUNT

Permissible credits :
The foreign exchange received as:
pension of any other superannuation or other monetary benefits from the
employer outside India;
realised on conversion of the assets acquired, held or owned by such
person when he was resident in India or inherited from a person who was
resident in India
received or acquired as gift or inheritance from a person who was resident
outside India
Permissible debits to the RFC account

The funds in RFC account are free from all restrictions regarding
utilization of foreign currency balances including any restriction on
investment outside India.
Foreign securities can also be acquired from RFC account.
The restriction of taking prior approval of government or prior
approval of RBI is not applicable to transactions undertaken out of
RFC account *
*However, the prohibited transactions as specified in Rule 3 of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 cannot be undertaken at all.
RESIDENT FOREIGN CURRENCY
(DOMESTIC) ACCOUNT

Regulations 5A of Foreign
Exchange Management
Resident Individual may
(Foreign Currency Accounts
open, hold and maintain
by a Person Resident in
India) Regulations, 2000

Current account No ceiling on the balances

Does not bear any interest in the account
RESIDENT FOREIGN CURRENCY
(DOMESTIC) ACCOUNT

Permissible Credits
The account can be opened out of foreign exchange acquired in the form of currency notes, Bank
notes and travellers cheques, from any of the sources like:
payment for services rendered abroad;
as honorarium, gift, services rendered;
in settlement of any lawful obligation from any person not resident in India;
proceeds of export of goods and/or services, royalty, honorarium, etc.;
gifts received from close relatives (as defined in the Companies Act);
disinvestment proceeds received by resident on conversion of shares to ADRs/GDRs
proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency
from an insurance company in India permitted to undertake life insurance business by the
Insurance Regulatory and Development Authority; may also be credited to this account.

Permissible Debits
The account may be debited for payments made towards permissible current and capital account
transactions. At the request of account holder, on change of his status of resident to non resident
the balance in his account can be credited to NRE/FCNR (B) account.
REMITTANCES
 Remittance

For Current Account Transactions Liberalised Remittance Scheme

Schedule I Schedule II
USD 250,000 Subsumes limits
per F.Y under CAT
Prohibited approval from the
GOI

Schedule III Permissible

Permissible capital current a/c
Account transactions transactions
Approval
from RBI

For Capital Account Transactions

Schedule I Schedule II

Person resident In India Person resident outside India

by CA. Sudha G. Bhushan

 Transfer from NRO account
From the funds in NRE Freely repatriable on
or Current Income subject
account request
to applicable Taxes
REMITTANCES

Non Resident Indian

From the funds in NRO Under Certificate from CA Remittance limited to USD 1
account Form 15CA/15CB million per financial year

As per FEM (Current Schedule III of CA Rules

In General Account Transactions) specifies the limits of
Rules,2000 remittance
RESIDENT
LRS facility subsumes limits
Under Liberalised USD 2,50,000* per financial
specified in Sche III of CA
remittance scheme Year (April March)
Rules

From the funds in NRO Retiring from Remittance limited to USD 1

Foreign National
account employment/inheritance million per financial year
 THANK YOU

Please feel free to call/mail me for further clarification.

CA.Sudha G. Bhushan
Taxpert Professionals Private Limited
Tel: +91 9769033172 || 07738892291
E-mail : sudha@taxpertpro.com
Visit us at: www.taxpertpro.com

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