FEMA – Summary of Recent Amendments in Forex Facilities for Individuals

RBI liberalises Forex Facilities for Individuals The Reserve Bank of India has further liberalised foreign exchange facilities for individuals under the Foreign Exchange Management Act, (FEMA) 1999.The facilities are: 1. NRIs can be Joint Holders in Resident’s SB/EEFC/RFC Accounts Individual residents in India are now permitted to include non-resident close relative(s) as joint holder(s) in their resident bank accounts, namely, savings(SB), Exporter Earners’ Foreign Currency (EEFC) and Residents’ Foreign Currency (RFC) accounts, on ‘former or survivor’ basis. (A.P. (DIR Series) Circular No. 12, Dated- September 15, 2011) 2. Residents can be Joint Holders in NRE/FCNR Accounts Non-Resident Indians (NRIs)/ Person of Indian Origin (PIO) , are now permitted to open Non-Resident (External) (NRE) Rupee Account Scheme/Foreign Currency (Non-Resident) (FCNR) Account (Banks) Scheme with their resident close relative(s) as joint holder(s) on ‘former or survivor’ basis. However, such resident joint account holder shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the lifetime of the NRI/ PIO account holder. (A.P. (DIR Series) Circular No. 13, Dated- September 15, 2011) 3. Residents can gift Shares/Debentures upto USD 50,000 Value The Reserve Bank of India  has granted general permission to individual residents in India to gift shares / securities /convertible debentures, etc. to their NRI/PIO close relative (relative as defined in Section 6 of the Companies Act, 1956) subject to certain prescribed conditions. It has raised the limit as given in Regulation 10(a)(e) of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 to US $ 50,000 per financial year from the existing limit of US $ 25,000 during the calendar year . (A.P. (DIR Series) Circular No. 14, Dated- September 15, 2011) 4. Resident Indian can open NRE / FCNR (B) account with their Resident close relative Resident individuals permitted to include resident close relative(s) as defined in the Companies Act, 1956 as a joint holder(s) in their EEFC/RFC bank accounts on ‘former or survivor’ basis. However, such resident Indian close relative, now being made eligible to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder. (A.P. (DIR Series) Circular No. 15, Dated- September 15, 2011) 5. Sale Proceeds of FDIs can be credited to NRE/FCNR (B) Account Sale proceeds of Foreign Direct Investment (FDI) can be credited to Non-Resident (External) Rupee (NRE) Account Scheme/Foreign Currency (Non-Resident) Account FCNR (Banks) Scheme provided the original acquisition was by way of inward remittance or funds held in their NRE/FCNR (B) accounts. (A.P. (DIR Series) Circular No. 16, Dated- September 15, 2011) 6. Gifts to NRIs can be credited to NRO Accounts in Rupees Resident individuals are now permitted to make rupee gifts within the overall limit of USD 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) to an NRI/PIO who is a close relative by way of crossed cheque/electronic transfer to the Non-Resident (Ordinary) Rupee Account (NRO) of the NRI/PIO.  (A.P. (DIR Series) Circular No. 17, Dated- September 16, 2011) 7. Loans to NRI Close Relatives can be given in Rupees Similarly, Resident individuals are now permitted to lend in Rupees within the overall limit under the Liberalised Remittance Scheme of USD 200,000 per financial year to a Non Resident Indian (NRI)/ Person of Indian Origin (PIO) close relative by way of crossed cheque/electronic transfer, subject to the following conditions: 1.  The loan should be within the overall limit of USD 200,000 per financial year as per the Liberalized Remittance Scheme (LRS). 2. The amount should be credited to the NRO Account. 3. The loan shall not be utilized for the following purposes: (i) Chit fund business, or (ii) Nidhi Company, or (iii) Agricultural/ plantation/ real estate business/ construction of farm houses, or (iv) Trading in Transferable Development Rights (TDRs). 4. The loan amount shall not be remitted outside India. 5. Repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the NRO/ NRE/ FCNR account of the borrower or out of sale proceeds of the shares or securities or immovable properties against which such loan was granted.   (A.P. (DIR Series) Circular No. 18, Dated -September 16, 2011) 8. Residents can repay the loans given to NRI Close Relatives Resident individuals are now granted general permission to repay loans availed of in Rupees from banks in India by their NRI close relatives.Earlier, repayment of loans by close relative in respect of Rupee loan availed by NRIs was restricted only to housing loans. (A.P. (DIR Series) Circular No. 19, Dated- September 16, 2011) 9. Residents can bear Medical Expenses of NRIs Residents will now be allowed to bear the medical expenses of visiting NRIs/PIOs close relatives. Earlier, residents were allowed to make payment in rupees towards meeting expenses on account of boarding, lodging and services related to it or travel to and from and within India of a person resident outside India and who is on a visit to India. (A.P. (DIR Series) Circular No. 20, Dated – September 16, 2011)