Foreign Exchange Management Act, 1999 (FEMA) is administered through the authorized Dealers (Banks). Accurate compilations and timely submission of these reports is insisted for the compliance and any deviation or delay attracts penalties. RMC guides on the compliance with various provisions of FEMA, reporting under FEMA and issuing certificates required. Reportings under various situations are as detailed below:
Liberalised Remittance Scheme:
Resident individuals are permitted to make remittances up to USD 250,000 per financial year for any permitted current or capital account transactions or a combination of both as per the regulations prescribed.
Branch Office (BO)/ Liaison Office (LO) / Project Office (PO) or any other place of business in India by foreign entities:
- Applications from foreign companies for establishing BO/ LO/ PO in India are considered by the AD Category-I bank as per the guidelines issued by Reserve Bank of India under the provisions of Foreign Exchange Management Act, 1999.
- Further to registration Annual Activity Certificate (AAC) (Annex I) as at the end of March 31 along with the audited financial statements including receipt and payment account are required to be submitted to the designated AD Category – I bank and a copy of the same to the Director General of Income Tax (International Taxation).
- The AAC has to be certificated by a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities undertaken are in conformity with the general/ specific permission given by Reserve Bank of India may be submitted by the PO to the designated AD Category-I bank.
Foreign Investment
All the reporting prescribed under FDI Reporting, except specifically stated otherwise, is required to be done through the Single Master Form (SMF) available on the FIRMS platform at https://firms.rbi.org.in. For the purpose of reporting in the SMF, an Indian entity which has received foreign investment or indirect foreign investment or expects to receive it, is required to file an entity master on the FIRMS platform.
Foreign Currency – Gross Provisional Return (FC- GPR):
An Indian company issuing equity instruments to a person resident outside India, and where such issue is reckoned as Foreign Direct Investment under NDI Rules, 2019, shall report such issue in Form FC-GPR in the Single Master Form not later than thirty days from the date of issue of the equity instruments. Issue of ‘participating interest/ rights’ in oil fields shall be reported in Form FC-GPR.
The form FC-GPR has to be filed along with the following documents:
- KYC reports of both the remitter and the beneficial owner.
- A no-objection certificate (NOC) from the remitter for issuing equity instruments to the beneficial owner mentioning their relationship.
- A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf.
- A copy of agreement / board resolution from the investee company for issuing equity instruments to a person other than from who the remittance has been received.
Annual Return on Foreign Liabilities and Assets:
An Indian company issuing equity instruments to a person resident outside India, and where such issue is reckoned as Foreign Direct Investment under NDI Rules, 2019, shall report such issue in Form FC-GPR in the Single Master Form not later than thirty days from the date of issue of the equity instruments. Issue of ‘participating interest/ rights’ in oil fields shall be reported in Form FC-GPR.
The form FC-GPR has to be filed along with the following documents:
- KYC reports of both the remitter and the beneficial owner.
- A no-objection certificate (NOC) from the remitter for issuing equity instruments to the beneficial owner mentioning their relationship
- A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf.
- A copy of agreement / board resolution from the investee company for issuing equity instruments to a person other than from who the remittance has been received.
Annual Return on Foreign Liabilities and Assets:
An Indian company which has received FDI or an LLP which has received investment by way of capital contribution in the previous year(s) including the current year, shall submit form FLA to the Reserve Bank on or before the 15th day of July of each year.
The FLA return can be filed through a web-portal interface https://flair.rbi.org.in provided by RBI to the reporting entities for submitting “User Registration Form”.
Reporting for Transfer of equity instruments:
Foreign Currency-Transfer of Shares (FC-TRS) – Is required to be filed for transfer of equity instruments in accordance with NDI Rules, 2019, between:
(i) a person resident outside India holding equity instruments in an Indian company on a repatriable basis and person resident outside India holding equity instruments on a non-repatriable basis; and
(ii) a person resident outside India holding equity instruments in an Indian company on a repatriable basis and a person resident in India,
The onus of reporting is on the resident transferor/ transferee or the person resident outside India holding equity instruments on a non-repatriable basis, as the case may be.
Transfer of equity instruments where consideration is payable on deferred basis, shall be reported in Form FC-TRS to the AD bank on receipt of every tranche of payment. The onus of reporting shall be on the resident transferor/ transferee.
Reporting requirements of Limited Liability Partnerships:
Form FDI- LLP (I): A Limited Liability Partnerships (LLPs) receiving amount of consideration for capital contribution and acquisition of profit shares is required to submit a report in Form Foreign Direct Investment-LLP (I)53 within 30 days from the date of receipt of the amount of consideration.
Form FDI- LLP (II): The LLPs shall report disinvestment/ transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) within 60 days from the date of receipt of funds in Form Foreign Direct Investment-LLP(II). The onus of reporting shall be on the resident transferor / transferee.
External Commercial Borrowing (ECB)
Indian companies are allowed to access funds from abroad in the following methods:
- External Commercial Borrowings (ECB)
- Foreign Currency Convertible Bonds (FCCBs)
- Preference shares
- Foreign Currency Exchangeable Bonds (FCEBs)
ECB can be accessed under two routes, viz., (i) Automatic Route outlined in paragraph and (ii) Approval Route.
The reporting requirements are given below:
- Application for raising ECB under the Approval Route and for allotment of Loan Registration Number (LRN) for ECB – Form ECB
- Reporting of actual transactions of ECB – ECB 2 Return
- Form for reporting of details of Trade Credit – Form TC
- Statement on Guarantee/ Letter of Undertaking/ Letter of Comfort issued by AD banks in respect of Trade Credit.
Overseas Direct Investment (ODI):
a) A person resident in India,
(i) who has made Overseas Direct Investment (ODI) or is making any financial commitment or undertaking restructuring or undertaking disinvestment in a foreign entity, shall report it in Form FC
(ii) who has made ODI shall submit an Annual Performance Report (APR)
b) A person resident in India other than a resident individual, making any Overseas Portfolio Investment (OPI) or transferring such investment by way of sale, shall report the same in Form OPI
c) An Indian Entity which has made ODI, shall submit an Annual Return on Foreign Liabilities and Assets (FLA).