fema1

Authorised Person means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities; "Person" includes – (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not. "Person Resident in India” means - (i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include – (A) a person who has gone out of India or who stays outside India, in either case - for or on taking up employment outside India, or for carrying on outside India a business or vocation outside India, or for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) a person who has come to or stays in India, in either case, otherwise than - for or on taking up employment in India, or for carrying on in India a business or vocation in India, or for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India; "Person Resident Outside India" means a person who is not resident in India; "Repatriate to India" means bringing into India the realised foreign exchange and – the selling of such foreign exchange to an authorised person in India in exchange for rupees, or the holding of realised amount in an account with an authorised person in India to the extent notified by the Reserve Bank, and includes use of the realised amount for discharge of a debt or liability denominated in foreign exchange and the expression "repatriation" shall be construed accordingly; Capital Account Transaction means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6; Current Account Transaction means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes, - payments due in connection with foreign trade, business, services, and short term banking and credit facilities in the ordinary course of business, payments due as interest on loans and as net income from investments, remittances for living expenses of parents, spouse and children residing abroad, and expenses in connection with foreign travel education and medical care of parents spouse and children;  Current account transactions Section 5 Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction: Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed. Foreign Exchange Management (Current Account Transactions) Rules, 2000 3. Prohibition on drawal of foreign exchange Drawal of foreign exchange by any person for the following purpose is prohibited, namely:- a transaction specified in the Schedule I; or – a travel to Nepal and/ or Bhutan; or a transaction with a person resident in Nepal of Bhutan : Provided that the prohibition in clause (c) may be exempted by Reserve Bank of India subject to such term and conditions as it may consider necessary to stipulate by special or general order. 4. Prior approval of Government of India No person shall draw foreign exchange for a transaction included in the Schedule II without prior approval of the Government of India: Provided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter 5. Prior approval of Reserve Bank No person shall draw foreign exchange for a transaction included in the Schedule Ill without prior approval of the Reserve Bank; Provided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter 7. Use of International Credit Card while outside India Nothing contained in rule 5 shall apply to the use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.  SCHEDULE I Transactions which are Prohibited (See rule 3) Remittance out of lottery winnings. Remittance of income from racing/riding, etc. or any other hobby. Remittance for purchase of lottery tickets, banned/ prescribed magazines, football pools, sweepstakes, etc. Payments of commission on exports made towards equity investment in joint ventures/wholly owned subsidiaries abroad of Indian companies. Remittance of dividend by any company to which the requirement of dividend balancing is applicable. Payment of commission of exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco. Payment related to "Call Back Services" of telephones. Remittance of interest income on funds held in Non-Resident Special Rupee Scheme Account. SCHEDULE III (See rule 5) Release of exchange exceeding US $ 10000 or its equivalent in one calendar year, for one or more private visits to any country (except Nepal and Bhutan) Gift remittance exceeding US$ 5,000 per remitter/donor per annum. Donation exceeding US$ 5,000 per remitter/donor per annum. Exchange facilities exceeding US$ 100,000 for persons going abroad for employment. Exchange facilities for emigration exceeding US$ 100,000 or amount prescribed by country or emigration. Remittance for maintenance of close relatives abroad, (i) exceeding net salary (after deduction of taxes, contribution to provident fund and other deductions) of a person who is resident but not permanently resident in India and – (a) is a citizen of a foreign State other Pakistan; or (b) is a citizen of India, who is on deputation to the office or branch or subsidiary or joint venture in India of such foreign company (ii) Exceeding US$ 5,000 per year per recipient, in all other cases. Explanation: For the purpose of this item, a person resident in India on account of his employment or deputation of a specified duration (irrespective of length thereof) or for a specific job or assignment; the duration of which does not exceed three years, is a resident but not permanently resident". Release of foreign exchange, exceeding US$ 25,000 to a person, irrespective of period of stay, for business travel, or attending a conference or specialised training or for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up. Release of exchange for meeting expenses for medical treatment abroad exceeding the estimate from the doctor in India or hospital/doctor abroad. Release of exchange for studies abroad exceeding the estimates from the institution abroad or US$ 100,000 per academic year, whichever is higher. Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or 5% of the inward remittance whichever is more. Remittance exceeding US$ 1,000,000, per project, for any consultancy service procured from outside India. Remittance exceeding US$100,000, by an entity in India by way of reimbursement of pre-incorporation expenses   Capital account transactions (1) Subject to the provisions of subsection (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. (2) The Reserve Bank may, in consultation with the Central Government, specify - any class or classes of capital account transactions which are permissible; the limit up, to which foreign exchange shall be admissible for such transactions: (3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following - transfer or issue of any foreign security by a person resident in India; transfer or issue of any security by a person resident outside India; transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; any borrowing or lending in foreign exchange in whatever form or by whatever name called; any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India; deposits between persons resident in India and persons resident outside India; export, import or holding of currency or currency notes; transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India; acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India; giving of a guarantee or surety in respect of any debt, obligation or other liability incurred - (i) by a person resident in India and owed to a person resident outside India; or (ii) by a person outside India. (4) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. (5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. (6) Without prejudice to the provisions of this section, the Reserve Bank may, by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for carrying on any activity relating to such branch, office or other place of business. Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 ‘Transferable Development Rights means certificates issued in respect of category of land acquired for public purpose either by Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole; 3. Permissible Capital Account Transactions:- (1) Capital account transactions of a person may be classified under the following heads, namely :- transactions, specified in Schedule I, of a person resident In India; transactions, specified in Schedule II, of a person resident outside India. (2) Subject to the provisions of the Act or the rules or regulations or direction or orders made or issued thereunder, any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction specified in the Schedules; Provided that the transaction is within the limit, if any, specified in the regulations relevant to the transaction. 4. Prohibition:- Save as otherwise provided in the Act, rules or regulations made thereunder, a) no person shall undertake or sell or draw foreign exchange to or from an authorised person for any capital account transaction, Provided that – (a) subject to the provisions of the Act or the rules or regulations or directions or orders made or issued thereunder, a resident individual may, draw from an authorized person foreign exchange not exceeding USD 50,000 per financial year with effect from December 20, 2006, USD 1,00,000 per financial year with effect from May 8, 2007 and USD 2,00,000 per financial year with effect from September 26, 2007, for a capital account transaction specified in Schedule I. Explanation: Drawal of foreign exchange by resident individuals towards remittances of gift or donations as per item No. 3 and 4 of Schedule III to Foreign Exchange Management (Current Account Transactions) Rules, 2000 dated 3rd May 2000 as amended from time to time, shall be subsumed within the limit under proviso (a) above; (b) where the drawal of foreign exchange by a resident individual for any capital account transaction specified in Schedule I exceeds USD 50,000 or USD 100,000 or USD 200,000, as the case may be, per financial year, the limit specified in the regulations relevant to the transaction shall apply with respect to such drawal. Provided further that no part of the foreign exchange of USD 50,000 or USD 100,000 or USD 200,000, as the case may be, drawn under proviso (a) shall be used for remittance directly or indirectly to countries notified as non-co-operative countries and territories by Financial Action Task Force (FATF) from time to time and communicated by the Reserve Bank of India to all concerned. b) no person resident outside India shall make investment in India , in any form, in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage - (i) in the business of chit fund, or (ii) as Nidhi Company , or (iii) in agricultural or plantation activities or (iv) in real estate business, or construction of farm houses or (v) in trading in Transferable Development Rights (TDRs). Explanation: For the purpose of this regulation, “real estate business” shall not include development of townships, construction of residential/commercial premises, roads or bridges. 5. Method of payment for investment:- The payment for investment shall be made by remittance from abroad through normal banking channels or by debit to an account of the investor maintained with an authorised person in India in accordance with the regulations made by the Reserve Bank under the Act. 6. Declaration to be furnished:- Every person selling or drawing foreign exchange to or from an authorised person for a capital account transaction shall furnish to the Reserve Bank , a declaration in the form and within the time specified in the regulations relevant to the transaction. Schedule I [See Regulation 3 (1) (A)] CLASSES OF CAPITAL ACCOUNT TRANSACTIONS OF PERSONS RESIDENT IN INDIA a) Investment by a person resident in India in foreign securities b) Foreign currency loans raised in India and abroad by a person resident in India c) Transfer of immovable property outside India by a person resident in India d) Guarantees issued by a person resident in India in favour of a person resident outside India e) Export, import and holding of currency/currency notes f) Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India g) Maintenance of foreign currency accounts in India and outside India by a person resident in India h) Taking out of insurance policy by a person resident in India from an insurance company outside India i) Loans and overdrafts by a person resident in India to a person resident outside India j) Remittance outside India of capital assets of a person resident in India k) Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad by a person resident in India.  