Foreign Exchange Management Act (FEMA), 1999 provisions are perhaps the most misunderstood and most prone to forex violations by NRI’s, who find themselves under the radar of the regulatory and enforcement agencies in India such as Reserve Bank of India (RBI) & Enforcement Directorate (ED)

Forex Violations are also commonly referred to as Hawala Transactions in the Punjabi Language

A vast majority of NRI’s find themselves in violation and can face enquiries once they are found to have undertaken hawala transactions

With the current capital and current account transfers regulatory limits prescribed by RBI very wholesome, it is painful to see NRI’s still undertaking Hawala Transactions, often due to lack of clarity of the extant FEMA Policy of RBI as also a lot of illiteracy amongst the FEMA Practitioners who often do not educate their NRI Clients properly on the $1 Million Scheme available to NRI’s for repatriation

NRI Services Inc. is one of the premier FEMA Services Provider to its esteemed and valued NRI Clientele from across the world

NRI Services Inc. is perhaps one of a handful of FEMA Practitioners in India which provides the following FEMA Compliance Services to its clients:

  1. Advisory Relating to Repatriation under $1 Million Scheme to NRI’s
  2. Advisory Relating to Repatriation exceeding $1 Million to NRI’s
  3. Compounding of FEMA Contraventions before Reserve Bank of India (RBI)
  4. Handling Hawala Cases of NRI’s before Enforcement Directorate (ED), Preparing Submissions & Raising defences to minimise penalty
  5. Filing of Forms FC-GPR, FC-TRS, LLP-I, LLP-II, FLA, APR pertaining to FDI Investments into India
  6. Filing of Form ODI-I, ODI-II, ODI-III Pertaining to Outward Foreign Investments from India
  7. Furnishing FEMA Declarations, CA Certificated required under FEMA for outward remittances
  8. Filing of various approvals on behalf of NRI’s before Reserve Bank of India (RBI) in case of agricultural land purchases, disposals, inheritance and succession related IP cases
  9. Hawala Issues Arising out of Round Tripping Representation Advisory
  10. Setting up NRO, NRE & FCNR Accounts in India Advisory for NRI’s
  11. Overseas Citizen of India (OCI) Card Facilitation Services for OCI’s
  12. Portfolio Investment Services (PIS) for NRI’s in India
  13. Borrowing & Lending Advisory for NRI’s in India
  14. Immoveable Property Related Inheritance Issues FEMA Advisory in India
  15. Liasion Office/Project Office/Branch Office Related FEMA Advisory in India
  16. FDI Advisory for Investment into India Companies & LLP’s
  17. Returning NRI’s FEMA Advisory

NRI Services Inc. Team of late has been handling some very high profile cases of renowned NRI’s before ED & RBI in India.

NRI Services Inc.Saves Rs.1.68 Crs Penalty for Canadian NRI Client: Case Study

NRI Client (NRIC) based out of Vancouver, Canada receives a Investigation Notice from Directorate of Enforcement (ED) on 29.06.2018 under Section 37 of Foreign Exchange Management Act (FEMA), 1999

As per Foreign Exchange Management (Remittance of Assets) Regulation, 2000 dated 3rd May, 2000, transfer from one NRO Account to other NRO account is not a permissible credit uptil 01 April 2016, provision which was superceded by RBI Circular No. RBI/2015-16/390, A.P. (DIR Series) Circular No.67/2015-16 [(1)/5®️] dated May 05th, 2016

NRIC who had an NRO A/c with a MNC Bank, Ludhiana received Rs.1.70 crore in her NRO A/c Number from her Husband’s NRO A/c on 15.02.2011 by way of Cheque Deposit. The said amount was received as NRIC as gift from her husband

NRIC applied for an International Credit Card from MNC Bank, which was issued to her by MNC Bank

She made an outward remittance of Rs.1.57 Crores from her International Credit Card to Canada

Summons were issued u/s 37(1) and (3) of FEMA, 1999 read with section 131(1) of Income Tax Act, 1961 calling for certain information concerning such transfers, which was personally attended by the authorised representative of the applicant (CA Nipan Bansal, Director NRI Services Inc.

Detailed Directive dated 29.06.2018 was issued on the date of appearance asking for information, which was submitted in toto on 20.08.2018

The Assistant Director at Directorate of Enforcement(ADE), having scrutinised the information submitted in pursuance to the said summons came to the conclusion that International Credit Card transfers were in accordance with the provisions of FEMA Act, 1999

Herein reference was made to Master Circular no 02/2011-12 dated July 01, 2011 and Master circular no.8/2012-13 dated July 02,2012 on remittance facility for Non resident Indians /POI/Foreign Nationals, wherein it is clearly mentioned that “Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, without prior approval of the Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the cardholder’s FCNR (B) / NRE / NRO accounts”. So, the issue regarding the settlement of the transaction of International Credit Card out of the balances of NRO account was settled by DOE

The Learned Assistant Director, referred the matter of transfer of one NRO Account to other NRO Account to Reserve Bank of India, Mumbai for clarification as regards to conformity with extant FEMA Guidelines

In regards to which Reserve Bank of India, furnished a reply dated 18.12.2018 to Directorate of enforcement clarifying that the said NRO to NRO Account transfer is not in conformity with the extant FEMA (Remittance of Assets) Regulations, 2000

After receipt of such reply from RBI, a show cause notice was issued by ADE to the NRIC on 31.01.2019 giving an opportunity as to why penalty should not be levied for committing contravention under the provisions of Para 3 of Schedule 3 to FEMA Notification No.5 of FEMA, 1999

NRI Services Inc.advised the NRIC to approach immediately RBI Compounding Cell at Mumbai with a compounding application keeping in view that the minimum penalty prescribed under FEMA, 1999 for the said contravention ranges from 100% to 300%, which would have been atleast Rs.1.70 Crores in the extant case

NRI Services Inc.approached RBI Compounding Cell at Mumbai under the provisions of Foreign Exchange (Compounding Proceedings) Rules 2000 with a compounding application, which was accepted by RBI CEFA Cell in April, 2020 levying a compounding fee of 1.78 Lacs, thereby leading to savings of Rs.1.68 Crores for the NRI Client