Fema Compliance In India

Foreign Direct Investment (FDI) has been an important source of funds for companies. Under FDI, overseas money, either by an individual or entity, is invested in an Indian company. In India, Foreign Direct Investment policy is regulated under the Foreign Exchange Management Act, 1999 governed by the Reserve Bank of India. Generally an investment of 10% or above from overseas is considered as FDI.

FEMA aims to facilitate external trade, balance payments, promote the orderly development, and maintain the foreign exchange market in India. Some important compliance under the provisions of FEMA are as follows:

1. Annual Return on Foreign Liabilities and Assets
2. Annual Performance Report (APR)
3. External Commercial Borrowings
4. Single Master Form (w.e.f. 30.06.2018)
5. Advance Reporting Form (ARF)
6. Form FC-GPR
7. Form FC-TRS
8. Form ODI

Penal Actions for Non-compliance under FEMA

FEMA regards all forex-related offences as civil offences, whereas FERA regarded them as criminal offences.
If any person does not comply with any of the provisions, rule, regulation, orders of FEMA, he shall be liable for penalty up to thrice the sum involved in such contravention or up to 2 lakhs Rupees.

Further penalty which may extend to rupees five thousand for every day after the first day during which the contravention continues. Hence, it is highly advisable to follow all the compliance of FEMA.