Schedule II [See Regulation 3 (1) (B)] CLASSES OF CAPITAL ACCOUNT TRANSACTIONS OF PERSONS RESIDENT OUTSIDE INDIA a) Investment in India by a person resident outside India, that is to say, issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and investment by way of contribution by a person resident outside India to the capital of a firm or a proprietorship concern or an association of persons in India. b) Acquisition and transfer of immovable property in India by a person resident outside India. c) Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India. d) Import and export of currency/currency notes into/from India by a person resident outside India. e) Deposits between a person resident in India and a person resident outside India. f) Foreign currency accounts in India of a person resident outside India. g) Remittance outside India of capital assets in India of a person resident outside India.  Foreign Exchange Management (Transfer or Issue of Any Foreign Security) (Amendment) Regulations, 2004 Core Activity’ means an activity carried on by an Indian entity turnover wherefrom constitutes not less than 50% of its total turnover in the previous accounting year; Direct investment outside India means investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity or by way of purchase of existing shares of a foreign entity either by market purchase or private placement or through stock exchange, but does not include portfolio investment. Financial commitment means the amount of direct investment by way of contribution to equity and loan and 100 per cent of the amount of guarantees issued by an Indian party to or on behalf of its overseas Joint Venture Company or Wholly Owned Subsidiary; Indian party means a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932 making investment in a Joint Venture or Wholly Owned Subsidiary abroad, and includes any other entity in India as may be notified by the Reserve Bank: - Provided that when more than one such company, body or entity make an investment in the foreign entity, all such companies or bodies or entities shall together constitute the "Indian party" Joint Venture (JV) means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment; Real estate business means buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges; Wholly Owned Subsidiary (WOS) means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party; 3. Prohibition on issue or transfer of foreign security Save as otherwise provided in the Act or rules or regulations made or directions issued thereunder, no person resident in India shall issue or transfer any foreign security: - Provided that the Reserve Bank may, on application made to it, permit any person resident in India to issue or transfer any foreign security. 4. Purchase and sale of foreign security by a person resident in India A person resident in India may purchase a foreign security out of funds held in Resident Foreign Currency (RFC) account maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts) Regulations, 2000; may acquire bonus shares on the foreign securities held in accordance with the provisions of the Act or rules or regulations made thereunder; when not permanently resident in India, may purchase a foreign security from out of his foreign currency resources outside India; may sell the foreign security purchased or acquired under clauses (a), (b) or (c). Explanation: For the purpose of this clause, ‘not permanently resident’ means a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years. Part I Direct Investment outside India 5. Prohibition on Direct Investment outside India Save as otherwise provided in the Act, rules or regulations made or directions issued thereunder, or with prior approval of the Reserve Bank, (1) no person resident in India shall make any direct investment outside India; and (2) no Indian party shall make any direct investment in a foreign entity engaged in real estate business or banking business. 6. Permission for Direct Investment in certain cases (1) Subject to the conditions specified in sub-regulation (2), (and Regulation 7 in case investment in financial services sector) an Indian party may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India. (2) (i) The total financial commitment of the Indian Party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed 300% of the net worth of the Indian Party as on the date of the last audited balance sheet, Provided that for the Indian Party which is a registered partnership firm, the total financial commitment shall not exceed 200% of its net worth (In Regulation 6, sub-regulation (2), clause (i) substituted - w.e.f. 14/06/2007 vide NTF. NO. FEMA 164/2007-RB, DT. 09/10/2007) Explanation : For the purpose of determining 'total financial commitment' within the limit of 200% or 300% of the net worth, as the case may be, the following shall be reckoned, namely :- (a) remittance by market purchases, namely in freely convertible currencies; in case of Bhutan, investment made in freely convertible currencies or equivalent Indian Rupees; in case of Nepal investment made only in Indian Rupees. (b) capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11; (c) 100% of the value of guarantees issued by the Indian party to or on behalf of the joint venture company or wholly owned subsidiary. (d) investment in agricultural operations