Remittance, Reporting and Violation

Per Annexure-5 to the Foreign Direct Investment FDI Policy effective from October 15, 2020, Department for Promotion of Industry and Internal Trade Ministry of Commerce and Industry Government of India.

1.     Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies: -

                        i.         Sale proceeds of shares and securities and their remittance is ‘remittance of asset’ governed by The Foreign Exchange Management (Remittance of Assets) Regulations, 2000 under FEMA.

                       ii.         AD Category-I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and NOC/tax clearance certificate from the Income Tax Department has been produced.

                     iii.         Remittance on winding up/liquidation of Companies - AD Category-I banks have been allowed to remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes.

                      iv.         AD Category-I banks shall allow the remittance provided the applicant submits: -

                                               i.     No objection or Tax clearance certificate from Income Tax Department for the remittance.

                                             ii.     Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for.

                                            iii.     Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, as applicable.

                                            iv.     In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.

2.     Repatriation of Dividend - Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be).

3.     Repatriation of Interest - Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes).

4.     The repatriation of Dividend and Interest is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.

5.     Reporting of FDI: -

                        i.         Regulation 4 of the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 vide notification No. FEMA. 395/2019-RB dated 17.10.2019 issued by the RBI stipulates the reporting requirement for any investment in India by a person resident outside India.

                       ii.         All the reporting is required to be done through the Single Master Form (SMF) available on the Foreign Investment Reporting and Management System (FIRMS) platform at https://firms.rbi.org.in.

6.     Adherence to Guidelines/Orders and Consequences of Violation - FDI is a capital account transaction and any violation of FDI regulations are covered by the penal provisions of the FEMA.

7.     Reserve Bank of India administers the FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA. The Directorate takes up investigation in any contravention of FEMA.

8.     Penalties: -

                        i.         If a person violates/contravenes any FDI Regulations, by way of breach/non- adherence/non-compliance/contravention he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contraventions where such amount is quantifiable, or up to two lakh Rupees where the amount is not quantifiable.

                       ii.         Where such contraventions is a continuing one, further penalty which may extend to five thousand Rupees for every day after the first day during which the contraventions continues.

                     iii.         Every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company (includes a firm or other association of individuals) for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

                      iv.         If the Adjudicating Authority thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government.

9.     Compounding Proceedings: -

                        i.         The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person.

                       ii.         No contravention shall be compounded unless the amount involved in such contravention is quantifiable.

                     iii.         Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.

                      iv.         The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not later than 180 days from the date of application made to the Compounding Authority.

                       v.         Compounding Authority shall issue order specifying the provisions of the Act or of the rules, directions, requisitions or orders made there under in respect of which contravention has taken place along with details of the alleged contraventions.

10.  KKACA™ assists with: -

                        i.         Income Tax Clearance Certificate

                       ii.         Remittance Certifications

                     iii.         Liaisons with AD Category-I bank for Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies/Repatriation of Dividend and/or Interest

                      iv.         FDI Reporting

                       v.         Representation before Adjudicating Authority

                      vi.         Compounding Proceedings before Compounding Authority