through overseas offices or directly (e) External Commercial Borrowing in conformity with other parameters of the ECB guidelines Notwithstanding anything contained in these Regulations investment in Pakistan shall not be permitted. (ii) The direct investment is made in an overseas JV or WOS engaged in a bonafide business activity. (iii) The Indian Party is not on the Reserve Bank’s Exporters caution list /list of defaulters to the banking system circulated by the Reserve Bank or under investigation by any investigation /enforcement agency or regulatory body. (iv) The Indian party has submitted up to date returns in form APR in respect of all its overseas investments; (v) The Indian Party routes all transactions relating to the investment in a Joint Venture/Wholly Owned Subsidiary through only one branch of an authorised dealer to be designated by it. Explanation: - The Indian Party may designate different branches of authorised dealers for different Joint Ventures/Wholly Owned Subsidiaries outside India. (vi) The Indian Party submits form ODA, duly completed, to the designated branch of an authorised dealer. (3) Investment under this Regulation may be funded out of one or more of the following sources, namely: - (source of fund) i. out of balance held in the Exchange Earners' Foreign Currency account of the Indian party maintained with an authorised dealer in accordance with Regulation 4 of Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000; ii. drawal of foreign exchange from an authorised dealer in India shall not exceed 300% of the net worth in case of corporates and shall not exceed 200% of net worth in case of registered partnership firms of the Indian Party as on the date of last audited balance sheet; Explanation: - For the purpose of the limit of shall not exceed 300% of the net worth in case of corporates and shall not exceed 200% of the net worth in case of registered partnership firms the following shall be reckoned, namely: cash remittance by market purchase capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11 and 12; hundred per cent of the amount of guarantees issued by the Indian party to or on behalf of the Joint Venture company or Wholly Owned Subsidiary Explanation:- an Indian Party may offer to a person resident outside India any form of guarantees, that is, corporate or personal / primary or collateral / guarantee by promoter company in India / guarantee by group company, sister concern or associate company in India, provided that : total 'financial commitment' including all forms of guarantees remains within the overall ceiling stipulated for overseas investment by an Indian Party and no guarantee is 'open ended'. utilisation of the amount raised by issue of ADRs/GDRs by the Indian party; External Commercial Borrowing in conformity with other parameters of the ECB guidelines. Explanation: For the purpose of reckoning net worth of an Indian party, the net worth of its holding company (which holds at least 51% stake in the Indian Party) or its subsidiary company (in which the Indian party holds at least 51% stake) may be taken into account to the extent not availed of by the holding company or the subsidiary independently and has furnished a letter of disclaimer in favour of the Indian Party; Swap of shares. ADR/GDR Stock Swap subject to the valuation norms and sectoral cap. Provided further that the ceiling mentioned in sub-clause (2)(i) shall not apply where the investment is made out of balances held in its EEFC account, maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, as amended from time to time. (4) An Indian Party may extend a loan or a guarantee to or on behalf of the Joint Venture/Wholly Owned Subsidiary abroad, within the permissible financial commitment, provided that the Indian Party has made investment by way of contribution to the equity capital of the Joint Venture. (5) An Indian Party may make direct investment without any limit in any foreign security out of the proceeds of its international offering of shares through the mechanism of ADR and/or GDR: Provided that (a) the ADR/GDR issue has been made in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993 and the guidelines issued thereunder from time to time by the Central Government; (b) the Indian Party files with the designated authorised dealer in form ODA full details of the investment proposed. (6) (a) For the purposes of investment under this Regulation by way of remittance from India in an existing company outside India, the valuation of shares of the company outside India shall be made, - where the investment is more than USD 5 (Five) million, by a Category I Merchant Banker Registered with Securities and Exchange Board of India (SEBI), or an Investment Banker /Merchant Banker outside India registered with the appropriate regulatory authority in the host country; and in all other cases, by a Chartered Accountant or a Certified Public Accountant. (b) For the purposes of investment under this Regulation by acquisition of shares of an existing company outside India where the consideration is to be paid fully or partly by issue of the Indian party’s shares, the valuation of shares of the company outside India shall in all cases, be carried out by a Category I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate regulatory authority in the host country. 6A. General Permission for Investment in Agricultural Operations Overseas Directly or through Overseas Offices A person resident in India being a company incorporated in India or a partnership firm registered under Indian Partnership Act, 1932, may undertake agricultural operations including purchase of land incidental to such activity either directly or through their overseas offices; Provided that the Indian party is otherwise eligible to make investment under Regulation 6 and that such investment is within the overall limits as specified in Regulation 6. for the purposes of investment under this regulation by acquisition of land overseas the valuation of the land is certified by a certified valuer registered with the appropriate valuation authority in the host country. 6B. General Permission for Investment in Equity of a Company Registered Overseas A person resident in India, being a listed Indian company may invest in the shares of an overseas company which is listed on a recognised stock exchange and has in its name share holding of not less than 10% in any listed Indian company as on 1st January of the yea of investment the rated bonds/ fixed income securities issued by companies at (a) above: Provided that- in the case of investment by a listed Indian company, the investment shall not exceed 35% of the net worth as on the date of its last audited balance sheet; every transaction relating to purchase and sale of shares of the overseas company or bonds/ securities shall be routed through the designated branch of an authorised dealer in India. 6C. Investment by Mutual Funds (1) Mutual Funds registered with the Securities and Exchange Board of India, may invest within specified limits, in the shares or the rated bonds / fixed income securities of an overseas company listed on a recognised stock exchange or in Exchange Traded Funds, or other securities as may be stipulated by the Reserve Bank of India from time to time. (2) Every transaction relating to purchase and sale of foreign security by Mutual Funds shall be routed through the designated branch of an authorised dealer in India. 7. Investment in Financial Services Sector (1) Subject to the Regulations in Part I, an Indian party may make investment in an entity outside India engaged in financial services activities: Provided that the Indian party has earned net profit during the preceding three financial years from the financial services activities; is registered with the regulatory authority in India for conducting the financial services activities; has obtained approval from the concerned regulatory authorities both in India and abroad, for venturing into such financial sector activity; has fulfilled the prudential norms relating to capital adequacy as prescribed by the concerned regulatory authority in India. (2) any additional investment by an existing JV/WOS or its step down company in the Financial Services Sector shall be made only after complying with the conditions stipulated in sub-clause (1). 8. [OMITTED- 09/10/2007]  9. Approval of the Reserve Bank in certain cases (1) An Indian Party, which does not satisfy the eligibility norms under Regulations 6 or 7 or 8, may apply to the Reserve Bank for approval. (2) Application for direct investment in Joint Venture/Wholly Owned Subsidiary outside India, or by way of exchange for shares of a foreign company, shall be made in Form ODI, or in Form ODB, as applicable. (2A) An application made under sub-regulation (2) in Form ODI (a) for the purpose of investment by way of remittance from India, in an existing company outside India, shall be accompanied, by the valuation of shares of the company outside India, made- where the investment is more than USD 5 (five) million, by a Category I Merchant Banker registered with SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country; and in all other cases, by a Chartered Accountant or a Certified Public Accountant. (b) for the purposes of investment by acquisition of shares of an existing company outside India where the consideration is to be paid fully or partly by issue of the Indian party’s shares, shall be accompanied by the valuation carried out by a Category I Merchant Banker registered with the SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country. (3) The Reserve Bank may, inter alia, take into account following factors while considering the application made under sub-regulation (2): Prima facie viability of the Joint Venture/Wholly Owned Subsidiary outside India; Contribution to external trade and other benefits which will accrue to India through such investment; Financial position and business track record of the Indian Party and the foreign entity; Expertise and experience of the Indian Party in the same or related line of activity of the Joint Venture or Wholly Owned Subsidiary outside India. 10. Unique Identification Number Reserve bank will allot a unique Identification Number for each Joint Venture or Wholly Owned Subsidiary outside India and the Indian Party shall quote such number in all its communications and reports to the Reserve Bank and the authorised dealer. 11. Investment by capitalization (1) An Indian Party may make direct investment outside India in accordance with the Regulations in Part I by way of capitalisation in full or part of the amount due to the Indian Party from the foreign entity towards: - payment for export of plant, machinery, equipment and other goods/software to the foreign entity; fees, royalties, commissions or other entitlements due to the Indian Party from the foreign entity for the supply of technical know-how, consultancy, managerial or other services Provided that where the export proceeds have remained unrealised beyond a period of six months from the date of export, and fees, royalties, commissions or other entitlements of the Indian party have remained unrealised from the date on which such payment is due, such proceeds shall not be capitalised without the prior permission of the Reserve Bank. (2) An Indian Software exporter may receive in the form of shares upto 25% of the value of exports to an overseas software start up company without entering into JV agreement by filing an application with the Reserve Bank through the Authorised Dealer. 12. Export of Goods towards Equity- Procedure (1) An Indian Party exporting goods/software/plant and machinery from India towards equity contribution in a Joint Venture or Wholly Owned Subsidiary outside India shall declare it on GR/SDF/SOFTEX form, as the case may be, which shall be superscribed as "Exports against equity participation in the JV/WOS abroad", and also quoting Identification Number, if already allotted by Reserve Bank. (2) Notwithstanding anything contained in Regulation 11 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, the Indian Party shall, within 15 days of effecting the shipment of the goods, submit to the Reserve Bank a custom certified copy of the invoice through the branch of an authorised dealer designated by it. (3) An Indian Party capitalising exports under Regulation 11 shall, within six months from the date of export, or any further time as allowed by Reserve Bank, submit to Reserve Bank copy/ies of the share certificate/s or any document issued by the Joint Venture or Wholly Owned Subsidiary outside India to the satisfaction of Reserve Bank evidencing the investment from the Indian Party together with the duplicate of GR/SDF/SOFTEX form through the branch of an authorised dealer designated by it. 13. Post investment changes/additional investment in existing JV/WOS A JV/WOS set up by the Indian party as per the Regulations may diversify its activities / set up step down subsidiary/ alter the shareholding pattern in the overseas entity Provided that the Indian party reports to the Reserve Bank, the details of such decisions taken by the JV/WOS within 30 days of the approval of those decisions by the competent authority concerned of such JV/WOS in terms of local laws of the host country, and, include the same in the Annual Performance Report required to be forwarded annually to the Reserve Bank in terms of Regulation 15. 14. Acquisition of a foreign company through bidding or tender procedure (1) On being approached by an Indian Party, which is eligible under the Regulations to make investment outside India, an authorised dealer may allow remittance towards earnest money deposit or issue a bid bond guarantee on its behalf for participation in bidding or tender procedure for acquisition of a company incorporated outside India, (2) On the Indian Party winning the bid, the authorised dealer may allow further remittances towards acquisition of the foreign company, subject to the ceilings specified in Regulation 6; and the Indian Party shall submit through the authorised dealer concerned a report to the Reserve Bank in form ODA within 30 days of effecting the final remittance. (3) For participation in bidding or tender procedure for acquisition of a company incorporated outside India which does not fall within the provisions of sub-regulation (1), the Reserve Bank may, on application in Form ODI, allow remittance of foreign exchange towards earnest money deposit or permit the authorised dealer in India to issue a bid bond guarantee, subject to such terms and conditions as the Reserve Bank may stipulate. 15. Obligations of the Indian Party An Indian Party, which has acquired foreign security in terms of the Regulations in Part- I, shall i. receive share certificates or any other document as an evidence of investment in the foreign entity to the satisfaction of the Reserve Bank within six months, or such further period as Reserve Bank may permit, from the date of effecting remittance or the date on which the amount to be capitalised became due to the Indian Party or the date on which the amount due was allowed to be capitalised; ii. repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc., within 60 days of its falling due, or such further period as the Reserve Bank may permit; Provided that in the case of investment in securities in Bhutan made in freely convertible currency, all dues receivable thereon as are repatriable, including those on account of disinvestment/ dissolution/ winding up, shall be realised and repatriated in freely convertible currency only. iii. submit to the Reserve Bank every year within 60 days from the date of expiry of the statutory period as prescribed by the respective laws of the host country for finalisation of the audited accounts of the Joint Venture/Wholly Owned Subsidiary outside India or such further period as may be allowed by Reserve Bank, an annual performance report in form APR in respect of each Joint Venture or Wholly Owned Subsidiary outside India set up or acquired by the Indian Party and other reports or documents as may be stipulated by the Reserve Bank. Explanation It will be in order for individual partners to hold shares for and on behalf of the firm in an overseas JV/WOS in the individual name if the host country regulations or operational requirements warrant such holdings, subject to the condition that the entire funding for such investment is done by the firm. 16. Transfer by way of sale of shares of a JV/WOS outside India (1) An Indian party may transfer by way of sale to another Indian party who complies with the provisions of Regulation 6 above, or to a person resident outside India, any share or security held by him in a Joint Venture or Wholly Owned Subsidiary outside India without prior approval of the Reserve Bank, in the under noted categories: (i) in cases where the JV / WOS is listed in the overseas stock exchange; (ii) in cases where the Indian promoter company is listed on a stock exchange in India and has a net worth of not less than Rs.100 crore; (iii) where the Indian promoter is an unlisted company and the investment in overseas venture does not exceed USD 10 million. Provided that The sale does not result in any write-off of the investment made; the sale is effected through a stock exchange where the shares of the overseas Joint Venture or Wholly Owned Subsidiary are listed; if the shares are not listed on the stock exchange, and the shares are disinvested by a private arrangement, the share price is not less than the value certified by a Chartered Accountant /Certified Public Accountant as the fair value of the shares based on the latest audited financial statements of the Joint Venture or Wholly Owned Subsidiary: The Indian party does not have any outstanding dues by way of dividend, technical know-how fees, royalty, consultancy, commission or other entitlements, and/or export proceeds from the Joint Venture or Wholly Owned Subsidiary; The overseas concern has been in operation for at least one full year and the Annual Performance Report together with the audited accounts for that year has been submitted to the Reserve Bank; The Indian party is not under investigation by CBI/ED/SEBI/IRDA or any other regulatory authority in India. (2)Sale proceeds of shares/securities shall be repatriated to India immediately on receipt thereof and in any case not later than 90 days from the date of sale of the shares/securities and documentary evidence to this effect shall be submitted to the Regional office of the Reserve Bank through the designated authorized dealer. (3) An Indian party, which does not satisfy the criteria specified at sub regulation (1) above, shall apply to the Reserve Bank for permission to transfer by way of sale of shares of a JV/WOS outside India which may be granted subject to such conditions as the Reserve Bank may consider appropriate. 17. Transfer by way of Sale of Shares involving Write -off Where the transfer by way of sale of shares or security referred to in sub regulation (1) of Regulation 16 by any Indian party listed on any stock exchange in India, is for a price less than the amount invested in the share or the security transferred, - 1.where the difference between the said value and the sale price does not exceed the percentage approved by the Reserve Bank, from time to time, of the Indian party's actual export realisation of the previous year, the Indian party may write-off to the extent of the difference, the capital invested in the overseas JV/WOS; 2.where such difference is more than the percentage approved by the Reserve Bank, from time to time, of the Indian party's actual export realisation of the previous year, the Indian party shall apply to the Reserve Bank for permission to write -off the capital invested, which permission may be granted subject to such conditions as the Reserve Bank considers appropriate. 18. Pledge of Shares of Joint Ventures and Wholly Owned Subsidiaries An Indian Party may transfer, by way of pledge, shares held in a Joint Venture or Wholly Owned Subsidiary outside India as a security for availing of fund based or non-fund based facilities for itself or for the Joint Venture or Wholly Owned Subsidiary from an authorised dealer or a public financial institution in India or to an overseas lender, provided the lender is regulated and supervised as a bank and the total financial commitment of the Indian Party remains within the limit stipulated by the Reserve Bank for overseas investments in JV/WOS.  Part II Investments abroad by Individuals in India 19. Prior Permission of the Reserve Bank for Direct Investment by a Proprietary Concern in India A proprietary concern in India may apply to the Reserve Bank in Form ODB for permission to accept shares of a company outside India in lieu of fees due to it for professional services rendered to the said company. Provided that: - (a) the value of the shares accepted from each company outside India shall not exceed fifty per cent of the fees receivable by the Indian concern from that company; and, (b) the Indian concern’s shareholding in any one company outside India by virtue of shares accepted as aforesaid shall not exceed ten per cent of the paid-up capital of the company outside India, whose shares are accepted. 19A Overseas Investments - Proprietorship Concerns:- Proprietary / unregistered partnership firm in India being a recognised Star Export House with a proven track record and a consistently high export performance satisfying the criteria as per schedule II of the Notification may set up a JV/WOS outside India with the prior approval of the Reserve Bank. 20. Investment by Individuals (1) A Resident individual may apply to the Reserve Bank for permission to acquire shares in a foreign entity offered as consideration for professional services rendered to the foreign entity. (2) Reserve Bank may, after taking into account, inter alia, the following factors, grant permission subject to such terms and conditions as are considered necessary: credentials and net worth of the individual and the nature of his profession; the extent of his forex earnings/balances in his EEFC and/or RFC account; financial and business track record of the foreign entity; potential for forex inflow to the country; other likely benefits to the country.  Part III Investments in Foreign Securities other than by way of Direct Investment 21. Prohibition on issue of foreign security by a person resident in India. (1) Save as otherwise provided in the Act or in sub-regulation (2), no person resident in India shall issue or transfer a foreign security. (2) A person resident in India, being an Indian Company or a Body Corporate created by an Act of Parliament. may issue FCCBs not exceeding USD 500 million to a person resident outside India in accordance with and subject to the conditions stipulated in Schedule I. may issue FCCBs beyond US $ 500 million with the specific approval of the Reserve Bank. (3) The company/body corporate referred to in sub-regulation (2), issuing the FCCBs shall, within 30 days from the date of issue, furnish a report to the Reserve Bank giving the details and documents as under: Total amount for which FCCBs have been issued, Names of the investors resident outside India and number of FCCBs issued to each of them. The amount repatriated to India through normal banking channels and/or the amount received by debit to NRE/FCNR accounts in India of the investors (duly supported by bank certificate). 22. Permission for purchase /acquisition of foreign securities in certain cases (1) A person resident in India being an individual may acquire foreign securities:- by way of gift from a person resident outside India; or issued by a company incorporated outside India under Cashless Employees Stock Option Scheme:- Provided it does not involve any remittance from India, or by way of inheritance from a person whether resident in or outside India. (2) A person resident in India, being an individual, who is an employee or a director of Indian office or branch of a foreign company or of a subsidiary in India of a foreign company or of an Indian company in which foreign equity holding effectively, directly or indirectly, is not less than 51 per cent, may accept the shares offered by such foreign company Provided that (i) the shares under the ESOP Scheme are offered by the issuing company globally on uniform basis, and (ii) an Annual Return is submitted by the Indian company to the Reserve Bank through the Authorised Dealer bank giving details of remittances / beneficiaries etc., Explanation: - For the purpose of this sub-regulation, 'indirectly' means 'indirect foreign equity holding through a trust/ special purpose vehicle or a step down subsidiary'. (3) An authorised dealer bank may allow the remittance by the person eligible to purchase the shares in terms of sub-regulation (2) for acquiring shares under ESOP Schemes, irrespective of the method of the operationalisation of the scheme Provided that the conditions specified in that sub-regulation are fulfilled. (4) A person resident in India may transfer by way of sale, the shares acquired in terms of sub-regulations (2) and (3) above Provided that the proceeds thereof are repatriated immediately on receipt thereof and in any case not later than 90 days from the date of sale of such securities. (5) A foreign company, who has issued the shares in terms of sub-regulation (2) of this Regulation may repurchase the same provided that the shares were issued in accordance with the Rules / Regulations framed under Foreign Exchange Management Act, 1999, the shares are being repurchased in terms of the initial offer document and, An Annual Return is submitted through the Authorised Dealer bank giving details of remittances / beneficiaries etc. 23. Transfer of a foreign security by a person resident in India A person resident in India, who has acquired or holds foreign securities in accordance with the provisions of the Act, rules or regulations made thereunder, may transfer them by way of pledge for obtaining fund based or non-fund based facilities in India from an authorised dealer. 24. General Permission for Acquisition of foreign securities as qualification / rights shares (1) A person resident in India being an individual may (a) acquire foreign securities as qualification shares issued by a company incorporated outside India for holding the post of a director in the company: Provided that, - the number of shares so acquired shall be the minimum required to be held for holding the post of director and in any case shall not exceed 1 per cent of the paid-up capital of the company, and the consideration for acquisition of such shares does not exceed the ceiling as stipulated by RBI from time to time. (b) acquire foreign securities by way of rights shares in a company incorporated outside India: Provided that the right shares are being issued by virtue of holding shares in accordance with the provisions of the law for the time being in force. (c) where such person is an employee or a director of the Indian promoter company, acquire by way of purchase shares of a Joint Venture or Wholly Owned Subsidiary outside India of the Indian promoter company, in the field of software; Provided that – (1) (i) the consideration for purchase does not exceed the ceiling as stipulated by RBI from time to time. (ii) the shares so acquired do not exceed 5% of the paid-up capital of the Joint Venture or Wholly Owned Subsidiary outside India, and (iii) after allotment of such shares, the percentage of shares held by the Indian promoter company, together with shares allotted to its employees is not less than the percentage of shares held by the Indian promoter company prior to such allotment. (2) A person resident in India, being an individual holding qualification /rights shares in terms of sub regulations (a) or (b) above may sell the shares so acquired, without prior approval, provided the sale proceeds are repatriated to India through banking channels and documentary evidence is submitted to the authorized dealer. (3) An Indian company in the knowledge based sector may allow its resident employees (including working directors) to purchase foreign securities under the ADR/GDR linked stock option schemes: Provided that the issue of employees stock option by a listed company shall be governed by SEBI (Employees Stock Option and Stock Purchase Scheme) Guidelines, 1999 and the issue of employees stock option by an unlisted company shall be governed by the guidelines issued by the Government of India for issue of ADR/GDR linked stock options. Provided further that the consideration for the purchase does not exceed the ceiling as stipulated by the Reserve Bank from time to time. Explanation: For the purpose of this clause 'knowledge based sector' means such sectors as have been notified by the Government of India from time to time in terms of its guidelines for the issue of ADR/GDR linked Employees Stock Options by the Indian Companies dated 15th September 2000. 25. Prior permission of Reserve Bank in certain cases A person resident in India being an individual seeking to acquire qualification shares in a company outside India beyond the limits laid down in the proviso to clause (a) of sub-regulation (1) of Regulation 24 shall apply to the Reserve Bank for prior approval. 26. The purchase of foreign securities by Mutual Funds and Venture Capital Funds shall be subject to these regulations, and such other terms and conditions as may be notified by the SEBI from time to time.